MSP TITANS CONT ...
To be clear , I ’ m not saying they ’ re lazy . More specifically , most of the smaller MSPs who aren ’ t profitable and feel “ stuck ” simply aren ’ t disciplined about practicing good business principles such as running their MSP by the numbers , clarifying who they want as a client ( and then being disciplined to say “ no ” to everyone else ), building a team that can execute ( instead of them doing the technical work ), and being disciplined about cost control .
Smaller “ stuck ” MSPs get myopic on operations and waste an inordinate amount of time and money piecing together a mash-up of costly technical tools versus staying focused on leading their organization with clear and inspiring goals for growth and preserving profitability .
Since all the Titans were either small MSPs that grew and / or are actively growing through acquisition , they have a lot of insights into why the vast majority of our industry are not growing or profitable despite the current surge of opportunities and demand for managed services , cybersecurity , and regulatory compliance solutions .
One of the Titans interviewed , Travis Mack , CEO of Valeo Networks , commented that many smaller MSPs are running a lifestyle business instead of a commercially viable business . “ How you run your business at $ 1 million is 180 degrees different than how you run it at $ 3.5 million . If you want to get to $ 5 million and above , you have to invest into learning the business end of running your MSP — not just technical skills but business acumen .” He continued , “ They want to be $ 5 million or $ 10 million , but their behaviors , decision making , and mindset , if you want to use that term , are all stuck back at the $ 1 million mark .”
That noted , there were some things that trended during my conversations that weren ’ t as timeless as the entrepreneurial drive . There were very specific moves and decisions the Titans are making now to ensure success in the short and long term . Those are the things I will talk about in this report .
SECRET # 1 : They ’ re Focused On Lowering Costs And Improving Efficiency To Preserve Margins And Protect Profitability
Like all MSPs , the Titans are dealing with high inflation and rising labor costs across the board — factors that are eating into their margins .
They aren ’ t afraid to raise prices — and all have increased their rates significantly over the last couple of years without losing their clients or slowing down growth ( a lesson in and of itself ). Tom Andrulis , CEO of Intelligent Technical Solutions , said , “ We had to go to some clients and significantly increase their rates . Most understood , and we kept them .” He continued , “ We had one client that went from $ 4,000 a month to $ 20,000 a month in fees , and they retained our services .” While that ’ s a big jump , Tom said that with labor rates so high and talent hard to find , you cannot afford to keep low-money clients because they not only lower your margins but distract your people from providing excellent service to your best , most profitable clients . He added , “ Raising your rates allows you to raise wages and keep your best people onboard and happy .”
However , MSPs have to be careful about raising prices too high or they could trigger churn and make it harder to compete for new business . There certainly is a limit to what customers will pay before they look elsewhere .
They also can ’ t cut salary and bonuses for their techs to increase margins because they know their employees have plenty of options to get paid more . If they fail to keep up with or slightly ahead of the salary requirements for their engineers , they will lose their best people .
Therefore , one of the ways they are preserving margins without pricing themselves out of the market is to become more efficient and lower costs in any way that doesn ’ t negatively impact the client experience . Here are the top three ways the Titans are doing this :
Selecting The Right Vendors To Partner With .
Several Titans mentioned they are consolidating vendors to get better pricing and preserve margins . One of the vendors that came up time and time again was Kaseya due to the IT Complete platform delivering more integration , which means more efficiency for their engineers and less complexity , which all lead to higher margins . Jason Waldrop , President , Managed Services of Red River , said , “ Kaseya is a great company to work with . I ’ ve been with them since the beginning and find they have excellent technology and are 100 % correct in the strategy of providing one easy , complete platform .” Many of the Titans agreed with this sentiment and feel , now more than ever , that it ’ s critical to lower costs and increase efficiencies .
This is similar to what Southwest Airlines did in having one type of plane , which made operations easier and less costly because they only had to hire pilots and crew members who knew how to operate one plane . They only had to buy spare parts for one plane . They only had to retain mechanics who knew how to fix and maintain one plane . Doing so made them leaner and more efficient than airlines that have the complexity of managing , servicing , and maintaining multiple types of aircraft .
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