There are many factors to be wary of as you grow your managed service provider (MSP) business. Preparing for issues before they happen can be the difference between clearing the hurdle and languishing in stagnation.
The following are seven common mistakes we see often—some are specific to the MSP model and some are general business obstacles. By making you aware of these, we can—hopefully—help you avoid them.
Many business owners believe there is no such thing as growing too fast, and in some business models, that way of thinking might work. However, for the MSP, there is always a balance that must be maintained between client volume and capacity. It takes time to hire capable techs and train them. If you gain too many clients too quickly, your work will exceed what your team can handle, and delays could increase beyond what clients are willing to wait for. The end result is they will look for help elsewhere.
One of the most excessive efficiency drains we witness in the MSP sector is businesses that do not standardize across their client base. Making sure your clients are using the same routers, printers, switches, servers, and workstations, etc., drives gains of efficiency by orders of magnitude when you are talking about fast-growing MSPs. Standardization can make training new techs faster and easier, and can also mean your processes for updates and configurations are identical across devices and software.
This aligns closely with point two, but to elaborate, what I mean here is standardizing your offerings to customers. We are all familiar with bronze/silver/gold plans, and there is nothing wrong with having three. The problem comes when three grows to six or even 10. This also applies to à-la-carte items, such as antivirus or backup. My advice would be to standardize on one product/service/vendor and keep it that way.
Hiring salespeople will have little effect if you are not properly creating opportunities for them through marketing. A marketing plan should act like a faucet, you can turn it up or down based on what your needs are at the time. Also, it consists of more than just advertising. Your marketing plan is the formula you use to attract new prospects into your business. Social media, cold calling, advertising, etc., are all pieces of your marketing plan—and over time, you should be able to perfect your formula to the point where you can calculate how much new business you’ll get for each dollar spent, or from each hour invested in your marketing activities. As a growing MSP, your main marketing job is to test all types of activities and measure them, so you can determine the yield for each type of activity. Once tested, you can use those that generate the most return for the least cost.
Key performance indicators (KPIs) are statistics you keep up with how your business is performing. For an MSP just starting out, focusing on just a few things—like revenue, profit, billable/non-billable hours, and monthly recurring revenue (MRR)—as a percentage of total revenue are a good starting point. If you watch these numbers, you will know if you are moving forward.
As your MSP business grows, start measuring more statistics in more detail as you add employees. Marketing efforts should be measured based on dollars or time/effort per opportunity generated. Sales should be measured by percentage of opportunities closed. Measuring the performance of your techs is a little more complicated. Obviously, higher billable hours are important for break/fix shops, and reducing time per ticket is important for fully managed MSPs. Ultimately, measuring the right behaviors will give you a clearer view of whether your business is headed in the right direction.
As any business grows, its exposure to liability increases in all forms. Making sure you are reducing liabilities includes everything from proper hiring practices to ensuring you have all the proper insurance plans in place. In many cases, MSPs are liable for some very expensive assets, especially client data. In this age of malicious attackers looking to exploit any data they can get their hands on, data protected by your security offerings will likely be breached at some point. Do your due diligence to protect your clients and reduce your risk, and carry all the proper insurance cover. Check with your insurance professional; they are trained to help you navigate these risks.
Many of the items above require the MSP owner to change focus from dealing with the everyday customer issues and requests to handling the health and well-being of the business itself. If necessary, block out time daily to accomplish something related to the items above. In addition, creating a growth plan using your KPIs and marketing plan is critical to mapping a course to the destination you want to take your business to. You will never get where you want to go without a plan. Very few achieve success randomly—most succeed after years of hard work that pay off down the road.
The analogy I used at the beginning (of clearing the hurdle) is appropriate for business growth. Many businesses are unable to achieve next levels of success because without a plan, or without working “on” their business, they simply cannot overcome that hurdle. If you want to take that step up with your business, make the time, test your activities, and track your growth. You will have a much better chance of success.
Eric Anthony is principal of customer experience at SolarWinds MSP. Before joining SolarWinds, Eric ran his own managed service provider business for over six years.
You can follow Eric on Twitter at @EricAnthonyMSP
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