Have You Updated Your MSP Business to Version 2.0 (or Higher)?
After a long period of accelerated growth, even the most dynamic of entrepreneurs can find themselves in a rut. Some of the most successful organizations go through periods where they plateau, when profits or sales may still be growing but the operations seem to be on autopilot. It’s actually quite common for owners and executives to take a slight respite when things are going extremely well, slightly easing off the throttle and loosening their grip on the wheel. Corporate leaders often struggle harder when trying to keep up with the needs of a rapidly growing client base, which doesn’t leave a lot of time for them to focus on the future. As long as revenue continues to climb, there isn’t much urgency or motivation to work on future business planning.
And that can be a problem.
After years of sales expansion and client acquisition, many managed services professionals are experiencing this “plateau effect” and realize they need to alter their operations to boost momentum. Maybe the business may still be growing, but not at the same level it could be if the products and services portfolio were refreshed or the IT team’s skill sets improved and expanded. Whether your end goal is to build greater business value for a future sale or retirement, or just to hit a predetermined annual revenue target, sometimes an MSP has to shake things up to get over the hump. The biggest obstacle to success is sometimes success itself, where owners become content with the “status quo” and stagnation sets in.
That’s the point when the company stakeholders often take a step back to review current operations, survey unmet client and prospect needs, and revise (or construct) a long-term business plan. Those decisions may include hiring additional managers and other employees, merging with or purchasing another provider or selling out to another organization.
However, plateaus are often precursors to greater operational issues, so rather than hit the proverbial wall, MSPs should note embrace a stepped up planning processes. Believe it or not, the solutions are often simple, but in order to make the right decisions, stakeholders need to take a deeper look at the market opportunities and their organizational strengths and weaknesses.
MSP Success Requires an Ascension Plan
Regardless of an organization’s end goals, the route should be thoroughly mapped with specific plans of action for all contributors. Every stakeholder should set aside time each week to fulfill their part of the company’s strategic initiatives and keep their co-workers informed when obstacles or work schedules delay completion.
No matter how busy the operation is, by just setting aside a few uninterrupted minutes a day, MSPs can knock off a couple items on their weekly “to do” list. By the end of the month, all those activities can really push a project towards completion — without having to take work home.
By design, managed-services growth is exponential, with recurring revenue contracts creating a steady, monthly cash flow that adds to the organization’s market value. Even if selling the business isn’t in the strategic plan, as the company’s bank accounts grow, its prospects for success and expansion grow as well. Profits can be used to add employees and new services, and the organization’s financial situation will look attractive to suitors and potential investors (banks and individuals).
The easiest ways for MSPs to increase revenue potential and business valuation, while fairly simple to implement, often require a substantial amount of time and energy. Each organization has to identify the most applicable approach for their particular operations, as well as their specific market conditions and clientele.
The three most likely ways to increase the value of an MSP business include:
1. Expand the portfolio. Few MSPs provide complete IT support for every one of their customers. While offering that comprehensive of a service and product portfolio may be too costly for most providers, from a training and investment perspective, adding a couple profitable new practices may be an option. An assessment of current client needs can help MSPs identify the best prospects for expansion, such as the current top practice choices of mobility and managed print services.
2. Target new vertical markets. A good way for MSPs to expand beyond their current customer base is to focus their efforts on a specific industry — but it takes a lot more than adding a specialized solution or service to be successful in a new vertical market. That good fortune only comes after a thorough assessment of the target audience needs, revenue potential, cost projections and potential competition. Trade associations and local business groups may make it easier to find the right prospects, but MSPs should take a close look at the opportunity before taking on a new vertical focus.
3. Geographic expansion. Just as much time and energy goes into expanding an MSP’s coverage area. While new regions offer fresh business prospects, they may also bring new competitors and a variety of personnel issues. Before extending geographies, MSPs need to consider the costs associated with hiring employees, extending technology platforms, opening satellite offices and executing their new marketing plans. If geographic expansion makes sound financial sense, it can likely be repeated in new regions with less of a learning curve.
This is just a small sampling of ideas contained in the new CompTIA Quick Start Guide, Six Steps for Building an Effective and Profitable Managed IT Services Business. Developed by members of our managed services community, this resource can help MSPs improve and fine-tune their organizations’ sales, marketing and operational activities. Get your free copy here.
Lisa Person is the director of member communities at CompTIA and is in charge of the Managed Print Services, Managed Services and IT Security communities. Lisa has spent the last twenty years in the channel, working on both the manufacturer and solution provider side. This experience allows her to identify industry pain points and act on initiatives that will positively impact the IT industry at large.
