Starting an MSP business: Five things I would do differently
I started an IT support business back in 2004. It was largely built on a traditional break / fix model, but I gradually moved towards retainers and monthly fees, which is the direction the IT support industry now seems to favor.
In 2009, I moved abroad for a slower-paced life in the sun, and sold off a proportion of my MSP business. I still do some specialist IT consultancy, but much of my time is now spent writing about the industry.
In this article, I consider five things that I would do differently if I were restarting my MSP business today. Much has changed in the IT world, but most of these points would have been equally valid nearly a decade ago.
Though my business was perfectly successful, if I’d known then what I know now, I would undoubtedly have more money in my savings account. I also would have spent 2004 to 2009 experiencing considerably less stress!
1. Guarantee your revenue with “all in” deals
While it’s admittedly a harder sell to convince clients to pay a fixed fee for a comprehensive MSP service, it is far better for you, for a number of reasons.
The main thing is that your revenue is guaranteed. Sure, there will always be times on an hourly model when you experience a “bumper month” (often as a result of something going horribly wrong), but charging by the hour also means clients can cut you to the bone when they need to reduce their costs.
Also (and this is something I only realized when I started considering the sale of my business), guaranteed contracts increase the value of your firm. Regardless of how many solid years you’ve had, there’s no certainty the trend will continue if you don’t have tight contracts.
2. Outsource – don’t give work away
I soon lost count of the number of times I gave away programming and Web development work because it wasn’t something I was comfortable with.
If I were to do it all again, I’d be more inclined to take on the projects and outsource them to offshore providers via sites like oDesk and eLance. If you’re not comfortable with this, then at the very least make sure you send the work to partner companies who pay you generous commission.
3. Tone down the generosity
In my early days of business, I was always giving away a free hour here and there, replacing worn network cables free of charge and doing other “nice little things” for my clients.
While I’m not saying you should never do such things, I have learned that nobody really respects you for selling yourself short. Provide a service you are proud of and charge appropriately. If I had realized this when I started my business, I think I would have easily increased my turnover by 15-20% with no difference whatsoever in my client relationships.
4. Consider charging (a little) more
If you charge 10% more for everything you do, you make 10% more. It’s really that simple. It’s also a lot harder to put rates up than it is to put them down.
Obviously you still have to match up to your competitors, but think about your rates very carefully.
5. Set up plenty of commission streams
I am lucky to still receive various scraps of commission for things I implemented years ago: online backup solutions, antivirus products and webhosting deals.
The terrible shame, however, is that I could still have MANY more in place if I’d been just a little more proactive in my reselling and commission-generating efforts.
So don’t start work with a new client and just use what’s there. Take the first opportunity to move them to your preferred solutions, and the ones that earn you commission. You could still be earning that money years from now.