4 Factors that Can Sink an MSP4 Factors that Can Sink an MSP
Feel like you can cruise for a while? The most dangerous times are those of plenty.
April 20, 2017
By David Walter
When your MSP business reaches a certain level, it can be difficult to expand due to simple complacency. You reach your “cruising altitude,” as it were, and at that point operational pressures cease enough that people relax when they shouldn’t. Businesses are like great white sharks — they must continue swimming, or they die. Any business, large or small, must continue to accrue profit and expand or it will eventually sink under the weight of four factors: natural inflation, loss of clients, competition and the cost of implementing new solutions.
Natural inflation: Your MSP business may be excellent, but it doesn’t matter how effective services are, natural inflation will continue to deflate the value of the dollar. Ten dollars used to be a fine meal at a decent restaurant. Today, $10 will hardly get you an appetizer. In a few years, the same appetizer at the same restaurant will be $20. Now, you can hike up your prices to match this inflation, but you’ll have to do it as the market rises; otherwise, you’ll lose clients. Even naturally following this curve may not be acceptable to clients, as they’ll have a different perception of the market, often seeing price increases as poor treatment even if they’re in line with inflation.
Client loss: The businesses you provide support for are going to diminish naturally over time. Some will be poorly managed and find themselves forced to close operations, which will mean you lose a client. Some will expand and require solutions you aren’t able to deliver. Some will get big enough to source their solutions internally. Some will be dissatisfied with service and move on to the competition, even if you’re doing a first-rate job. You can’t predict why. If you’re just drifting along and not securing new income streams through sales, you’ll be caught in the lurch. I’ve seen an MSP drift as long as two years or so without any marketing or sales initiatives. When such an organization loses a client, it suddenly becomes a crisis as they’re not prepared to absorb the loss.
Competition: There are always going to be providers who are trying to undercut or displace your business. New MSPs will hit the market and suddenly expand, old ones will revitalize their business models and bring something new to the table. Most MSPs are going to remain cognizant of tech developments because when properly applied, they return greater profit for less expense. For you to do the same, and remain ahead of the competition, you can’t allow yourself to drift.
New solutions: It can be expensive to upgrade service-delivery options. If you’re not continuously expanding, even if you do decide to compete by following cutting-edge trends, it won’t be cost-effective to do so if you’re not always attaining clients. You’ll have an upper limit to how much expansion your company can attain. With technology’s exponential development, you’re going to need to stay on board the development train to avoid becoming irrelevant. Nobody needs floppy disks anymore; if your organization specialized in their manufacture and dissemination, you’d be essentially defunct today. Smartphones will probably go the way of the floppy disk in the next 50 years. But what will be the next big change next year, and will you be able to provide services incorporating that change to your clients? Not if you’ve grown complacent and begun to drift.
Remaining upwardly mobile means keeping your selling division active and successful. You need to have marketing that reaches the prospects that constitute your primary constituency, and in a way that converts a statistically regular portion of leads into clients. Just like you should remain cognizant of tech developments, you should keep abreast of advertising and marketing innovations that allow you to reach a wider audience. Sitting still has a history of undermining successful MSP operations.
David Walter is the Marketing Director at MSP SEO Factory, a company providing IT marketing to businesses in the United States. Their expertise is creating managed services marketing ideas and turning them into original, optimized blog posts. David has 16 years’ experience in marketing for the IT industry, as well as experience in direct MSP marketing, internet marketing and article writing.
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