Mont Phelps is no stranger to running a successful IT company. Over the course of his career at NWN Corporation, the company he founded, he oversaw growth in revenue from the millions to the hundreds of millions. As such, he’s traveled down the same roads that you’re traveling on now.
“Frankly, it hasn’t been that long since we were exactly like you are, exactly where you are, and facing exactly the same issues you are facing right now,” Phelps says. Despite his massive success, Phelps does not pretend to be a guru or visionary. He’s a down-to-earth man who’s more than willing to share how he and his team laid the groundwork for growth. He discusses his tactics as a means to help other businesses in a similar position but doesn’t hold so dear to his ideas that he allows no room for alternatives. To Phelps, it all starts with a vision and mindset.
Golfers vs. Football Players
“I believe that business is a team sport,” Phelps states plainly. “A team is always going to be better than an individual, provided that the team functions well.” Developing a tightknit, well-oiled team is, in Phelps’ eyes, the No. 1 priority for any business. Of course, that’s easier said than done.
“One of the issues with this industry is that we’re all control freaks. By the way, I’m the worst,” he says with a laugh. “Somehow, you have to get over that. Many entrepreneurs run their business like they’re a golfer. They play every shot; they make every decision. Sure, there’s somebody there to hold the bag, but it’s really all you.” Phelps believes that you can absolutely be successful using this model; you just won’t reach the same heights that a team-based organization will.
Instead, Phelps thinks of the ideal company as analogous to a football team. “In a football team, everybody’s job is important; everyone has a different skill set,” he notes. “You’re not on the field all the time. It’s really about the team. You have to trust each other. The level of communication is critical. People need to act both as part of the team and independently. It’s a lot more complex.”
Much like a football team has an offense, a defense, and special team units, Phelps divides his organization into sales, delivery, and operations teams. While there is a small amount of overlap between teams and everyone works toward the same goals, the teams each play their own role. It’s a rare person who can play on both offense and defense, especially when you get to the highest levels of competition. That’s where Phelps lives, so he never pretends that he can do it all or has all the answers.
“You have to give somebody the authority and responsibility to do their job,” he adds. “You have to let them make mistakes. You have to support them and develop them.” Once you actually start building a team, not just engaging in team-building exercises, you have the potential to unlock growth and sales numbers you never thought possible.
The Vision to Scale
Putting the right team in place was fundamental for NWN’s success, but so was creating a vision for the future. “I had no background in this industry,” Phelps recalls. “It took me a little while to figure out where we wanted to go.” Once he hit upon the plan, though, Phelps did not waiver in his commitment.
“We had the vision, focus, and energy to know that we were going to go big,” he says. “We never made any short-term, compromise decisions because you’re going to grow past those. I grew up on a farm and I learned to ‘do it right the first time.’ That’s a big deal.”
His point about compromise decisions warrants some further unpacking because it’s a mistake too many entrepreneurs make. All too often, they choose the decision that’s good for right now but will quickly be outmoded if we hit our growth targets.
Phelps points to his company’s ERP system as a good example of how this plays out in practice. Rather than choosing a system that met the needs of where his company was at the time, he opted for one that would meet their needs well into the future. That meant more cost and frustration on the front end, but it also meant that the system never needed to be replaced, which would’ve been a herculean undertaking.
According to Phelps, another essential component of creating a business capable of scaling is career development. “We want people to have a career, not a job,” he says. “You have three teams. You have to focus on the growth and development of each of those. I’ve always thought growing a business is a lot like the way an inchworm moves. Front of the inchworm is sales and marketing. The front of the inchworm can have all the energy in the world, but he can’t go any farther until the back end can catch up.”
Strategies for Growth
Rather than chasing the newest fad or developing a massive suite of services, Phelps thinks growth strategies are best when they come from a logical starting point: the customers. “In the early days,” he recalls, “it’s really about deciding who you choose to be your customers. From there, you have to listen to them. I’m simple-minded. We focus on the customer.”
From listening to customers, NWN Corporation was able to add services that met the needs of his base, increasing the amount each customer spent. “Eighty percent of our growth comes from existing customers,” he reveals. “We’re growing together. Our big gamble, one that has paid off, was investing in the cloud. We implemented it, but the idea came from the needs of our customers.”
A dedicated customer base and referral network is essential for growth, but Phelps and his team also recognized that not every customer was a fit for them. He humorously refers to the customers that he doesn’t want to work with as being on a DNR (do not resuscitate) list. We all have these types of customers — the ones who take up more time and resources than they return in value — right? Why break your back to appease this small minority when your time is better spent working with the people you have great relationships with?
Sensible Investment Options
Another crucial consideration for a growing business is how to obtain funding. NWN is a profitable company who invested their resources back into their business, but they still needed to secure funds from other sources. However, they didn’t go about this by giving up equity to outside investors.
Phelps doesn’t pretend that this route is the only one that can work, but he does acknowledge that it is the one that made sense to him. “Giving up lengthens the decision cycle,” he states. “You also don’t know if your investors will have the same goals as you.” Dividing up equity can leave you in a situation where you have too many cooks in the kitchen or, to use Phelps’ football metaphor, too many coaches creating the game plan.
Rather than courting investors, Phelps states, “I would encourage people to build very strong relationships with the vendor community. There are options when you can move the needle for those folks. Marketing funding, people funding — there’s really no limit.” NWN also relied on a bank loan to withdraw funds as needed.
When it comes to exit strategies, Phelps also believes that appeasing others isn’t the best route. Even if your ultimate goal is to sell your company, he thinks trying to meet all the criteria of a salable business — the numbers you’d get from Wall Street, for example — is a fool’s errand.
“My view is to build a great company, and growth will be a direct result of being really good at what you do,” he notes. “Build a great company. That builds value. When the time is right, I think you’ll have an opportunity to monetize.” People want to buy a successful, growing business. Create that, and you won’t have to spend hours making yourself the belle of the ball; you’ll already be it.
Managing a Growing Team
Once you reach the higher tiers of growth, certain new problems arise. Chief among them is figuring out how to maintain alignment and foster team-building across a very large organization. That’s doubly true in an industry like IT services, where, as Phelps puts it, “The show goes on. You can’t just call a timeout.”
The only time NWN gets its entire team together for an all-staff meeting is via phone conference, once a quarter, for 15 minutes. They also hold a yearly conference in which about one-third of the staff attend in a given year on a rotating basis. While they’re there, they continue to do business as needed.
Also essential in managing an ever-growing staff is creating systems and processes that allow for consistent success. “As you grow, you have to formalize some things,” Phelps states. “When done right, the process is enabling.”
One process that guides NWN’s sales team is a focus on rewards rather than incentives. “We believe that if somebody’s not motivated, they shouldn’t be here. We don’t believe in incentives; we believe in rewards. They may sound the same, but the philosophical underpinnings behind the two concepts are very different.” Yes, salespeople receive a commission for the value they bring to the company, but the commission is viewed as a reward for a job well done, rather than an incentive to do a job in the first place.
In his years of experience, Phelps has learned that many aspects of business will differ from company to company. There’s no single recipe for success, even within the small world of MSPs. That being said, there are characteristics and pursuits that improve companies of all sizes. With that in mind, we wanted to ask Phelps to provide us with the ironclad practices that will lead to what he calls a “culture of relentless pursuit toward improvement.”
“I encourage you to do two things,” he says. “One is building a team to the point where you trust other people to help you succeed, reward them for that, and give them an opportunity to fail themselves. The second thing is that we all make decisions, and we all make an effort to make the best decision we can. That’s not news. To me, the more important thing is how you make it right. Once you know where you want to go, start moving in that direction, not in big but in incremental steps with the whole team. Do that, and I think you’ll get there.”
Mont Phelps stepped down from his role as CEO of NWN Corporation CEO in 2018. He continues to be involved in the company but has passed on day-to-day leadership duties to current CEO Skip Tappen. We’re grateful to Mr. Phelps for sharing his wisdom and experience with us. We hope you’ll heed his advice and grow your company past the $100 million revenue mark.