How to Transition Smoothly from Break-Fix to MRR
It’s a story you hear more and more — providers are looking to transition away from a break-fix model and add a monthly recurring revenue (MRR) offering. In fact, CompTIA predicts that, for more than half of all IT solution providers, 75 percent of revenue will come from managed services by this year.
As a lot of folks are figuring out, short-term fixes are time-consuming and not the most cost-effective. By its very nature, break-fix means dropping everything you’re doing and trying to put out fires as they crop up. Also with break-fix, customers don’t pay a fixed monthly fee for the services provided. They are used on an as-needed, pay-as-you-go basis.
By contrast, the managed services/MRR model allows managed service providers (MSPs) to be proactive rather than just reactive. MSPs proactively monitor and protect clients’ networks to prevent the aforementioned IT fires. Unlike break-fix, managed IT service providers are able to provide their clients with up-and-down, across-and-through IT support.
In the case of Huntington Technology (No. 382 on the 2018 MSP 501 rankings), the decision to make the switch came after realizing that the reactive, “all you can eat” style of service wasn’t cutting it.
“We found that our tech-savvy clients were looking for more technology and business strategy expertise, rather than in-the-moment, break-fix services,” says Steve Krasnick, president and owner of Huntington Technology.
So, Huntington perked up and listened, and set out to take the plunge. In 2017, the company hired a business coach to help transition from break-fix to the managed services/MRR model.
“We wanted someone to help us better understand our revenue streams, set goals, and determine a growth strategy,” says Krasnick. “This process has helped our management team focus on ways to increase sales, review and improve internal processes, empower and incentivize our internal team, and approach new opportunities with a new mindset.”
Since the switch, Huntington has refined its process and now has two highly effective managed-service plans. One is called “HT Essentials,” which is the company’s minimal level of coverage. That plan covers the installation of an intelligent remote monitoring and management (RMM) solution as well as centralized antivirus protection. This allows Huntington to effectively manage the endpoint. The second managed-service plan is called “HT Total Care” and includes the RMM tool, centralized antivirus and unlimited remote support for the endpoint. Huntington’s “Total Care” clients also have a bucket of onsite hours that can be used throughout the year.
“We have been offering the Essentials and Total Care plans for over a year now,” says William Bluford, vice president of Huntington Technology. “We recognized that the break-fix model was just not reasonable or profitable as clients were using a lot of our time and we would lose money on some of the agreements. Long-term agreements are more scalable, and having that fixed monthly fee helps us forecast and plan ahead like never before.”
Huntington’s original agreements used to be just one-year contracts, but they now propose three-to-five-year agreements with built in annual increases. The company found that asking a client to sign a new agreement annually was difficult and the renewal process would drag out for several months. Not exactly sustainable.
Huntington also changed their pricing model from per device to per user. They found keeping track of the users for a client was easier than keeping track of the various devices.
“Consider the benefits of the MRR solution,” urges Bluford. “Having a steady, predictable stream of income and the ability to provide our clients with the full gamut of IT support has really turned the game around.”