By Ashley Ogilvie

Only about one-third of MSPs target specific verticals. The rest? They take a shotgun approach to business development. Targeting specific verticals as a business strategy brings a competitive advantage; it allows you to develop core competencies specific to each market, and it allows for repeatability. You’ll be able to create value-dense relationships, meeting customer needs in a way that competitors that don’t specialized cannot match.

That said, targeting verticals only works in the long run if you nurture those sources of competitive advantage. Here are five tips on how to do that effectively.

1. Identify unfilled needs: Before you start targeting a specific vertical, consider these three questions: Which sectors are currently unserved? Which lucrative sectors are poorly served? In which sector does the majority of your client base already exist?

Success with verticals is all about identifying urgent yet unmet needs that you believe you can tackle. If you want to take on a well-served vertical, make sure there’s something you can do better than your competitors. Specialized organizations that are well served are unlikely to switch MSPs just based on price. That’s good news if your competitors are weak or if you have IP they don’t, but barring that, try to identify a vertical with limited competition, perhaps one that hardly knows it needs an MSP. Think outside the health care/retail and hospitality/finserve/SLED box. Figure out an emerging market, then effectively convey the MSP value proposition.

To determine which sectors you are capable of serving, and which needs you could meet that aren’t being met already, takes an investment of time. You need to get out there and talk to current and potential clients. Spend a day in their life to identify current pain points or unmet needs.

If you already target a specific vertical, consider the core competencies used in serving that vertical that can be transferred to another. For example, if you serve the legal vertical, you might have competency in compliance, so find other verticals with high compliance requirements.

2. Become the expert: To strategically (and successfully) target a specific vertical, you must know as much as your client does on that industry. The more of an expert you become, the more your clients will rely on you and seek you out for more business. You might have to take courses in a field to build a baseline level of knowledge, or you might need to hire strategically. You’ll definitely need to talk to companies in the industry (read: time investment). 

Certain sectors, such as health care and retail, have laws that require specific compliance. If you decide to target the health care industry, your expertise must fully cover HIPAA compliance before you can have the first sales conversation. Ditto for PCI with the retail customer. Show that you deeply understand the environment your target vertical operates in, and you’ll gain trust that much faster.

Moreover, ensure you are consistently on top of the technology trends in the vertical. In health care, IoT is increasingly popular — apps and connected devices are transforming how health care is delivered. However, in our experience, not nearly enough MSPs currently state that IoT is a top revenue opportunity for them. Essentially, whichever industry you choose to target, you must also align yourself with the growing trends in that sector.

3. Learn about your competitors: Being the subject expert is only half the battle. You also have to be an expert on your competitors. How do other firms compete in this space? What needs are they missing that you could instead fulfill? What are they charging? Verticals need to be approached strategically, and understanding your competitors’ behavior will help you identify areas of weakness that can be exploited and opportunities that are unserved, even in verticals that are already targeted by multiple MSPs. As Sun Tzu said, ‘If you know the enemy and know yourself, you need not fear the result of a hundred battles.”

4. Expand geographically: Unless you’re in a very large city, geographic expansion goes hand-in-hand with a vertical strategy. How prepared are you for the possibility of serving customers hundreds of miles away? In a recent survey, 43 percent of MSPs state that expanding geographically is not a current goal, but that they are open to the idea. Remain one step ahead of your competition by going beyond simply being open to preparing for and critically considering how to pursue geographical expansion if the opportunity arises. The structure of your business changes when you face the task of managing a complex customer business remotely, putting people on the road or hiring in distant locations, so the decision to target specific verticals comes with other strategic implications.

5. Prep to become the CTO/CIO: IT touches everything now, so be proactive in linking your IT service offerings to legal/regulatory, security, IoT, the supply chain and other needs. Work to become the go-to tech expert for the vertical, with extensive knowledge regarding how each aspect of technology works for the businesses in that space. Take a strategic view of how you can leverage your expertise to anticipate trends, and help companies in that vertical compete better. A good time to explore this angle is during  a quarterly business review  The formal virtual CIO business is also lucrative for MSPs.

Throughout this, documentation is going to be one of your most important tools. Not only will you want a comprehensive set of SOPs, but it also helps to be able to document client environments thoroughly — it builds trust in addition to helping your techs deliver superior service. For example, if you’re focusing on health care, build a set of flexible asset templates to help you document client environments more thoroughly and more easily than your competitors.

Ashley Ogilvie is a content writer for IT Glue. Ashley comes to IT Glue from a communications background and writes about MSP best practices and lean management.