Overcoming Top Barriers to MSP Growth

Managing growth is a common challenge for MSPs. They may struggle to identify new leads, or find that they aren’t generating real profits from new customers.

Growth requires discipline and focus, but there are obstacles that can impede progress. To get past those growth barriers, MSPs need to look at their business and their processes in new ways. Barracuda and TruMethods have partnered on an e-book, The TruMethods MSP Improvement Plan: 4 Areas You Need to Fix to Find MSP Success, that outlines some of these barriers to growth and how to overcome them.

Establish a Clear Plan

How do you want your business to look in five years? Ten? Odds are that your vision is of a successful company with a larger client portfolio. To get there, you will need to make internal changes to foster that growth. One of the biggest mistakes MSPs make is trying to reach those growth goals without the proper business planning.

First, establish a clear vision for where you want the company to be in 10 years. Then set shorter-term, three-year growth targets that are realistic and measurable. Identify what actions you can take over the course of the first year to achieve those growth goals, and then execute on them by setting quarterly priorities.

This approach makes it easier to map out a long-term path to success, while also providing achievable steps to take in the short term.

Your Packaging and Pricing Approach Might Be Wrong

MSPs often have a hard time when it comes to pricing. They charge too little for services and wind up eating the cost of excessive IT trouble tickets, which erodes their margins. Reshaping the pricing/packaging model will require MSPs to stop equating a lower price with a greater value. Customers will pay a premium if they’re getting the right service when they need it.

Calculate your current all-in seat price (AISP) and average monthly recurring revenue (MRR) per client to establish a baseline. Determine how those pricing levels affect your business across the entire client base. Focus on the value you provide, and price accordingly using the simplest calculations possible.

MSPs aren’t just selling individual line items in the IT budget. They’re providing business security, uptime, and reliability — all critical elements for your clients to successfully run their businesses.

Your prices should be based on the results you’re selling, not the individual components of the solution. Try to keep pricing levels to a minimum. Too many pricing and packaging levels make things confusing for your support staff and tend to drive customers to the least-expensive package.

Develop flat monthly rates that will be easier for your clients to budget for, and that will provide recurring revenue while positioning your company as a true partner to your clients.

Improve Lead Generation

Another obstacle to growth is lead generation. MSPs often don’t manage their prospects efficiently or effectively.

A successful lead program needs to be structured and measurable. Set a specific goal for first-time appointments (FTAs), as well as annual and monthly recurring revenue goals. Your revenue is directly impacted by close ratios and deal size, so the quality of each prospect lead is as important as the number of FTAs.

Work closely with referral partners to generate quality leads, and consider establishing an inside sales rep to focus on prospect development and database management. Most importantly, track all of this activity and measure your progress against your goals in weekly meetings.

Demonstrate Results

Remember what we said about value earlier? Focus your sales message on security, productivity, cost savings, and efficiency – and then demonstrate the results that you are experiencing through your reporting.

Selling technology simply commoditizes your products and doesn’t do much to improve your margins. But, showing your clients how your own unique approaches and processes can help them reach their own business goals will help you sell more to the right types of clients, and generate the required levels of recurring revenue.

Further, make managed services a priority, and dedicate staff and resources to increasing services revenue. Provide a complete solution, and charge a premium for the value you are providing them. You can’t really grow by undercharging your customers and then scrambling to provide a quality service with fewer resources.

With a structured lead generation program in place, a results-based sales approach and the right pricing, MSPs can better position themselves for growth that is both profitable and sustainable.