10 Tips for Generating Revenue through Managed Security
During the past couple of years, a vexing trend has persisted for MSPs: The industry has been marked by shrinking net profits, even while net revenue for managed services continues to rise.
Though MSPs are required to offer more services than in the past—and their clients are penalized more for security lapses—some still try to win customers in the short term with a “competitive” pricing model rather than planning for long-term profitability. Some MSPs have never met a contract they’d turn down. While low prices might help you catch customers and convert them quickly, it’s no guarantee of future success.
But you have bills to pay today. These high-level recommendations are designed to help MSPs find the balance between sustainable profitability now and sustainable growth for tomorrow.
- Be the expert.
The cyber threat landscape is rapidly shifting. Stay current on the most pressing issues in the field by devouring the literature and listening closely to the full-time experts. For example, if you serve customers in the European Union, be their go-to resource for GDPR compliance. If financial institutions are your target vertical, understand the finer points of PCI compliance. When it comes to security, differentiate yourself through specialization.
- Bill like an expert.
For immediate income while building your business and reputation, consider gradually increasing your prices to align with your experience. You are the expert helping your customers navigate their unique business needs, after all. And remember: Never give away your services for free.
- Create opportunities for recurring revenue.
A recurring-revenue services model can prove helpful to your bottom line over time. On average, top performing MSPs generate 45% to 55% gross margins from managed services versus gross margins from product revenue.
- Have the difficult conversations about profitability.
Regularly evaluating the profitability of each of your customers is critical for growth. Determining which clients maintain the highest support ticket volume, or rack up the most billable hours, is a good way of doing this. This may reveal opportunities for additional offerings like bundled services, advanced managed security services, and more. Your clients’ business continuity will benefit in the end.
- Stick to your sweet spot.
A menu approach to your offering is OK, but it shouldn’t be so packed with services that you couldn’t possibly excel in all of them. To return to our first point, try to specialize where possible. If a customer can’t appreciate this, it probably isn’t a good fit. Your reputation could suffer from claiming to know what you don’t. And, over time, chasing a poor fit often costs more time and money, which leads to the next point …