Although a customer may not have initially been interested in backup or compliance services during the sales cycle , their needs will change over time . Plus , once they start seeing how much value they ’ re getting from working with your MSP , they ’ ll be much more open to expanding the relationship .
For MSPs , not pursuing cross-sell opportunities within their current client base is a huge mistake . The costs to win additional business from existing customers is negligible , but cross-selling can dramatically improve an MSP ’ s MRR .
With customers already in the fold , MSPs can assess each client to see where opportunities for expansion lie . This includes proactively checking to see if the client ’ s security is adequate , if they are planning for backup and disaster recovery , or if they are undergoing a digital transformation that requires additional cloud services .
Pricing For Profit
Another area where MSPs aren ’ t always maximizing their margins is pricing their services . The underlying rationale for their price tags is often a hodgepodge of formulas and approaches .
Some MSPs are purely driven by what they see competitors charging . Others try to guess what the engagement will cost them , tack on some margin , and present it to customers , and some simply ask customers what they can afford and try to make it work .
There ’ s no reason to adopt such a slapdash pricing strategy . By doing a little bit of homework , you can follow a standard formula that always nets a healthy margin :
• Calculate the cost of the tools required to manage the account .
• Tabulate the labor required for proactive services ( such as monitoring endpoints or installing patches and upgrades ).
• Tabulate the labor required for reactive services ( e . g . fixing stuff when it breaks ).
With these figures in hand , MSPs can add it all up , divide it by the number of seats , and see exactly how much it ’ s costing them per seat to support each type of service . Take that number , tack on a 70 % margin , and the pricing is all set .
Of course , not every MSP is already tracking these metrics , so it might require some effort to complete this exercise and create a systematic way to assess your expenses . But without that underlying cost data , any pricing calculations are essentially being done blind . MSPs are inevitably undercounting just how much it ’ s really costing them to deliver and , therefore , underpricing in most cases .
Charge what your services are worth and don ’ t be afraid to turn away prospects or fire clients that don ’ t match your model . Every bad deal with low margins is taking up bandwidth that could be spent landing and supporting customers with higher margins and greater upside .
Mandating Standardization
Unless you ’ re lucky enough to have a startup knock on your door and ask for help from day one of their business , MSPs are inheriting a potpourri of legacy systems when they onboard a new client . But just because a customer is using a particular solution before signing on doesn ’ t mean MSPs must settle for the status quo .
Every additional variant an MSP supports is a direct hit on their ability to maximize profitability and efficiency . So , if your new client is using a firewall , server , or anti-virus solution that you don ’ t typically support , your staff are now going to require additional training and must keep tabs on new patches , upgrades , security alerts , and firmware updates from multiple vendors . Then there ’ s the impact of “ switching costs ” as your staff shift from one vendor ’ s platform to the next . And , of course , these systems require monitoring with a variety of dashboards that may not integrate well or use common terminology or user interfaces .
MSPs should make their lives — and the lives of their staff — easier by switching clients to their preferred solutions as part of the engagement . Most customers don ’ t really care about which vendor ’ s solutions they ’ re running on ; they just want things to work . If a particular prospect is unwilling to make the transition , MSPs should seriously consider walking away from the opportunity . While that additional revenue is nice , supporting multiple vendor solutions directly impacts profitability and the ability to scale efficiently . With this approach , staff only need to get certified on a limited number of platforms , and the business is primed to fully exploit the benefits of automation .
MSPs also shouldn ’ t be afraid to approach existing customers and get them to switch to their preferred solutions . Even if that results in losing some business , it will pay off in the long run as engagements become more uniform , automated , efficient , and profitable .
Exponential Capacity Thanks To Automation
Many MSPs are pretty small operations — more than one-third have fewer than 10 employees . But that doesn ’ t mean they have to hire an army of minions to accelerate growth .
By standardizing on a comprehensive tool set supporting the full range of IT services they ’ re looking to provide , many routine tasks can be automated . This frees up their limited staff to focus on the hard , interesting challenges , letting day-to-day matters run on autopilot much of the time .
Automation enables MSPs to increase their book of business without ramping up headcount . This leads directly to increased profits and potential for growth .
Integration For The Win
Core applications like remote monitoring and management , professional services automation , and IT documentation are table stakes for any MSP . Unfortunately , many MSPs treat these as discrete tools in their arsenal .
But amongst high-growth MSPs , 80 % believe integration between core MSP applications is important , and 92 % connect this integration to helping them drive better bottom-line profits . Adopting a common platform for as many services as possible saves MSPs time and money , and there ’ s no better place to start than with the most commonly used apps .
Remember , time is money ! Your staff only has so many hours in a day , so devising ways to get the most out of them by eliminating inefficiencies is key to increasing margin on every engagement . n
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