Profitable Managed Services: Six Ways to Acquire Customers
One of the best presentations on managed services I've ever read reached my inbox on April 10. It was sent by Joe Paquet, VP of vendor alliances and relations at Axis Business Solutions, an MSP in Portsmouth, N.H.
Paquet took the time to summarize key learnings from the MSPAlliance's Managed Services Summit, held earlier this month in Atlanta. Slide after slide, he offers value tips to MSPs that want to get started in the business.
For instance, here are six ways MSPs can effectively acquire customers, according to Axis Business Solutions:
Paquet took the time to summarize key learnings from the MSPAlliance's Managed Services Summit, held earlier this month in Atlanta. Slide after slide, he offers value tips to MSPs that want to get started in the business.
For instance, here are six ways MSPs can effectively acquire customers, according to Axis Business Solutions:
One of the best presentations on managed services I’ve ever read reached my inbox on April 10. It was sent by Joe Paquet, VP of vendor alliances and relations at Axis Business Solutions, an MSP in Portsmouth, N.H.
Paquet took the time to summarize key learnings from the MSPAlliance’s Managed Services Summit, held earlier this month in Atlanta. Slide after slide, he offers value tips to MSPs that want to get started in the business.
For instance, here are six ways MSPs can effectively acquire customers, according to Axis Business Solutions:
- Expand your offerings to your existing base, since that approach is more profitable than acquiring new clients.
- For new customer acquisition:
- Define prospect profiles and targets
- Understand each client’s business and strategic initiatives
- Develop clear business cases for your offerings
- Strive for long term contracts with clear exit clauses
- Educate customer continuously on value of your company/services
- Charge for Change Management
- Become an industry expert
- Align your organization with industry best practices
- Use client testimonials
That’s a pretty simple — but valuable — list. Kudos for Axis Business Solutions for capturing the information, and thanks to Paquet for sharing it with the broader industry.
Expanding on #4, “Become an industry expert.” I would recommend speaking on web events and contributing a guest column to a web site or magazine. But I would warn against something that requires an ongoing commitment such as a daily blog. You have a business to run. Being an expert is fun. Being a business person is what gets you the profits.
I partially agree on the blog point. Only start a blog if (A) you have something unique to say (other than selling yourself and (B) you have the time to update the blog at least weekly, but preferably at least 3X a week.
It can truly become a full-time commitment — and full-time distraction — if you don’t plan accordingly.
Thank Joe. We use Axis for our purchasing – they are great!
I’ve got another idea on how to profitably sell managed services: QUIT DISCOUNTING SERVICE PRICES!
A report that just came out at RainToday.com shows just how bad our industry is at selling profitably. See my post at here.
Mike Cooch
http://www.smbitpros.com
Mike,
You stole my thunder … in a good way. You’ll see some content on MSPmentor next week about the very issue you raise: Pricing strategies.
Good to hear from you.
-jp
Sorry about that! I was so frustrated when I read the report that I had to get it out of my system immediately!
Lose the Race to the bottom…Or better said, Win the race to stay on top.
After attending the MSP Alliance event in Atlanta a couple of weeks ago, There was a quite a bit of talk about the precipitous falling of the price that a reseller can charge for Remote Monitoring and overall Managed Services.
People were sharing stories about the race to the bottom. I am here to say it doesn’t have to be that way if you are willing to work hard at building a solution that your customers will consume each and every month.
I would like to offer some suggestions to help us all maximize the price for which we can sell our knowledge, time and service level for maximum return.
The next guy that asks me what I charge for 30 desktops and two servers, I going to punch in the nose. Nothing will drive prices faster to the bottom with a rate-card model of pricing.
What happens if I told you that those 30 desktops and two servers were in business that made $80,000 a day? Or what happens if I told you that the devices were located in a Real estate office just down the street? Do you think that you would price the opportunity differently? What if they were running Server 2000 or Server 2007?
There are so many factors that need to be considered in the pricing of a comprehensive IT Support plan that it is mandatory that a Best Practice Assessment is done. Not to learn about the Hardware and Software that is running, though that is part of it. More importantly, we need to clearly understand the business drivers. Does the customer value their data? How does the IT infrastructure influence the hiring and firing of employees? How does IT integrate with Accounts Receivables and Payables? Could improvements in access to this type of data improve the business? If so, what is the value of that improvement in real dollars? Can an efficient running IT infrastructure help the company save money? What do the printers cost per month to run? We can usually find $200-$2000 per month in cost savings by looking at the phone bill and printing cost alone.
What is the cost of down time? Get the owner to validate what it would mean in dollars and cents to lose connectivity for 1 hour? 1 day? What is the expected response time from your team?
Though you certainly should do your homework about the customer and the industry, are there compliance issues that the company is faced with in their industry?
This leads me to another point; you need to work on becoming an industry specialist. This can be accomplished in a variety of ways. The best MSP, though they may serve many different types of customers, always present themselves as a specialist in the industry. For the same reason that you take your car to a mechanic that says he specializes in your brand, owners, CEO and CFO’s want to know that you have an understanding of their business.
Ask questions of the owner to get an understanding of what they are looking for in service provider.
Are they looking to use IT to help make money? If so, outlining projects around CRM, the mobile worker, sharing of data and marketing efficiencies might be prudent in your presentation.
Are they looking to mitigate risk? Then security, compliance, multi-skill set with comprehensive reporting might be the best way to present your solution.
Are they looking to save money? You need to be careful of this mind-set. If they are looking to your services as a way to reduce cost from a current provider or internal IT staff make sure that you validate what type of savings they are looking for? What do they not like about the current level of service? What would they expect to be receiving for that price? Don’t do the work on a competitive bid just to have them through it in front of their current IT provider and say match it or else? I encourage all MSP to charge for their advice that is provided in a best practice assessment. Apply the charge to first month of service. If they push back in paying for your professional opinion well, that says a lot about what the future might hold for you with this prospect…Get out while you can.
Are you new to the industry? If you are just making your way into this model of business, I would like to warn you that Managed Services is probably more of a value to you then your customer. Yes, more valuable of a business model to you than your customer. It is important that you understand this.
Though your cost of delivering the services might be reduced you should not feel like you need to extend this cost savings to the customer. In fact, I would say that you might be able to justify increasing the cost of services and relishing in the gain of time that you will gain.
Now that you have a better understanding of the IT infrastructure and business objectives of the company you are now prepared to put together a proposal that clearly identifies three things: First, your understanding of the problem. Second, desired outcomes of the management and lastly, a plan of action to help achieve the goals. If your proposal is accepted then and only then are you ready to put some numbers to the total solution.
When you deliver the pricing, it should be done in such away as to specifically address the problem, highlight solutions and be easy to understand.
Mr. Owner, as a specialist in providing comprehensive IT support in this industry we have a plan that will help you achieve the goals you have shared with us. For the fixed fee of $3000 we will be able to achieve all of the items that we outlined in the proposal in a timely manner. Your employees will be more efficient because of X, Y and Z, we can help you sell more with the implementation of A, B and C and you’ll be able to sleep knowing that 1, 2 and 3 are taken care of and backed by powerful reporting.
In the book, Good to Great, written by Jim Collins, the opening sentence is one of the most powerful. “Good is the enemy of Great” all of us settle for good at some point in our lives, family and business when Great could just mean that extra step, a little more effort and a little bit more focus.
I want this to be a Great industry. Something that we can all reflect back on and say we did what it took to be Great. We focused on the things that we could be the best in delivering to our customer and we sought support and counsel in the areas that we needed to improve. Jim Collins book goes on to say that the best companies hired the best people it could find then set out on the developing the goals and agenda.
I look forward to seeing everyone at the top.
Mr, McKendrick….Please step down from the podium
Todd: It’s too bad you don’t have much passion for this industry and its continued success 😉
Thanks for taking the time to point out that we are doing “good” as an industry … but we shouldn’t settle for good.
I love your post, Todd. Our data backup business is not about the price – its about the value. I look forward to sharing the stories about how our margins grew as the market became more competitive 🙂
I love what Joe P is doing with this site – but must question Joe P (do you have to be called Joe P to be in the MSP Space ??) regarding his number 1 way to aquire customers as an MSP.
I fervently believe that any dilution in your expertise and offering is a dilution in the value your existing and potential customers will pay for. (Joe’s slightly contradictory No. 4)
Our business is a bunch of highly qualified and focussed guys in Leeds,UK servicing a Who’s Who of UK industry and Public Sector bodies. They don’t want for us to try and sell them any of the other 10’s of things we could sell them. They want is to manage their offsite backups – with dedication and unrivalled expertise.
And oh how tempting it is to follow Joe P’s No.1 and speed up the company growth to cover the fixed costs and investment….. Our customers listen to and value our opinions – they ask us about storage because they trust us and we know our sh** – on the service side – they ask us about everything service related because we bump into everything – but the minute I would try and sell them something other than “what we do” our relationship and our business is dead.
Thanks for the advice but we will stick to what we know.
Hi Simon: Great to hear from you.
Just a quick point of clarification for readers who are less familiar with MSPmentor: Joe Panettieri (me) is the guy who edits this site. Joe Paquet from Axis Business Solutions is the person who contributed this list for group discussion.
Are you adding any additional backup-related services to your base services? One thing I’ve noticed is a lot of MSPs are introducing managed storage — so I’m wondering how you differentiate.
Hi Joe – sorry for adding to the confusion with my Joe P quip 🙂
Managed storage is a nightmare market in my opinion. Amazon S3 has already imho murdered this market for value seeking MPS’s – a strong brand, decent infrastructure for $ cents per GB.
Where we see the add ons are in speed of restore, and full Disaster Recovery (DR) to an easily accessible environment – which the wonder of VM allows us to offer based on hugely scalable platforms for not much more investment.
The days of the old fashioned “dark site” are limited – more and more people will rely on a virtual DR environment, accessible anywhere through IP, to be hosted and managed by a specialist backup service provider.
I hope 🙂
Simon: No need to apologize. This site is designed for interaction. And a little humor can go a long way in the IT market.
Have you really seen Amazon S3 (Simple Storage Service) begin to impact the managed storage market, or is Amazon more of a long-term concern?
I think that the Amazon S3 offering actually helps the MSP market. Take a look at what Digisense is doing with this solution. They are providing a business level remote backup and archiving solution and don’t even offer the storage rather they integrate with Amazon S3 and the MSP can then decide to either markup the Amazon service or have the customer pay Amazon directly. This may seem that the MSP is missing out on a lot of revenue potential, but the reality is that the small MSP does not usually have the billing systems in place to start charging customers a per GB solution. This allows the MSP to focus on the value they provide around the planning and management of the solution rather then how much per GB they are going to make. MSP’s no longer need to build out a giant infrastructure to start selling a solid remote backup solution.
I am just a backup and recovery guy so everything I say and do is tainted by this :-). I’m also in the UK so again this side of the pond is very different (and so my US friends tell me sooooooo much easier than the bear pit that is US managed services) :-). I have also been at this since 2001 so already show terrible signs of ageing…..
As a general point I would say that offsite backup has already experienced many of the cycles that other MS offerings are starting down the road.
The digisense thing is interesting, although I hadnt known the offering until you mentioned it. My gut reaction is that the barriers to entry for offsite backup providers ticks a few notches lower – you no longer even need to have a data centre/storage infrastructure because Amazon are tasked with taking care of it. Joe P has already (pretty much correctly imho) stated before Christmas that offsite backup is already a commodity.
And there begins my point.
We see people using S3 all the time. They are generally small sub 10 user networks who see it as a cheap backup strategy to get their data offsite and tick all the boxes. BUT HOW DO YOU GET YOUR DATA BACK – QUICKLY?? The S3 SLA is not going to support you – how do you get 20-500 GB to your customer – NOW ?? Over DSL this restore will take 4 days or more – 4 DAYS ??? But they need mail restored – now – and they need their CRM back – now – and they need Quickbooks etc back – NOW. You are providing YOUR customer a backup/DR solution and they will be shouting really loud for you to deliver.
Trust me. No-one shouts louder than a customer who thinks they have lost everything.
As an MSP beware of offering a backup service that could undermine the whole of your other efforts on that customer. “X MSP was brilliant at hosted mail and managing my network but I had a corrupted accounts system and I didnt recover it for 4 days…….”. We have a client who processes 1,000 orders for peripherals an hour. 4 days lost invoicing would – literally – kill their business.
I 100% would argue that any remote backup solution based on S3 storage is not solid. It is the cheap end of the cheap end. There already exists some big company backed entry level remote backup providers such as Mozy and Carbonite that do have some traction – please think long and hard before relying on an MSP who has no control over the recovery process.
IMHO, the list is incomplete without #7, Use Online Marketing Effectively — meaning, if I search for a service provider on Google, do I find your company’s home page?
Try using a search term like “Find a Managed Service Provider” and view the top organic listings (not the paid Ads). Ask yourself, what are these MSPs doing that I’m not?
Why should MSPs become savvy online marketers? According to the latest market studies from the CMO Council, Forrester Research and others, the quest to find a best-fit business technology solution provider most often starts with a keyword search on Google.
That said, you would think that marketers are shifting their limited budgets to follow this trend. Again, research indicates this is typically not the case. In fact, most MSPs likely still use either direct mail, telephone cold-calling, and other methods that have proven to be ineffective.
It’s partly human nature — people stick to what they know, even when they know the predictable result is less that satisfactory. I predict that the seventh way to acquire customers, online marketing, will move up the list of all MSPs… eventually.
The smart ones already have begun to leverage the online channel for prospective customer relationship development. We know, again from market research, that selling managed services is clearly an educational process for the vast majority of new buyers.
Therefore, your website content must inform and guide your prospective customers. My point: if your online presence doesn’t systematically address the “buying facilitation” needs of your prospects, then you’re missing a huge opportunity to differentiate your business in the marketplace.
You want a Profitable Managed Services business model? Get your cost-per-sale in line with the market leaders. You can do it by becoming a savvy online marketer.
David: Great addition. For those MSPs that are just getting started with web marketing and PR, I strongly recommend the book “The New Rules of Marketing and PR,” by David Meerman Scott.
Side Note: David was among the guest speakers I recruited for an event last December attended by a few hundred VARs. Definitely a thought leader on Web marketing.
Joe, I’ve actually written a customer engagement primer entitled Twenty-First Century Marketing Communications that outlines the basic guiding principles that MSPs can start to apply to their online marketing efforts.
David H. Deans
David: Marketing is often the last thing MSPs consider … but it should be far higher on the “to do” list. Thanks for sharing that resource with readers, David.
-jp
As a small business owner myself, I’d say the search starts with a keyword search on google but it certainly doesn’t end there. MSPs need to network and with business people, not technology people. When an MSP tells me how what he provides helps me solve a business problem, then he has my attention for 2 big reasons 1) I care about my business and its problems not about technology (until it becomes a problem or a solution) and 2) He differentiates himself from the others who are more comfortable talking technology and its benefits instead of overall business benefits.
Its only in networking environments (or conversations with clients) that these conversations can start to take place so I can find someone to trust with my mission critical data. So online marketing is important I agree, its just the beginning of the search for a provider though, not the end of it.
Stu