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By adopting these strategies, MSPs can make the most of the current market growth—and outperform the competitors this growing market continues to attract.
February 15, 2018
Sponsored by Datto
The managed service provider market is growing, and the percentage of companies using MSPs is estimated to have grown from about 30% to 50% in the last year alone, according to CompTIA. However, the growth for individual MSPs varies considerably, just like their operating margins. High-growth MSPs often find that their profits don’t keep pace with their revenue because they’re not achieving adequate efficiencies of scale. Others are growing their top lines more slowly, but are achieving much better bottom-line results.
Here are a few strategic tips for MSPs looking to optimize growth and profits. By adopting these strategies, MSPs can make the most of the current market growth—and outperform the competitors this growing market continues to attract. (Check these and more out in our recent webinar.)
1. Define and Document Repeatable Processes: Technical competency is necessary for MSP success, but it’s not sufficient. To profitably deliver valuable technical services at scale, MSPs must make that delivery consistently repeatable. This repeatability can present a challenge to MSP leaders, who are often hands-on technical practitioners themselves. These leaders tend to expect their staff to apply similar competency and creativity to their jobs in the hope that this competency and creativity will make the business a success. Unfortunately, if everybody does everything differently, some will do it wrong. Some will also take more time to do it, which invalidates pricing. Inadequately defined and documented processes also make MSPs vulnerable to staff turnover, since a new hire can’t quickly replicate the behavior of someone who just left. MSPs must build repeatability into all aspects of the business, including technical operations and customer engagement.
2. Be Missional: It takes a lot of work to be a successful MSP. You have to put together great technology solutions, win over customers who can spend their money elsewhere, deliver responsive service, continuously coach a growing team of diverse personalities, and rigorously control costs. You may need more than just a profit motive to lead your company to MSP excellence. You also need a mission. Market-leading MSPs define their mission in various ways. Some define it as bringing technology excellence to their local market. Others define their mission as empowering a particular vertical to reap the benefits of a specialized set of technologies.
3. Pick the Right Partners: Channel players have always had to choose their partners wisely, but the criteria MSPs apply to their technology partners differ from that of VARs. Resellers are typically focused on attributes such as technical specs, brand power and discount structure. That’s because they had to close purchase deals with customers who knew what kind of hardware and software they were getting. MSPs are in a different position. They’re delivering services and optimizing customer satisfaction over time. Customers have less visibility into how MSPs deliver value, while MSPs have to be more concerned with the quality and efficiency of an ongoing engagement.
4. Build Recurring Revenue: MSPs spent a good part of their careers working as a VAR or in the systems integration business, where revenue often comes in large but sporadic doses. Transitioning to a recurring-revenue MSP model can be difficult, since monthly services income can be different than they are accustomed to, but the market is changing. SaaS and other cloud services offer customers a low CapEx approach to technology implementation. In fact, the sharing economy more generally is enabling companies to reduce capital investments in everything from office space to delivery vehicles. It’s important for MSPs to capitalize on this trend, rather than fight it.
If you’re an MSP looking for more tips to grow your business in a market of constant change, you’ve come to the right place. In our eBook The 7 Best Practices of Successful MSPs we offer various tips to optimize your business growth. In this eBook, you will learn why repeatable processes and procedures matter, how successful MSPs utilize a mission, the value of choosing a technical focus, and more!
Rob Rae is VP of Business Development, Datto.
This guest blog is part of a Channel Futures sponsorship.
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