When VARs, MSPs and IT solution providers evolve their businesses to include a managed services practice, the goal is to deliver recurring services to ensure recurring revenue and recurring profit. While it’s not so easy as to convert to this model overnight, start by identifying an entry point to deliver managed services to a new or existing client and build your practice over time. Let’s take a cross-section of one year operating with this business model and discuss how you can build a similar practice layer by layer.
Naturally, the core of a practice is the managed services you deliver each day – from day 1 to day 365. While you are not providing every service to every client every day, you are monitoring, maintaining and managing your client’s machines, devices, and other technology infrastructure per the scheduled intervals of your agreement.
Installment Invoicing Equals Recurring RevenueIt’s common for an agreement to include installment invoicing, which drives recurring revenue –- the primary key to a managed services practice. If you commit to sending out monthly invoices before delivering the scheduled services, you drastically decrease disagreement of the invoice totals while increasing the probability your payment will be received before delivering services. Take it one step further like the most successful practices and accept automatic electronic transfers of funds (ETFs) or credit card payments, much like how you might pay bills in your personal life.
Secure More Work with MOR MeetingsWith the client’s payment made and your service delivered, schedule Monthly Operation Review (MOR) meetings with your client. The goal is to communicate what work you have completed during the last period to the person most responsible for daily operations, be it the service desk manager, office manager or possibly the small business owner. If you proactively deliver outstanding service so the client rarely experiences any incidents, they may not realize the quantity or scope of behind-the-scenes work to keep their technology infrastructure—and business—flawlessly operating. You also want to let them know you will do in the upcoming period. These MOR meetings are also the perfect opportunity to secure more work by talking about the needs and challenges in their business going forward, lending your consultative opinion and then presenting the solutions you offer.
Plan Your Work, and Work Your PlanIn Quarterly Executive Reviews, arrange to meet with the business line executives to form a Business Technology Advisory Council and to discuss strategy. Depending on the size of the client, you could be meeting with the same people from the MOR meetings (and choose to replace every third MOR meeting with a quarterly review) or an entirely different group. The differing objective is to understand and focus upon their business: Does your client plan to grow, maybe offering a new service or opening a new office and hiring more employees? Demonstrate how your business will help them achieve those goals and assemble a business technology plan to be implemented at the beginning of next year. This plan builds your one-time revenue engagements, then adds additional managed services opportunities and ultimately rolls up to your revenue budget for next year.
To act on the business technology plan, your suggested solution may call for a significant amount of work and products. Minimize enormous upfront costs for the client and still provide the exact solution needed when they need it by administering a lease for the new hardware or offering Hardware as a Service (HaaS). The fixed monthly fee for an agreed upon term can be added to your existing managed services invoice, minimizing the accounting work for the client.
Maximize Revenue with Single Services & TrainingFor ad hoc projects and unplanned situations, offer clients the ability to choose one-time services from your a la carte menu. For example, when hiring a new employee, the client can come to you first for the new desktop and handheld device and setup, instead of shopping from a big-box retailer or worse yet, your competition. Plus, managed services do not entirely replace break-fix needs, so your a la carte menu can include break-fix services too. This menu becomes the foundation for a catalog of services and products you sell. Publish it via an online storefront so both clients and prospects can view and purchase from your entire collection of solutions.
The last, and arguably underrated, component is training. Often, clients assume they don’t need any elective training and decline to add those items, even when implementing more complex solutions. Persuade your clients to take advantage of the training your practice provides by offering flexible schedules (like off-hours) and delivery methods (like webinars). Align your suggested training to the client’s products and software, and to conquer issues you discover during the MOR meetings. Training is a true value-added service that helps clients get the most—and the best—out of the solutions that you provide.
Each layer of interaction with your clients during a year contributes to your recurring revenue and profitability. A common entry point to building a managed services practice and model is the first sales effort with prospects, and meeting with executives to present your recommendations. Your first trial project could be remediating the environment to prepare for your support; then you bolt on managed services and engage into that first layer at day 1. But no matter your entry point, converting to this model with each client will bring you recurring revenue, recurring profits and recurring clientele for life.
Len DiCostanzo is Dean of Autotask Academy and Senior VP of Autotask Corp., developers of Autotask hosted professional services automation software, the VARStreet family of advanced quoting and e-commerce tools and Taskfire, a hosted service desk and ticket management system sold by IT solution providers for businesses of all sizes with internal IT resources.