Lessons from a Rural MSP: Jacob Bespalec's Insights on Growth and Sustainability

Speaker A: You're listening to SuperPod, the no filter MSP show, presented by Superox, where we go behind the scenes with today's top MSP owners and experts to get to know what they are really doing to evolve their business. Hello, everyone. Welcome to superpod, the no Filter MSP Show. I'm Radhika Nair, your host, and joining me today is Jacob Bispalik. He is the CEO of APT Interactive. It's a rural MSP based out of Nebraska. And Jacob has really big goals for his MSP. He wants to build it into a $20 million MSP. And he, uh, started a couple of interesting things already to get to that. Um, he's outsourced his help desk. This is something that a lot of MSPs are exploring and, and he's also looking to grow through acquisitions. So Jacob is here to talk about how he is building a rural MSP and how he wants to scale it into a $20 million MSP. Thank you, Jacob, for joining us today. So, Jacob, if you could start off with a bit of background about, uh, about yourself, maybe a little bit about your, uh, growing up, about your education and how you came into this world of msps.

Speaker B: Yeah, absolutely. So I grew up in rural Nebraska in a town of about 2200 people and a high school graduating class of about 40. Um, the way that I got into computers was really serendipitous. Um, I had a, had a mentor, um, that was a really good friend of the family, um, that exposed me to the world of Macintosh, um, and got me into the Apple cult. M. And it really set off a journey of sorts for me where I just always wanted to know more about how every component of that machine worked, of the software, of how the whole picture came together to create a great user experience. Um, and then, um, that mentor, uh, moved out of state and I was kind of left alone, like half into this journey of, um, you know, development and discovery. Um, and needed to go. You wanted more. Uh, I needed to go find the resources to get that, as they were not, you know, very plentiful in rural Nebraska. Um, and about that time, uh, you know, my parents said, you know, hey, you can't be sitting around the house all summer. Uh, you need to go find something to do with yourself. Um, and the standard job for a middle schooler in rural Nebraska is to go to tassel, where you pick the tassels, um, off of seed corn. Um, and I knew that wasn't for me at all. Uh, working in the humid Nebraska summers and trudging through cornfields was not something I was willing to do. Um, and there happened to be a small computer store in town, and so I approached the owner and said, hey, you know, would you be interested in some summer help? I knew a lot about macOS, um, and I've learned all these things, um, and want to learn more. And he generously, um, kind of let me into the fold, um, and gave me a summer job for two summers and really taught me a lot, um, of what I know about business today. Even then, um, he was always transparent with me, um, and honest about, you know, how things were going in the business. You know, what he saw was interesting and what we were doing, you know, as a company, um, and really set a incredible foundation really early on from there. Um, that gentleman then retired, um, as I was going into high school and I found myself without a summer job again. Um, but being in a small town and everybody knew that I had worked down at this computer store. Um, you know, my cell phone number traveled very quickly around town, and folks just kept calling, and I, uh, tell everybody the phone hasn't stopped ringing since, which is. Which is true. Um, I still have, you know, clients

Speaker A: to this day, but how old were you at that time?

Speaker B: Um, I would have been a freshman in high school. Um, so 15. 16.

Speaker A: All right. No, 15. 16 is when you were right, when you started working there, or this was when, uh, when the gentleman retired.

Speaker B: This is when, um, yeah, he retired. And I really set off on my own at that point.

Speaker A: At the age of 15.

Speaker B: Yep. And, yeah, and I still have clients to this day that, um, I had, you know, when I was 15 years, uh, old that still call me, you know, to help them with their. Their printers and their. Their computers.

Speaker A: And you're now how old? 28. 20.

Speaker B: 28. Yep. It's been. It's been really rewarding, um, yeah, to be able to continue, like, to come back to those people, but, um, I still try to take care of them myself, M. If I can, because it's such a fun experience. You have to reminisce about the early days, um, you know, and how things all got started. Um, but, yeah, I had, you know, gainful employment all throughout high school, um, just doing, you know, as much computer work as I pretty much could gather, um, and never still really saw this as a career option for myself that I would go into, you know, like, IT service. I didn't even know that was. Was a thing you could do, you know, short of, you know, having a computer store. Um, and from there I decided um to go to the University of Nebraska um and start a major as a computer engineer because I thought I wanted to go build software M and had some great ideas about how I could really change rural uh, Nebraska through software um, and very promptly failed my first programming class at college um, and very quickly realized that that was not a career that I was actually that interested in. I was, I was interested in the image of being a software developer but not um, in the work so much itself um, and really had to kind of reinvent a little bit at that point um, and decided to uh, I spent a very brief time as a math major um and then landed in the College of Business um and have a degree in marketing now. My, my, my roommate um at the time um though was in, stayed in that computer engineering uh major and field um and brought him into what is now APT Interactive and he served as our, our cto um until just recently. Um, he moved on to go pursue software development again and out of the IT space. But what I've been telling people for the last seven or so years is that the middle of computer engineering and marketing is IT services is exactly an msp. Um, and it was about that time kind of uh, in the middle of university that somebody had shared with us the MSP model and plan and what that looks like. Um, we had still just been doing one off computer service. We made a bunch of websites, we ran a support department for a local tech company, uh, we filmed weddings. We did just a bit of everything um in those days trying to figure out what we really wanted to do with ourselves for the long term. Um, and then like I said, yeah, somebody had shared, you know, hey, have you ever considered being an msp? And I was like well what is that? What does that look like? Um, and instantly knew that that was for us, that that's what we wanted to do was recurring billing made a ton of sense to us. Um, you know, working in the SMB environment, uh, with folks just like we are used to, you know from my hometown, um and Brian's hometown and everybody in between which was exactly where we wanted to be. And so we set off on this journey using some very meager tools without a whole lot of experience, without much experience in professional IT with no certifications, just uh, kind of bright eyed and bushy tails, willing to learn as much as we could along the way. Um, and it was really a story of the last seven, almost eight years now, um, of us being an MSP has been a story of better and better tools and better and Better education. Um, and I can pretty well chart that on a map, you know, year over year, to the point that we are now that I feel like we finally have a value proposition, a unique, ah, selling position and a way to differentiate ourselves as an msp, um, against the folks in the region and against a bunch of other folks.

Speaker A: I also want to understand, um, if you could tell me what the initial days were like. You were just out of, uh, uh, college and setting this up. What was the, ah, initial days like?

Speaker B: Yeah, absolutely. So we in college still, um, we had started getting a little bit more physical, um, computer building work where folks were coming to us and asking us to build machines for them. Um, and we were working between my parents basement, um, about an hour away, um, and our dorm room, uh, with two other roommates. Um, and nobody was super thrilled with that arrangement. Um, we were very quickly out of space and monopolizing other people's. Um, and my grandfather had been retired for a couple of years from a career in H Vac, and had a building, um, in downtown Crete. Um, um, and it seemed just like a perfect match. And so we asked, uh, my grandpa if we could rent, you know, the front of the building from him for a little while. Uh, where we, you know, we're trying to figure out if this is what we wanted to do. Um, and so we started building computers out of the front of this business. Um, and it was going really well. We loved the new amount of space. It was really small commute, um, from Lincoln. Um, and so we eventually, uh, bought the building, um, from him and moved into the whole space, um, and spent seven years in that space. Uh, we just about full gut remodeled the thing, tore the walls down, tore the ceiling out, um, moved all of my grandpa's tools out, uh, and helped him, you know, consign, uh, those or sell them or store them. Um, and then the next year, we completely redid the entire exterior of the building. New roof, solar panels, new windows, new storefront, um, but we left the interior untouched because we still knew that we weren't quite sure what the future held for us and what we wanted to do and how we wanted to change, you know, build our business. Um, and that led us, you know, right to the start of 2020, into the pandemic. Um, and I think that was one of the best decisions that we ever made was to not touch the interior. Um, because while, you know, being in rural Nebraska, um, most of our clients, um, had not sent, you know, their staff home. A lot were considered essential businesses. Is there you know, a unique single, uh, business in town, whether that's, you know, there's only one optometrist in town, uh, one hardware store, so on and so forth. But a lot of our customers were forced to then interact with their vendors and their, um, colleagues, uh, that were working remote and hybrid. Um, and so I see that like, as a, As a moment where we really increased our skill level as well, um, being able to handle better remote technology in a much more proficient manner, um, and able to guide our clients through, you know, their. What. What the pandemic looked like for them. Um, and I think that was largely successful. The, the worst part of the whole thing for us, um, was just supply chain availability, um, which really hampered revenue growth throughout, you know, those kind of three years of the pandemic. Um, and even today we still see a little bit of it. Um, as, you know, some companies are still recovering, um, their supply chains and re, you know, taking, you know, those moments, uh, to rebuild them entirely.

Speaker A: Um, can I just interrupt you one second? And what were the kind of. Or what are the kind of clients that you have? And uh, and I know from our past conversations that, you know, you serve a lot of customers who are. This is rural Nebraska we're talking about. Right? So I'm assuming they are spread out and not really concentrated in a specific region. It's an assumption I'm making here. So if you can give me a little bit of an idea about what your clients look like. And also, did you start with the, you know, recurring revenue model itself or did you have a break fix kind of, um, option? What was that like?

Speaker B: Yeah, so we've always had the break fix option and we still do today. We've really classified that more as just a time and materials, um, type of, type of work. Now, um, to be a little bit more clear with customers that aren't fully bought in, um, to recurring revenue and to the MSP model. Um, but yeah, from seven years ago we were billing quarterly, ah, was what we actually landed on to start recurring revenue, um, so we could have a little bit higher payments up front, a little more cash flow, uh, to work with, and also weren't dipping into the customer's wallets as frequently. Um, we were nowhere near what would be a market rate for IT service. Um, really what we were offering was help desk and uh, an antivirus product. Not true MSP service. Um, and those clients were spread, um, across every single vertical, um, from some health care, um, from optometrists, pharmacy, family practice, uh, to machine shops and Mechanical contractors to hardware stores and screen printing shops, um, you know a little hospitality here and there, um, more services based businesses like uh, dance studios and martial arts studios. Um really when you, you just visit a small town, every type of business, you know, accountants and lawyers that you see represented in you know, Main Street America, we probably had somebody in that vertical that we were taking care of. M so we've been able to build a really wide breadth of expertise across a lot of industries and I think it's made the work a lot less monotonous um, and a lot more enjoyable from that perspective of things.

Speaker A: Understood. And uh, how big is your team? How did that the people organization of App Interactive Group.

Speaker B: Yeah, so it's been really interesting for the last seven years. Um, it's mostly been my CTO and I um, but he moved on here about three months ago um and there are now three of us full time. Uh, we have a new field tech um that's been here for about three months. Um, that should be an awesome operations person uh here in another couple of years um and hopefully be able to hire um, many of him versions of himself to do what he is doing now. Um and we have a graphic designer full time on staff as well that does a lot of the back office, um, and kind of some executive assistant type duties. Um, we've had a lot of folks come and go throughout the years. Whether it was uh, interns, 1099 contractors, folks to pull cable, folks to help us do website development. We've had somebody come in part time uh in some capacity for a lot of those different things and it's been kind of a revolving door in that way and it led to some really rewarding relationships watching those people grow and develop. Uh, but here in the last couple of months um, we have in effect grown uh more than we ever have before. Um in that we hired an outsourced help desk company. Um we're now working with the folks over at benchmark 365 um and have about 15 folks in a pod dedicated to APT Interactive. And it is from an HR AH and collaboration perspective, um, just like hiring 15 people overnight, um, and so getting to know each one of them, uh, their unique strengths and talents, um, where they excel, where we can help them grow further has been huge. And honestly uh at this point in the relationship has been one of the best decisions we have ever made. Um, allowing us to work that decision

Speaker A: if I may ask.

Speaker B: Part of it was um, between Brian and I, uh, we were the field technicians. One of us was Touching every single ticket, um, and talking to all of the customers, and realized that we had kind of gotten ourselves into an unsustainable business model where our customers would call us, we'd pick up the phone and they would expect, you know, their issue to be fixed immediately. Right then, well, you're on the phone. Why can't you fix it now? Well, because there's 40 tickets ahead of you and we've got to get to you prioritize and triage these appropriately. Um, and we saw that start to create some issues. Um, and about that same time, um, started to see that Brian was ready to move on, um, was kind of getting burnt out on IT service, um, and wanted to go back to a career in software development. Um, we put our heads together, we're like, okay, how do we solve both of these issues at once? We probably can't just go hire a couple of more folks, um, then we have to train them, um, go through onboarding. A certain percentage won't work out, um, and we'll just kind of be stuck in this odd loop. And as a, it was a really small MSP from a headcount perspective, um, each one of those bodies matters a considerable amount and can have disastrous effects if somebody's just out sick. Um, so we knew we needed to do something much more sustainable, um, and started listening. Uh, you started doing some research, asking the MSP subreddit listen, um, to a number of podcasts, other trade publications, and you stumbled across the folks at Benchmark, um, and really saw them go through kind of a similar journey, uh, where they started their outsourcing, um, operation for themselves and then rela as an MSP and realized this is actually more valuable to other MSPs, um, and they should package that as a product to us. And it's been, it's been fantastic and allowed us to, you know, keep a staff of three. Um, but, you know, we're acting like, um, you know, a staff of 18,

Speaker A: essentially, in that way, from a revenue size standpoint. Where are you at? And I also wanted to understand what next.

Speaker B: Yeah, so last year we closed 400,000 in revenue in 2023. Um, 2024. I was very much hoping, uh, we would get to 750,000, but I think it's probably going to be somewhere between 500 and 600. Um, just because of a lot of this retooling that we've had to do, um, has not freed us to do as much sales work. And by us, I mean me, because I am the salesman at the moment. And So I have really high hopes um for what um Q1 is going to look like in 2025. Um, I think we can meet and exceed that uh 750,000 number. Um right now we measure um ourselves mostly on total revenue. But I want to start shifting the way that we think about revenue generation um and our financial goals in the organization um both to the way most MSPs measure in just a function of total recurring revenue mrr um and set some better targets for that um but also in um your gross margin and net margin percentages uh making sure that everything that we do because uh we do a lot at App Interactive from web design, um and other graphic design projects um to phone systems, manage print and then the core of the traditional MSP offerings want um to make sure that all of those services um are contributing effectively um to MRR growth um and to a high net margin. Um and if we continue to maintain that then we can continue to take care of our people um, and grow.

Speaker A: Understood. Gotcha. Um, so apart from um, the partnership that you have with Benchmark, right Any such major changes that you are planning in the future?

Speaker B: Um, I think we, we're planning on increasing our spend with Benchmark um to better tie superops and their software platform together um, to make sure all of our customers are covered um, with Dispatch through Level 3 support 24 7, 365 days a year. Um we're also investigating some outsourced uh m kind of mid market sales um and account management folks. Um at the moment I'm doing a little uh proof of concept and trial with some of them um so that you know our account management can be more robust and done on a much regular basis. Um we've got two or three engineers that we're looking to hire here around the first of the year as well. M folks that aren't doing field service that are just at their desk ready to solve complex customer projects um and chase down those things that you know just doesn't really well fit inside of Benchmark scope or work. Um, we'll also be looking here in about 12 months at Growing based on acquisition. Um, I see that as a really sustainable path for us um to some significant growth where we were nearly in those shoes um about a year ago, um, when we realized Brian was ready to leave, um, it was like how do we take care of our customers um and how do we make sure that they're cared for? And so we had approached a couple of folks um, ah about the possibility but then really doubled down and you brought all these great resources on board, um, instead and now have really grant plans for the future um, and sit on the other side and want to sit on the other side of that table. So we've started reviewing initial deal documents for other MSPs um, that are available, uh, to try to get prepared for that. We want to go out and find all of the sub 1 million dollar, you know, 1, 2 man MSPs that were exactly in the shoes that we, we are and we're in, um, and empower them with greater set of tools, greater set of resources. So you know, either they can just keep working the way they have, um, you know, until they're ready to retire, um, or you really bring them into ah, APT Interactive in a way that is sustainable for them. Um, because we found that you know, a lot of these folks out there that are, you know, one man shops, um, you have incredible customer relations, um, people are fiercely loyal um, to like hey, that's Dave the IT guy and we will never leave Dave because we love Dave so much. He takes such great care of us. We want to go find those folks um, and really empower them to be the best version of themselves, um, and do that all across the US so starting sometime in late 2025. You had asked earlier about more of our kind of long term plans, um, and really I think um, that we can be a $20 million MSP in a relatively short order of time given the resources that we have access to and at our disposal. I think there has never been a time like now that you can build an MSP as efficient and well run with the best tools available in the industry, the best people available in the industry. Um, you couldn't build something the way that we have it set up. You know, just a number of years ago, um, you know, Super Ops didn't exist on the market a number of years ago. Um, you know, and benchmarks a newer entrant as well. Uh, and I think a lot of people are taking, you know, outsourcing and offshoring a lot more seriously than they have. And I hope everybody does. Um, it's, it's allowed for tremendous growth for us, um, in a much more sustainable way than if we were, you know, in a way that we weren't able to hire, you know, 15 people overnight. So I, I think that with those resources at our fingertips, yeah, we can, you know, we can reach that 20 million mark. Um, I heard that's where, where Juan exited his MSP at, um, and so that's kind of that's the, the goalpost uh, for, for now.

Speaker A: One final question in fact if, if when you look back right up um, some of the points you have definitely mentioned but when you look back if there was one thing you would have done differently, what, what would it have been?

Speaker B: That's a really good question. Um, I'm not sure there is a lot that I could have even done different um to get to the place that we are now. Um, you know I would have loved to be more serious um about collections and billings with our clients. Um, I would have loved to better understand um, that the market that we find ourselves in um, everybody's not a customer. Um I think I really was, was blind to that um that everybody needs IT service. You know everybody should be buying MSP services from App Interactive and that's very much not true. Um we're really taking a lot of effort over the next quarter um to try to trim uh our customer list um to find the folks that don't really buy in um to what APT Interactive does and more importantly why we do it. Ah why we show up to work every day um and do our best for our clients um and find more sustainable places for the customers that don't buy into that to be uh whether that's some break fix folks um or self managing their IT and maybe just doing some time and material work for them from time to time. Um but I think that's what I really wish I would have known seven years ago that everybody isn't and everybody shouldn't be our customer. I think that would have led to some more sustainable growth than we've had.

Speaker A: Thank you so much Jacob. Thank you so much for taking out time for this.

Speaker B: Absolutely. Anytime for you guys. Thanks so much Radhika.