From The Editor | September 19, 2018

How An MSP Survived The Loss Of A Huge Account

Abby Sorensen July 2017 Headshot

By Abby Sorensen, Chief Editor

Tablets Outpaced by Smartphones As Drivers of Sales

In February 2017, CIO Solutions lost a big account. So big, in fact, that it accounted for 40 percent of the MSP’s revenue. This isn’t a mom and pop shop IT Services provider we’re talking about – the account’s revenue brought in millions of dollars annually. Fast forward to September 2018, and CIO Solutions is gracing the cover of Channel Executive magazine. The company not only rebounded – it completed a successful acquisition and is in a strong position for future growth. We couldn’t fit this side story in the magazine, so instead we’re sharing the lessons learned from loss of a large customer in a web-exclusive feature.

First, some background on CIO Solutions. Founded in 1986, the company came out on the positive end of a sudden shift to managed services shortly after CEO Eric Egolf came on board in 2004 (that shift is another story in and of itself). For more than 20 years, the MSP has built a strong reputation in California’s central coast region. Losing this particular account was no fault of CIO Solutions. A large healthcare system decided to cut costs by consolidating all local vendors in favor of a larger, national vendor. Regardless of the circumstances or size of a lost account, Egolf shares a few lessons that any solutions provider can learn from.

Lesson #1: Have A Plan (A Plan That Involves Having Cash)

Losing this one client didn’t come as a surprise to CIO Solutions. Egolf says they knew the day might come, and yet the company still held on to that client for 15 years. By the time that day did come, CIO Solutions had the cash reserves to see it through the shock. The fact that the client walked away during a growth market and not during a recession also helped.

Egolf likens this to the “Productive Paranoia” concept in the legendary business book Great By Choice. Jim Collins says great companies, “remain productively paranoid in good times, recognizing that it’s what you do before the storm comes that matters most. Since it’s impossible to consistently predict specific disruptive events, they systematically build buffers and shock absorbers for dealing with unexpected events. They put in place their extra oxygen canisters long before they’re hit with a storm.”

Mountain climbers anticipate difficulties, and strategically place oxygen before they start a climb.

Likewise, CIO Solutions had about six months to prepare to lose this client, and they spent those six months stockpiling as much cash as they could.

Lesson #2: Avoid Knee-Jerk Responses

Having that cash helped CIO Solutions through the emotional rollercoaster of losing 40 percent of its revenue. The company created a financial plan and tried to stick to it. But that isn’t how the real-world works. Layoffs became necessary. Other events unrelated to the loss of that client ensued and changed the financial picture. Egolf and the leadership team anticipated how emotional it would be and did their best to avoid knee-jerk reactions to the company’s financial situation.

“What ends up happening,” Egolf says, “is you would literally make decisions every three days or every week before your financials even came through. I think of it like the scene in Braveheart, where they’re holding this wall.” For CIO Solutions, it was the cash reserves holding up the wall.

Lesson #3: Own the Reality Of Large Clients

It’s easy to read this story and say, “This is why solutions providers shouldn’t put 40 percent of their eggs in one basket.” And that might be true – peers even told CIO Solutions to be cautious of this risk. But the way Egolf sees it, this one client did a lot more good than harm. CIO Solutions wouldn’t be where it was today with the revenue from that client. This revenue was reinvested in the business and set the stage for future growth. Egolf says, “I think you can grow and hold on for the ride, as long as you’re also focusing on other aspects of your business.”