CEO George Mach fully owns Apex IT Group, a managed IT service provider that he launched in 2007. But it wasn't always that way. For the past seven years or so, TruMethods CEO Gary Pica and CTO Bob Penland owned stakes in Apex. And Howard Borochaner served as COO of the Mount Laurel, New Jersey-based company before selling his shares to focus on consulting for MSPs.
The foursome combined day-to-day talent (Mach and Borochaner) with proven MSP-building guidance (Pica and Penland). Pica, after all, was a first-mover in the market more than two decades ago -- launching an MSP in 1997 and successfully selling the company to mindSHIFT in 2005. At the time of that deal, Pica's company (Dynamic Digital Services) had more than 5,000 customer nodes under management. Penland was the NOC manager who helped pull much of that technology together. And Borochaner was Pica's partner at Dynamic Digital Services -- a market expert with strong operational experience.
After selling DDS to mindSHIFT, Pica stayed involved with the business before moving on to launch TruMethods in 2008. His goal: Help CEOs build more successful IT service providers. Penland once again provided technical know-how, plugging into TruMethods as CTO in 2009.
A Meeting of the Minds, And the Rise of a CEO
So how exactly did Pica, Penland and Borochaner connect with Mach at Apex IT Group? And how did Mach grow into the CEO and business leader he is today -- ultimately expanding his majority stake and acquiring the entire company in June 2018?
In a series of conversations with ChannelE2E, Mach and Pica shared some preliminary thoughts. And more recently, they offered detailed perspectives in an email exchange with ChannelE2E.
The result is an in-depth look at:
- The continued rise of an MSP owner -- Apex IT Group CEO George Mach.
- The influencers (Pica, Penland and Borochaner), who helped to shape Mach's views on proper business management, focus, and plenty more.
- And the latest, most fitting step -- how Mach achieved 100 percent ownership of his company.
After their successful Apex journey together, Pica, Penland and Borchaner recently sold their shares in the company. Pica and Penland continue to focus on TruMethods, Borochaner now consults for MSPs, and Mach is full owner and fully focused on Apex.
Here's a recap of their business journey.
ChannelE2E: George, How did you start Apex IT Group and what was your original vision for the company?
Mach: I started in 2006. I left a company that was unable to operationally support the sales growth that my team and I were working on. The company later got acquired by an MSP in the Philadelphia region. The original version of Apex was an enterprise IT VAR. It was my intention to offer many services including staffing, application development and networking services.
ChannelE2E: How did you both meet?
Pica: I was still running my MSP so it was prior to 2008. A friend of mine was running a local business incubator and Apex was in the program. He asked if I would meet with George -- a young kid in his early 20’s with a lot of drive and determination. I shared some of my experiences with George, and invited him to tour Dynamic Digital Services. After I launched TruMethods I had Apex do some work for us.
Mach: I met Gary in 2007. I was working tirelessly in my college incubator and the director by the name of Frank Keith, would come by and check on me and my progress almost daily. He dropped a business card on my desk for a guy he knew from Rotary who was in the IT business. He suggested many times that I take a meeting with him, but I didn’t make it a priority since I was focused on world domination in my 10x10 office.
Then, one day I googled the guy's name -- "Gary Pica" and discovered his background. I met Gary for breakfast at a Cracker Barrel. He sparked the discussion, and I had laid out my business plan and vision to Gary. He politely told me that I might want to reconsider how I approach my master plan of being all things to all people. He described his experience building Dynamic Digital Services, the first MSP to market in the Philadelphia region. He offered up a site visit to DDS -- which MindShift Technologies recently acquired. When I took the tour, my view on what was possible changed. The office was immaculate, the systems were organized and the feel/culture was what I always envisioned. Gary laid out the managed services offering, his approach and outlined his results. I immediately understood and changed my approach to build what is known as Apex IT Group.
ChannelE2E: At what point did you discuss a potential investment relationship in Apex?
Pica: I got to know George better when Apex was doing a small project for TruMethods. George had a partner at the time and as I learned more about the business I recommended that he work to buy out the partner. I gave him some advice of how to approach things.
Mach: Gary would come and check on my progress between 2007 – 2010. I took most of his advice and applied it to the best of my ability at that point in time. We grew Apex quickly and made a lot of mistakes along the way. I attended IT Nation in 2010 with my former business partner/ops manager. I spent a lot of time with Gary and Bob Penland at the event. Gary came to me and said, “I have some good news. I want to do a deal with you and Apex.” I was shocked and taken aback, and of course honored. He then said, “The bad news is your operations partner isn’t qualified and you need to buy him out of the business.” This was the hardest decision of my life and Gary walked me through it. In the end it was easier than I thought and was the best decision of my life.
ChannelE2E: Gary, why did you and Bob Penland decide to invest in Apex?
Pica: At some point in George's negotiations to buy out his partner, the discussions presented an opportunity for Bob Penland and me to buy the partner's stock. All three of us felt comfortable that it would be a good move. So Bob and I made the investment.
ChannelE2E: What was the state of Apex when Gary and Bob invested in the company?
Pica: I think they were typical of what see in the market place. They had $80,000 to $100,000 of MRR (monthly recurring revenue) but $40,000 was from one customer. They had a lot of service desk tickets, which created a lot of 'noise' on the service desk, too many employees and not enough profit. There were a lot of moving parts relative to revenue. Still, it was impressive that young guy like George was able to get the business to that point.
Mach: Thanks Gary. That was kind of you. There were many “warts” as Pica would call them, on the business at that time. We had all the wrong people, all the wrong client mix, and a lot of work to do. We navigated through litigation with a competitor -- I was young and not completely qualified to run the business that is Apex today. We didn’t have a clear plan, no financial command, more debt than desired and limited profitability -- and there was imminent danger. Gary had confidence in me; he moved forward with the deal that turned into the successful business we run today.
ChannelE2E: What did you switch up in the business after Gary and Bob invested in Apex?
Pica: Over time we changed everything. The first step was to implement a business planning process. This was critical because George ran the company; Bob and I were only involved in strategic planning and helping setting priorities. Next we prioritized implementing the TruMethods framework. We put people into defined roles and prioritized the process improvement. Specifically we implemented the TruMethods Software, myITprocess to build a process of Standards-Alignment-Impact-Strategy. Today at TruMethods we call this the Technology Success Process. We watched ticket counts fall and the value of our service offering rise. Next, George began to put more focus on recurring revenue sales. The biggest hurdle was building our team over time.
(Editor's note: In conversations with ChannelE2E, Mach affirmed and reinforced Pica's points above.)
ChannelE2E: George, was it difficult to give up a little control and take advice from outside investors?
Mach: No. I needed that direction at that age and point in time in my career. I was humbled and honored that Gary Pica chose me as his understudy in an MSP, so I soaked up his mentorship and advice. I don’t think the relationship would have flourished and Apex been successful if I didn’t listen and apply Pica’s teachings.
ChannelE2E: From each of your perspectives, what were the key milestones or improvements to Apex during the investment relationship years?
Pica: I saw a turning point when three things came together.
- First, George had matured as a business leader. He gained perspective over the business planning process. Our quarterly meeting becomes easier because he would have the plan almost complete before we met.
- Next was adding my partner from Dynamic Digital Services, Howard Borochaner to the team to run the service delivery team. Howard and I grew up two houses away from each other were best friends (we are still close friends). That is how he become involved with Apex. When we needed leadership on the service side to mature the operating and free George to run the business and focus on sales, I brought in a known quantity.
- The third thing was when our Technology Success Process matured. As those three factors aligned the culture and results changed quickly.
Mach: Pica called it a “Frame off Restoration” in the early years. (I am sure you recall this, Gary):
- Business planning discipline and financial management/command.
- Engaging Howard Borochaner to redevelop and lead operations.
- Building and maturing our Technology Success Process utilizing myIT Process and the TruMethods framework and related disciplines.
- Sales focus and focus on acquiring the “right fit” clients.
My personal growth as CEO and Gary Pica coaching me to realize I must own 100 percent of the results. No one else is ultimately responsible for our results, except me. The business grew and changed as I grew and changed. What an awesome revelation.
ChannelE2E: When and why did you begin discussing George becoming complete owner -- and Gary and Bob exiting as investors?
Pica: Over the past year the business reached a level of scale and profitability where George would be able to pursue buying the stock as a viable option. From my perspective, the business was always Georges and we would allow him to pursue any options that were reasonable to the partners. Once the right team was built and the sales and service delivery process matured, I had less involvement then in the early days. George is ready to lead the company into the future. I am still an advisor to Apex -- to help George with any new complexity that arises as he scales the business. Apex is also a member of the TruMethods peer group called the Winner Circle so I get a front row seat to watch George's progress.
Mach: Future considerations and options to exit, or for me to stay and grow Apex, were always an open and comfortable topic for me and Gary. He and I made all the major decisions in the business together even though he wasn’t in the day to day. Gary would always tell me that once we reached a point where we had options, it would always be up to me to decide how to move forward, assuming it was good for everyone involved. He would also say that "Apex will go as far as George Mach decides to take it." Gary is still my advisor and we remain in close contact. It is my obligation to help other current and future TruMethods members and IT business owners to know that they can have everything they want out of life and business if they plan and execute. I owe this to them. I have built everlasting relations with other business leaders in the TruMethods Winners Circle that will last my lifetime. I am grateful for this.
ChannelE2E: Gary, did the overall Apex journey for you differ from the earlier days of managed services & Dynamic Digital Services, or was it mostly the same?
Pica: The Apex journey was way better because George and his team did all the work. Telling people what to do is better that actually doing it. Today's market is much more conducive to building a top performing MSP. The target market is much richer. There are more SMB’s already looking to work with a provider. At Dynamic Digital we were still evangelizing the MSP message. The needs of the SMB’s are more complex so if you can build a process designed to meet those needs the sales process becomes much easier. Our average contract size at Apex is much higher than in my first MSP; that makes all of our math easier form a sales and profitability standpoint.
ChannelE2E: George, how do you see Apex evolving in 2019 and beyond? What key priorities do you have for the company?
Mach: I see a continued separation of Apex from other MSP’s in the local market place. I see our team growing in headcount but our operations evolving. Every team member is in some continued education track, each quarter. We are building our project management skills, our business assessment/advisory skills, which complement the maturity of our Technology Success Practice now, into 2019 and beyond.
We are building our Cyber Security practice in an organized, methodical, profitable way, right now. Our security practice is being built under a separate business plan encompassing people, process and tools using the TruMethods delivery framework/model, leveraging myITProcess as the basis of our Security Practice to benchmark against NIST standards and implement Managed Detection and Response services across our current and future client base.
ChannelE2E: What key points did I fail to ask?
Pica: There is math and science to building a top performing MSP and if you understand the framework you achieve amazing results. Part of my motivation was to show TruMethods members that our framework and software (myITprocess) can make a massive impact in today’s market place. I am proud of George and his team have accomplished; I hope it provides some inspiration to others.
Mach: Mission Accomplished, Gary. The journey continues. Apex would not be here if it weren’t for you and our relationship with TruMethods. We still have a lot of work to do and many people along the path that we need to help grow their business and positively impact their employees and customers. I firmly believe that TruMethods' business solutions are uniquely positioned above all others, to evolve with the market and help growing MSPs, MSSPs, and IT Service Providers remain competitive, profitable and successful through peer, business performance coaching and software.