What Are the Five Most Common MSP Mistakes?
Our Ask a Mentor system just received the following question from Paul: What are the top five mistakes managed service providers make? Here are some thoughts off the top of my head. But readers: Please weigh in with more thoughts.
Some common MSP mistakes…
1. You assume it’s all about choosing a tool: Yes, you need to carefully choose the most ideal tools for Professional Services Automation (PSA) and Remote Monitoring and Management (RMM). But just because you choose the right tool that doesn’t guarantee success. It’s sort of like choosing golf clubs. Even a great set of clubs won’t make you a great golfer. You still need a range of skills to guarantee success.
2. You don’t market your services: Your web site and promotional materials continue to evangelize your IT certifications rather than your business services.
3. You don’t adjust your compensation plan: How will commission-based sales specialists be compensated under a recurring revenue model? How will you keep them motivated and on-message with your offerings?
4. You don’t document your success: Who are your early customers? Why are they happy? How can you turn those customers into references for your business?
5. You Don’t Evolve: After enjoying some initial success charging monthly fees for remote monitoring and proactive management, you fail to evolve and don’t introduce more and more managed/SaaS services.
I’ve missed dozens of additional examples. Surely, the professionals out in the market can offer some more perspecitves? Share your comments below.
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Joe,
Those are all very good points. # 1 is probably an area where so many people with a technical mind get stuck. We always say it’s the people and process NOT the tools that make an MSP.
I think that the single biggest reason that companies fail at making the move to an MSP is they don’t adjust their sales process. What I mean by this is that they continue to sell product and/or services and then attach managed services to the sale as an option. Until they start leading with managed services they will never have any success. A few more mistakes:
1. You don’t identify a target market. — The value proposition to a 15 employee company is completely different than it is to a 100 employee company. Don’t make the mistake of trying to sell to all markets in the begining. Make sure that you have a clear value prop, master it for that market and then move on.
2. You don’t have a realistic close rate. — If your sales people are used to closing 80%-90% of opportunities and you expect this of them with managed services right out of the gate, they will most likely fail. Once they fail to meet this expectation they will fall back to pushing the old product/break/fix model. Until they are comfortable selling managed services a 10%-30% close ratio is not a bad thing, this gives them time be comfortable with the selling cycle. You will want to increase this as your team becomes more proficient, but they need to feel good about closing that 1st deal even if it took them 10 tries.
3. You confuse the customer. — Don’t hand the customer a spreadsheet with a list of different support levels and prices. This will just confuse them. When you create a proposal for your customer it should have one option, the option that you beleive best fits their needs.
4. You let the customer make a mistake. — If the customer needs a total solution but wants to tear it appart and end up with a scaled back solution. WALK AWAY. If you truly believe they need the total solution but are willing to sell them whatever fits into their budget you are starting the relationship off on the wrong foot and will end up with an unhappy customer.
5. You don’t understand the customer value. — We all know the value of managed services to us; recurring revenue. You need to understand the value to the customer before you ever mention managed services to a prospect.
I could probably keep rambling on so I will leave it at 5 mistakes..
Lane Smith
Do IT Smarter
Lane: Always good to have your expertise adding to the conversation. Of your top 5 issues, I could certainly relate most to item #1. Target, target, target. Today’s IT industry is all about market segments — which segment you target, and your unique approach to that segment.
After spending the better part of the last 5 years working with MSP’s on both sides of the Atlantic, I’ve seen my fair share of the challenges facing MSP’s. The upside however is that MOST are completely avoidable. With a little planning and some leadership you can avoid almost all of the ‘Common MSP mistakes’. Here are a few more that I’ve encountered.
o Not taking the time to create a new ‘go to market strategy’ that now factors in existing clients as well as new client acquisition. Having a conversation with a long term break-fix client about your new managed services without properly preparing for that conversation will in most cases end poorly. Have a positioning statement prepared and be audible ready to deliver it should ‘Ernie’ ask “What’s wrong with the way you’ve been supporting me up until now?”… Or if a new prospect asks you how your services differ from the competitions. Building a ‘go to market’ plan that factor’s in positioning statements and competitive differentiation information is critical.
o Not building amp; implementing a company-wide transition plan that properly scopes out the needs of each department so as to avoid any issues with the transition. (Ensuring a corporate-wide “unified vision” for any new large initiative is challenging. In most cases, these types of initiatives require a strong, top-down vision with ongoing staff training to achieve maximum success)
o Not creating scalable amp; flexible service offerings that take into consideration their technical skill sets amp; client needs but rather attempting to re-sell monitoring amp; other “cookie cutter” solutions. (You should take the time to build your services around all of the core elements of your business. Take the time to look at all of the tools amp; services your company has to offer and then start looking at your target prospects needs)
o To further the point made earlier by both Joe amp; Lane, the single biggest mistake I’ve seen in the last 5 years while working directly with MSP’s is leading off with a solution rather than taking your prospect through a thorough ‘needs analysis’ process and then customizing a solution to their dependency on their network. With managed services, you’re no longer selling a ‘product’; you’re now providing a ‘solution’. In a managed services solution based sales process, understanding your clients needs play an instrumental role in determining what it is you’re going to sell them. It also sets the stage for how you’re going to then position those services.
GFI MAX (HoundDog)
Mike Byrne
I’ve got a few…I agree with all of the others as well, but I don’t think these have been mentioned yet.
1. You are so in love with technology that you’ve got yourself REALLY convinced that managing servers and desktops is viewed as strategic to your clients, and so you sell it that way and get frustrated when they “don’t get it”.
2. You give up to soon. Sales in this business is a long term process. Once you’ve found someone that should be an ideal client, you must stay in front of them until they “buy or die”, as Robin Robins says.
3. You kill any chance you have at making good margins by under-pricing your services to win business.
4. You don’t execute on basic stuff like picking up the phone fast when someone calls or showing up on time for meetings.
5. You don’t have a disciplined financial planning system in place that ensures that you adjust quickly when necessary to keep your profits where they should be.
Mike Cooch
http://www.mspcoach.com
http://www.everonit.com
Mike and Mike: Thanks for driving the conversation forward. I suspect this will turn into a top 25 or top 50 list by the time we’re done.
Readers: More thoughts?
These are all good points, and some of the best ways for Break/Fix companies to realize they can’t rely 100% on just the products to do the work. So many times you have guys going back and forth over features that NO end user cares about or even knows. The offering isn’t about the tool totally, it is about your services and how you can close business based on value, not features. One of the biggest things I see is people (VARS) getting sold on the idea that Managed Services is all about 3-10K a month contracts, and that is the only way to be successful. Most Vendors that preach that are overpriced and sell you on that concept because anything less and you as a partner won’t make any margin. This type of contract will works for some end users, but not many. If you have 100 customers and 10 say yes, that is good money, but what about the other 90 that said no? At the same time, is there a Solution Provider out there that thinks the network is 100% up to par when you sign this contract? In most cases, no, but the problem is now on your shoulders when something goes wrong. If you’re not certain that network is going to run properly, then start simple with proactive support, but keeping your hourly rate going (or a small discount as an incentive). If you don’t, well it is your margins that are now affected because it is your time now, not your customers. At the same time like Mike mentioned, people get frustrated or lazy. Lazy because they’ve got about 10% or 20% of their customers on a contract and think “this is good, set cash in the bank ever month, I’m good” but still leaving their customers open to other Solution Providers with lower entry level agreements or worse DELL!! Frustrated because they can’t sell anyone on a full package and they give up. I get that technical people like technology, that is a given, but when it comes to Managed Services you have to take the tech hate off and think about which vendor is going to help you sell this, one that pushes just product or one that is going to build and grow with you? In the end the tool will make life easier, but does that mean you can sell it?
Joe,
Great question and conversation. I would point anyone interested in this topic to review the 3-part series of articles published on MSP Mentor earlier this year…. “How to Fail as an MSP, Common Mistakes to Avoid.”
http://www.mspmentor.net/author/peter-klanian/
Thanks,
Pete
Peter: My favorites days at MSPmentor involve readers taking over the conversation… allowing me to jump in, say hi, and learn more and more. Today is one of those days. Thanks for the link. I should have thought of your three-part series sooner.
Allow me to add a few comments:
1) Never stop learning and ACT on what you learn. This is the quickest way to achieve success. I truly believe that if you are copying someone else’s business model then you will always be chasing. I have seen many MSPs pop up just copying someone else’s deliverables, never truly understanding the value to the client. You may be able to have a successful practice and earn a good living by copying someone else, but you will never become a leader nor will you eventually exit your business under your terms. You also won’t have as much fun!
2) Work with your clients and others at your organization to seek continual improvement. You will (hopefully) find a lot of brilliant ideas right in your own back yard! Many MSPs are driven entirely by a single leader, it’s important that other smart people are involved.
3) Implement standard operating procedures (SOPs). Without this structure, your quality control is bound to suffer, following which your brand will suffer.
I guess this came out more like advice than mistakes, but hopefully they are of value to others reading this.
Thanks,
Chris