Five Ways to Survive a Double-Dip Recession
MSPs by and large fared well after the 2008 banking crisis that sent the economy into a dive. Many customers saw managed services as way to control IT costs at a time they needed to tighten budgets. As the economy potentially heads for another slide, you have to wonder what the effect will be on providers of managed services and cloud services. Presumably, since clients have become dependent on remote monitoring and management to keep their daily operations running smoothly, you wouldn’t expect MSPs to suffer terribly from the second half of a double-dip recession.
Cloud services, however, are another story. Clients may view them in some cases as an add-on and, as a result, delay deployments. But if they view them as replacement technology integral to business operations and strategic goals, the adoption of cloud services could continue mostly unabated.
Five Survival Tips
Whether this new downturn, if it happens, will leave service providers unscathed remains to be seen, but providers should take precautionary measures to protect their businesses.
Here is a list of five survival tips:
1. Review cloud offerings: Whether you have already started offering cloud services or are still in the discovery process, this is a perfect time to thoroughly investigate available options. Check out the vendors you are considering and their financial health, review the margins they are offering and determine whether their services complement your existing competencies. Most importantly, you must assess the market. You know your clients better than anyone, and you need to use that knowledge to make sound decisions on which cloud offerings make sense for them.
2. Update marketing strategy: Marketing is fundamental to the success of any business, and it is especially important in emerging areas, such as cloud computing, which require a fair amount of customer education. Go over your email lists, website content and scheduled phone and face-to-face conferences. Is your message clear and are your offerings well-defined? Are your customer communications in jargon-free language that non-IT people understand? The better you are at this, the greater the chance you have of retaining customers and getting them to up their investments.
3. Sell more: This is an obvious one, but sometimes service providers expend a lot of energy on finding new customers without putting enough effort into persuading existing customers to buy more. If the economy is getting worse, timing is important. Before clients get into cutting mode, approach them with new services that will enhance their IT environments, make them more productive and save them money in the long run. Replacing some legacy assets with cloud services may just be what clients are looking for.
4. Get paid: Managed services have brought order to what was often a chaotic approach by service providers to billing. Fee schedules are wonderful for cash flow, but you must make sure payments come in as scheduled. Also take the opportunity to review whether existing contracts bring in enough revenue. Are you charging enough to turn a reasonable profit? If not, make a note to renegotiate at contract renewal time. Be cognizant of your Days Receivable Outstanding (DRO) and make sure it doesn’t start climbing on you. Make sure you know which clients are continually lagging in paying. Sometimes all it takes is a quick note or phone call to ask the status of your payment to make sure your clients don’t delay their payments to you. If they are having problems, you will probably find out by just asking for a status. Offering an additional 2 or 3% from prompt payment discount won’t help in these cases.
5. Drop losers: It’s never easy, but sometimes you have to fire a customer. If what you do is never enough, the customer becomes a drain on your resources and you end up taking a loss, there is no point hanging on to that loser account. If you have any of these, put the client on notice so you can focus on lucrative existing business and finding new clients.
Maybe we’ll get lucky and the economy will hold up. But even if the economy shows strength, you are still bound to benefit from these survival tips.
Maurice Saluan is senior VP of sales for Zenith Infotech as well as seasoned sales veteran in the managed service arena. Monthly guest blogs such as this one are part of MSPmentor’s Platinum sponsorship. Find all of Saluan’s blog entries here.