SMB Community Podcast

A central theme of the episode is the challenge of communicating and defending pricing for managed services. Amy Babinchak and James Kernan described frequent client objections regarding cost, focusing on the importance of articulating clear value propositions. They noted that most client resistance either stems from an inadequate understanding of the provider’s value, or from attempts to negotiate lower pricing. Responding effectively requires MSPs to explain differentiators and to consciously decide whether a prospect aligns with their value-based approach.

Supporting this discussion, Amy Babinchak argued that many MSPs risk commoditization by relying on standardized, transactional service offerings. She highlighted a shift toward consultative selling, emphasizing the need to focus on unique solutions—such as AI guidance and security enhancements—instead of basic recurring services. Both speakers remarked that as automation and AI become more prevalent, differentiation and consultation will increase in relevance and provide a pathway to sustained business models.

Additional topics included emerging security threats related to USB drives. Amy Babinchak reported that widespread vulnerabilities, particularly in devices manufactured in China, have exposed businesses to high risks of malware via unencrypted firmware. She recommended MSPs phase out low-cost, unbranded memory sticks in favor of hardware with encrypted firmware, noting associated costs can be in the $100–200 range. The episode also addressed the responsibility for user security awareness training, with both hosts asserting that the MSP must ensure not only provision but active client engagement and outcome tracking, rather than relying solely on offering the service.

The practical implications for MSPs and IT service providers lie in proactively managing client expectations, emphasizing measurable value, and maintaining vigilance regarding hardware supply chain risk. Providers are encouraged to improve governance by reviewing service portfolios, confirming active usage of bundled offerings, and conducting regular business reviews. Regarding security, due diligence in vendor management and sound end-user education policies are highlighted as essential components of operational risk reduction.

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Managed Service Providers (MSPs) face measurable hurdles when scaling businesses past certain revenue thresholds, particularly the $10 million annual mark. The episode’s primary focus is the operational and sales methodologies implemented by Brian Strong, who reported helping lead an MSP from $2.2 million to $19 million in annual revenues over five years. This growth was attributed to instituting systematic sales processes, prioritizing revenue generation, and building organizational redundancy, which Strong identified as essential for sustaining and supporting large-scale managed services operations.

Supporting this central narrative, Strong detailed specific challenges encountered, such as a company operating at a $300,000 monthly loss after an acquisition, with survival requiring accelerated sales volumes rather than cost-cutting alone. Growth strategies were based on methodical sales enablement, including tracking KPIs, transparent open-book management, and aligning hiring practices with the organization’s long-term scaling goals. Notably, Strong emphasized targeting larger accounts and developing specialized technical talent to build resilience and capabilities across departments.

The conversation also addressed industry-wide patterns, noting that many MSPs remain “stuck” below the $10 million revenue band. According to Strong and Speaker B, a key obstacle is the lack of systems and staffing that enable owners to delegate daily operations and sales functions. Both speakers noted that relying solely on owner-operators impedes scale, and emphasized the need for targeted recruitment, standardized processes, and deployment of appropriate technologies to enable sustainable growth and improved customer service delivery.

For MSPs and IT leaders, these discussions underscore the necessity of robust, replicable sales processes, transparent operational metrics, and talent strategies designed for organizational redundancy and scalability. Risks of stagnating at lower revenue levels include limited service capacity, inability to serve mid-market clients, and heightened vulnerability to market or talent disruptions. Organizations seeking to grow beyond these barriers must invest in their people, formalize their processes, and ensure leadership is accountable for both revenue generation and operational sustainability.

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NinjaOne’s reported growth and positioning within the MSP software landscape presents a notable development for service providers evaluating vendor ecosystems. According to statements reviewed by Ryan Morris and Dave Sobel, NinjaOne claims an annual recurring revenue (ARR) exceeding $500 million, a valuation above $5 billion, and a customer base of more than 35,000. This self-reported data, while not independently verified due to NinjaOne’s private ownership, places the company within the top tier of platform providers for endpoint management, alongside ConnectWise and Kaseya. The expansion and platform focus suggest material choices ahead for MSPs considering stack consolidation, endpoint management, and integration requirements.

Supporting analysis from Dave highlights trends in the categorization of platform players, noting shifts among vendors such as Enable, which is repositioning from the MSP infrastructure platform to the security domain. The discussion raises a technical consideration: the evolution from API-driven integration toward emerging orchestration standards such as MCP servers, though details from vendors remain limited. MSPs are advised to understand tier distinctions among platform providers and carefully assess how these shifts may affect integration, security posture, and operational alignment.

Adjacent topics explored by the speakers include the risk and tradeoffs involved in vendor onboarding, M&A (mergers and acquisitions) processes, and the relevance of business continuity strategies. Ryan Morris and Dave Sobel critique extended, six-month vendor evaluation pipelines as potentially eroding competitive positioning in a landscape characterized by rapidly evolving technologies, especially AI-driven tools. Additionally, the episode revisits the skill set of the IT generalist, acknowledging that while specialist expertise remains essential in domains such as security, contemporary AI adoption demands generalist capabilities for validation, interpretation, and curation of technology outputs.

The podcast asserts several operational takeaways for MSPs and IT leaders. Prioritizing process documentation and standardization enables scalability and business value beyond the presence of individual owners, as financial professionals weigh factors such as repeatability and owner-independence in valuation. Businesses should balance rigorous stack control with responsive, customer-centric experimentation, managing the pace of change in vendor portfolios and technologies. In M&A scenarios, the speakers caution against overly formulaic approaches, emphasizing contextual evaluation of fit and motivation to mitigate post-transaction dissatisfaction. Collectively, these themes stress the need for ongoing adaptation, systematized governance, and objective risk management in MSP operations.

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The episode centers on profit margins and service mix strategies for MSPs, emphasizing the importance of maintaining recurring revenue margins above 50%, preferably targeting 65–70% for long-term sustainability. Industry averages indicate recurring revenue margins as low as 35%, which Speaker B and Speaker C note presents a risk to driving profit down to the bottom line. The discussion identifies that margins tend to erode with organizational growth due to overhead but underscores the necessity of regular price adjustments built into client contracts and regular scrutiny of margin performance as core practices to avoid financial shortfalls.

Supporting these observations, Speaker C advises MSPs to gradually move from lower margin brackets to achieve at least 50% in recurring services, acknowledging this transition typically requires sustained effort over several years. For professional services, a margin range of 40–60% is considered attainable, with 50% as the practical target. Regarding income mix, respondents suggest 70% of revenue should derive from recurring services and the remaining 30% from professional or project-based work. Both speakers highlight that smaller MSPs may achieve higher margins, while competitive pressure and organizational complexity often erode these numbers.

Adjacent discussions address operational and security challenges. The show covers recent FBI public service announcements warning of increased cyber threats originating from Russian and Iranian actors, specifically targeting government, political, and journalist entities. Speaker C and Speaker B recommend that MSPs communicate only the most relevant advisories to clients to avoid information overload, framing updates as evidence of service diligence rather than sources of alarm. In addition, Microsoft’s new AI security dashboard in Microsoft 365 is reviewed, which uses Defender sensors already present in Windows 11 devices to provide visibility into AI activity and configuration security at no extra cost, provided suitable licensing for Defender is in place.

The operational implications for MSPs include the need for rigor in pricing models, clear partnership agreements, and transparent communications with clients about both technology changes and external threats. The recurring emphasis on risk management, margin preservation, and responsible client engagement reflects a harm-reduction mindset. Regular contract reviews, maintaining consultative relationships, and avoiding over-communication of security issues are presented as accountability measures that support stability and trust in MSP operations.

Question of the week: What margins should I be targeting? And what is the mix that I should be shooting for?

Recurring

Professional services

Product sales

 

Talking to clients about international affairs. The Federal Bureau of Investigation (FBI) and the Cybersecurity and Infrastructure Security Agency (CISA) are jointly issuing this public service announcement (PSA) to warn the public about ongoing phishing campaigns by cyber actors associated with the Russian Intelligence Services (RIS) targeting commercial messaging applications. The activity targets individuals of high intelligence value, such as current and former U.S. government officials, military personnel, political figures, and journalists. https://www.ic3.gov/PSA/2026/PSA260320

 

The Federal Bureau of Investigation (FBI) is releasing this FLASH to disseminate information on malicious cyber activity conducted by actors on behalf of the Government of Iran Ministry of Intelligence and Security (MOIS). Specifically, MOIS cyber actors are responsible for using Telegram as a command-and-control (C2) infrastructure to push malware targeting Iranian dissidents, journalists opposed to Iran, and other opposition groups around the world. This malware resulted in intelligence collection, data leaks, and reputational harm against the targeted parties. https://www.ic3.gov/CSA/2026/260320.pdf

 

New AI Security Dashboard for M365.

Requires Defender onboarding to be effective 

Check it out: https://AI.security.microsoft.com

Learn: https://techcommunity.microsoft.com/blog/microsoft-security-blog/security-dashboard-for-ai---now-generally-available/449463

 

Amy’s class is now available for purchase at Coassemble. 

This is her Create your AI Service Package. 

The purpose of the course is to consider all of the things that you might want to include in your offering. https://www.thirdtier.net/2026/03/20/create-your-ai-management-package/ 

Coassemble: https://coassemble.com/c/0ZKD2Z

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Microsoft’s decision to increase pricing across its Microsoft 365 product suite, excluding Business Premium, is a notable development for MSPs and IT service providers managing client subscriptions and budgets. According to discussion on the SMB Community Podcast, the price hikes range from 8% to 30% across various plans and products, with only Business Premium escaping the adjustment while still adding new features. Microsoft is also expanding mailbox storage, with each mailbox now receiving an additional 50GB, raising the individual mailbox limit from 50GB to 100GB.

Additional details provided in the podcast highlight that Microsoft Business Premium continues to receive feature enhancements without a corresponding rise in cost. Upcoming functional improvements include expanded AI capabilities for Microsoft Chat, which will offer agent-based access to documents and files within the user’s tenant. The licensing distinction is important: while the unlicensed version of Chat requires manual document uploads, the licensed version allows AI features to operate securely within the organization’s environment, keeping sensitive data contained and not exposed externally.

The conversation also explored sales strategies and portfolio management for MSPs. Both hosts endorsed a harm-reduction approach to client engagement, advocating for saying “yes” to a broad range of customer needs to protect client relationships and avoid driving clients toward competitors. They noted that even if a requested service is outside of a provider’s core competencies, partnering with another vendor or project-managing the solution maintains client trust. Discussion further addressed the operational and valuation benefits of vertical specialization, particularly as MSPs grow beyond $2 million annual revenue, given higher buyer valuations for vertically focused firms.

MSPs and senior IT leaders should review Microsoft’s pricing adjustments in detail to mitigate downstream risk for their own margins and client contracts. Decision-makers are advised to analyze service offerings and clearly communicate distinctions between licensed and unlicensed AI features to minimize operational and security risks. Adopting a client-aligned engagement model—being prepared to source or manage non-core solutions—can reduce customer churn but may also require revised processes for vendor selection, project management, and risk evaluation. Specializing in key client verticals may enhance firm value in acquisitions or exit scenarios.

 

Microsoft Community Days: https://www.communitydays.org/Find one coming to a city near you!

How can MSPs better communicate their full service offerings?  Amy’s blog about saying yes: https://www.thirdtier.net/2024/04/02/amys-sayings-the-answer-is-always-yes/

Should MSPs have a VERTICAL MARKET FOCUS?

MICROSOFT IN THE NEWS: Microsoft Suite prices (except for Business Premium) increases and no more grace period for your data

https://www.sysdrive.net/two-microsoft-365-changes-coming-in-2026-that-every-business-should-know-about/

Microsoft Business Premium accounts get additional 50GB per mailbox https://www.microsoft.com/en-us/microsoft-365/blog/2025/12/04/advancing-microsoft-365-new-capabilities-and-pricing-update/

Copilot Chat without a separate license will be able to see into Outlook and Office products. And work as agents. But you have to upload the data into them. Does not have the same level of protection as the licensed version. E3 and E5 are getting the Intune Suite. It’s a lot of device management features, but one of note is Remote Help.

Restaurant Human Robot goes BERSERK in a Cupertino California after employee hit the wrong button https://www.thedailybeast.com/restaurant-staff-struggle-to-restrain-dancing-robot-causing-dining-room-chaos/

 

Resources and Events for MSPs:

 

Third Tier’s Continuing Education Program: https://www.thirdtier.net/2026/03/20/stop-drowning-in-m365-security-changes-join-our-continuing-education-program-for-admins-and-security-pros/

                    

Small Biz Thoughts Community for MSPs: www.smallbizthoughts.org

Engage with us at www.smbcommunitypodcast.com

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