As the world watches to see what opportunities a post-pandemic world brings in the coming years, many of us anticipate that the world economy will undergo significant changes and hopefully usher in a period of booming growth. If you are interested in starting a managed service provider (MSP) service, now is the time to do so. According to marketsandmarkets.com research data, the global MSP market will be worth $354.80 billion by 2026, growing at a CAGR of 7.9%.
The COVID-19 pandemic presented opportunities and challenges in equal measure for MSPs around the globe. Although some fared better than others, MSPs with diversified client bases were more resilient than those exposed only to hard-hit sectors like tourism and hospitality.
Additionally, as remote work became the norm, MSPs that offered mobility to the cloud and comprehensive cybersecurity services, outperformed peers who only had clients with on-premises service demands. According to the 2021 IT Glue Benchmark Survey, MSPs upped their investments in cybersecurity, cloud services, remote monitoring and management, and service desk to drive home operational efficiency and to meet the additional security vulnerabilities exposed by the sudden shift to remote working.
Various governments are aggressively pursuing digital transformation initiatives to modernize their IT infrastructure, strengthen governance and improve citizen services. It is expected that this trend will boost demand for managed services between 2021 and 2028 according to Grand View Research.
Overall, the MSP industry looks poised for booming growth. The pandemic has prompted even the slowest and smallest businesses to migrate to the cloud and digitize their work. Moreover, it is becoming increasingly common for companies to partner with MSPs than to set up and manage their internal infrastructure on their own. There will be greater demand for IT professionals as a result. According to an industry survey, MSPs expect managing a remote workforce, IT security, and business continuity and disaster recovery (BCDR) to be the biggest challenges for their clients in 2021.
Regardless of whether you are looking to start your own MSP business, move away from the break-fix model or grow your existing MSP company, this handbook will answer some of the most critical questions about how to run your business profitably. Drawing on decades of knowledge and experience in helping clients succeed, our team of Pulseway experts have created this document to help you achieve similar success. Happy reading!
Small business financing company, Guidant Financials, surveyed 2,400 small business owners in 2021 across the United States and found that despite the challenges of the pandemic, the best motivator among respondents for starting a business was to be their own boss.
The satisfaction of running and owning a business is unparalleled. Having a flexible schedule is another advantage of being your own boss. But as a well-worn phrase goes — "with great power comes great responsibility."
As an MSP owner, it is your job to ensure that the business runs smoothly and profitably. You need to hustle to find new clients and appropriately skilled staff, both of which are hard to come by. If you can strike a balance between the various levers vital to the success of your business, you will have the foundation you need to succeed as an entrepreneur.
Let's look at some of the most common reasons why people launch their own MSPs.
Many people make better progress while working independently. They derive greater satisfaction from running their own businesses than they would from a salaried job. The fulfilment they derive from being at the helm of their own company activities motivates them. About 43% of respondents to the Guidant Financial survey said they were "very happy" as small business owners.
Setting up an MSP can be a fulfilling and rewarding experience if you’re interested in the benefits it can bring and are determined to write your own growth story. Also, it allows you to create a unique work culture that reflects your value system and pace of work.
Some people find the repetitive pattern of a nine-to-five job uninspiring and dull. They often cite wanting to be in control of their time as the primary reason for starting their own business. Being self-employed gives them the flexibility to manage other aspects of their lives and devote time to their family and friends. When an enterprise gets going, it takes a lot of time to set it up and get it running. However, once it hits its stride, it has the potential to free up more time for leisure and passion projects.
Most IT professionals who launch MSPs do so because they are not only committed to developing the industry, but also because they have the skills and knowledge required to provide unmatched services. Running a successful MSP business requires industry experience as well as business acumen. Selling your unique offering can help you win more clients and guarantee financial stability for you and your business.
Once you’ve determined why you want to start an MSP, the next question to ask yourself is what kind of business plan you want to follow? Do you envision aggressive growth or would you rather sell it to another firm and pocket the proceeds? The first step towards driving your own MSP business in the chosen direction is to map out your strategy. Establishing a business plan will help you turn it into the success you want.
Here are some business strategies for MSP owners to consider:
Not every businessperson dreams of building a billion-dollar company. Big businesses come with major challenges and obstacles, and it takes considerable financial and technical resources to keep them going.
Keeping your MSP small is the best way to balance financial independence and individual freedom. It is not difficult for a small business to adapt to changing economic climates and customer demands. The buzzwords in the business world are agility and flexibility, which are qualities small companies usually reflect. Moreover, SMBs have fewer overhead costs, such as technology investments and employee salaries, so they are easier to manage. It is easier for them to manage their finances thanks to lower operating costs.
The primary customers of MSPs are small and medium-sized businesses. In a survey of 1,000 MSPs, most said that they support relatively small businesses. Approximately one-third of MSPs (38%) said they have a customer base of between one to 25 users while clients with 75 or more users made up less than 10% of an MSPs total client base.
While small business ownership is at one end of the spectrum, chasing aggressive growth is at the other end. If you want to grow your company aggressively, you will need to maximize sales and increase revenue frequently, which will require substantial investment that could send costs skyrocketing. However, those of you looking to pursue this path have encouraging data to fall back on. According to an IT Glue survey, the percentage of MSPs who cited "COVID-19 lockdowns" as their biggest challenge decreased from 74% in 2020 to 32% in 2021.
If you pursue an aggressive growth strategy, your business can quickly rise to the top and earn greater profits. However, if you lose control, things can fall apart just as quickly. Reinvesting revenue and earnings into the business is essential for fast-paced growth. Early on, these factors, combined with rising costs, may impact your profit margins. Until the company hits its first few milestones and achieves financial stability, high profitability expectations will have to take a backseat.
To keep up with the needs of your business, you need to constantly be on your toes. By laying down a solid foundation, you can master the twists and turns that are bound to come your way and achieve the growth you desire. But to do so, you must keep the following in mind:
Your business will thrive with the help of data. A thorough understanding of industry and market data will be beneficial when creating your business plan. It is vital to know what customers need before you decide what products and services to offer. Using data to identify growth opportunities and risk factors will help guide your business in the right direction. When you have more information, you can also plan your investments wisely.
A flexible and scalable business has a better chance of adjusting to changing tides in the marketplace. MSPs must be flexible to meet the changing needs and demands of clients as well as the economy. It is necessary to offer new services and improve the productivity of existing ones while maintaining a cost-competitive position. Having enough bandwidth to handle many customers at once and the capability to absorb costs if economic conditions change is crucial. Keep an open mind and be ready to shift gears when necessary.
Fortunately, we live in an age of advanced technology. Today, we have machines and tools that facilitate a range of business tasks and even perform them more efficiently than humans. If you want to grow your business profitably, don't be afraid to invest in the right tools. Having a reliable remote monitoring and management (RMM) tool will allow you to keep an eye on many clients even when you're on the move.
Pulseway assists MSPs to reduce downtime and set new standards of efficiency. It employs a mobile-first approach to enable technicians to fix customer issues wherever they are, offering great efficiency and flexibility. If you are starting out, it will even allow you to manage existing customers while you are out looking for new ones.
A lot of promising startups fizzle out because of rising costs. That’s why it is important to regularly assess your business. Growth should take place at a sustainable rate. Consider pausing and restrategizing if you feel expenses are getting out of hand and take steps to plug any leaks. For example, utilizing your tools (e.g. automation) in the most efficient way can help you manage increasing workloads without hiring additional staff.
It's never a good idea to put all your eggs in one basket. MSPs are subject to the same rules. When your business relies on just a few customers or just one service, it can suffer dramatically. It will be difficult for your business to recover financially if your big-ticket customers stop using your services. You could also find yourself at a competitive disadvantage if you offered just one service since clients would rather deal with an MSP that offers a range of services.
Not too slow and not too fast is a comfortable pace to grow your business at. This way you can stay alert to opportunities and take advantage of them even though you might not actively seek them out. With this effective business model, you can promote growth at a reasonable and comfortable rate, which in turn relieves the stress on your finances and employees.
You'll have plenty of time to establish a solid base before you move onto the next stage of growth. The extra time allows you to build a better rapport with your customers and improve your services. Consequently, your relationships with customers will thrive and service will improve. This model gives you the flexibility to grow your business while maintaining an enjoyable work-life balance.
Being a lifestyle entrepreneur is an exciting road to take. Even though lifestyle entrepreneurship is a new term, people have been pursuing it for a long time. Profit is NOT the primary business goal of a lifestyle entrepreneur. Yes, you read that right.
Rather than run a business for financial reasons, lifestyle entrepreneurs lead a business because they are passionate about the industry or subject and want to contribute to society. Their sense of accomplishment and gratification is enhanced when they do work they are enthusiastic about and which enables them to utilize their skills.
Often, lifestyle entrepreneurs are the sole drivers of their businesses, and they live off the income they generate. Despite its appeal, it requires a distinct skill set to be a lifestyle entrepreneur. To be a good lifestyle entrepreneur, you need to be flexible to adjust to changing demands. You need to be independent enough to handle things on your own and committed enough to achieve whatever you set out to do.
Practically speaking, even lifestyle entrepreneurs require a certain amount of revenue to keep their business going. They need to exercise financial prudence even though they may have noble goals and ideas.
To succeed on this path, you'll need good financial backing and the grit to persevere despite failure. In addition to getting more control over your life as a lifestyle entrepreneur, you can make a positive social impact as well.
Business owners who run organizations without hiring any other employees are solo entrepreneurs. They know the business from top to bottom and look into all aspects of it. These types of organizations are often modest and run from home rather than an actual office.
According to the IT Glue survey, the number of MSPs who are open to selling their business has increased from 15% in 2020 to 24% in 2021. This has reverted to pre-COVID-19 levels as veteran MSP owners would find it much more comfortable to exit their businesses as the environment improves.
If you intend to sell your business, your financials must be robust and profitable, preferably with a roster of profitable, loyal and satisfied customers. Potential buyers will seek synergies and profit opportunities before purchasing a business. The challenge is to shape your business to make it an attractive buyout target for other companies.
Why sell a profitable business? Some people are more interested in building a business rather than running one. In fact, some people's skill sets are better suited to creating a business rather than managing an ongoing one. They develop profitable companies and then sell them to the highest bidder. The proceeds of these sales are then used for personal expenses or invested into the next venture.
Individuals who build successful businesses from the ground up and drive them to profitability before selling them to another company are called serial entrepreneurs.
Companies hire MSPs because they don’t have the skills or desire to manage their IT infrastructure and recognize that this is not their core competency. Also, many businesses do not have the capacity to fully dedicate themselves to managing their infrastructure. Regardless of why they get hired, MSPs must focus on providing value to their clients through their services. In this section, we will discuss areas in which clients expect their MSPs to deliver.
A client looking to engage an MSP is looking for more than just freeing up some extra time. Their goal is to dedicate their resources to critical projects and ensure that IT infrastructure, which is the backbone of any business, continues running smoothly and without a problem.
Your job as an MSP is to make sure that the IT infrastructure of your client runs without a hitch. Recurring issues will tarnish your relationship with your customer, who probably wouldn’t bat an eyelid before abandoning your services if things don’t get better. It could also adversely impact your reputation and make it harder to win new clients the more people hear about your poor service.
To stand out from the competition, MSPs must strive to achieve impeccable customer service. Keep in touch with your clients, be proactive and respond to queries promptly.
Many clients will come to you for IT support because they lack expertise. By providing your clients with proper guidance, you can quickly be regarded as a trusted advisor. This moves the relationship beyond the purely transactional and creates the foundation for a long-term, mutually beneficial relationship. As IT professionals, you should always show your clients the best options for running their infrastructure and the most cost-effective approaches.
Research firm marketsandmarkets.com reports that MSPs in the DevOps space and those employing consumption-based pricing models will have a notable competitive advantage.
Your clients will rely on you for their IT needs, and you must anticipate and cater to their requirements beforehand. If your business is just starting out, don't be afraid to create custom packages for your clients. While this may be a time- and resource-consuming task, it will result in better customer service.
Help your clients scale their IT infrastructure according to their business needs and tell them about services that will help them streamline and modernize their business. Your ability to make a compelling offer depends on understanding your clients' business model and financial health.
Keeping your clients well-informed about the work you do is key to success. Your clients may feel that you are doing little or next to nothing if you don't provide them with regular reports.
Compliance is another area of transparency. Various industry standards and regulations need compliance when setting up an IT or cybersecurity infrastructure. This has become even more essential considering the recent explosion of cyberthreats. As an MSP, you are responsible for keeping the entire IT infrastructure of your clients compliant. Educate your clients on compliance rules so that they don't end up breaking the law or landing in trouble.
As cyberthreats become more sophisticated, security and compliance requirements are also becoming more prevalent. To keep up with the ever-changing landscape, it is essential that your MSP is able to demonstrate that it is fully compliant with all of the regulations that apply to it and its customers.
In an industry survey, about 69% of MSPs agreed that their clients struggle to comply with regulations, and the problem becomes more severe with new requirements. Because of evolving technology and less secure environments due to the shift to remote work, cybercriminals were more active in 2020 than ever before. Therefore, a significant percentage of MSPs have their clients turning to them for cybersecurity plans and best practices.
MSPs typically begin by offering endpoint and network management services. Over time, they either expand their service offerings or specialize in a particular area of IT. MSPs offer a wide range of managed services, and several factors influence which one you should add to your portfolio. You could choose services based on your expertise or location. In this section, we’ll look at some standard services requested by clients such as:
After starting your MSP business with essential services, you can choose to add or remove services according to your expertise and growth plans. There are a few things you need to keep in mind when creating your list of services.
Vertical integration allows you to carve out a niche for yourself in the market. It means that you provide services to a particular industry or profession. You could, for instance, offer services only to clients in the healthcare industry or focus on law firms. By doing so, you acquire a deep understanding of the IT needs of your focus industry, stay abreast of trends and tailor your services accordingly.
One of the keys to finding success as a vertically focused MSP is to diversify. The pandemic taught us that too much exposure to one vertical can negatively impact revenue. Diversifying your revenue streams can cushion the loss from one vertical with revenue from others.
An alternative approach would be to specialize in specific services rather than becoming an all-round service provider. This will allow you to accumulate in-depth knowledge and become recognized as an expert, which in turn will help you develop deep and long-lasting relationships with customers.
For example, you could become a cybersecurity specialist, disaster backup and recovery expert, or software-as-a-service (SaaS) expert. Multiple industry surveys project cybersecurity as the primary growth driver for MSPs moving forward. According to one survey, the demand for antivirus and antimalware will be the highest, followed by endpoint management security, OS patching, server backup and email security (including anti-phishing and anti-spam solutions).
It is not uncommon for well-established MSPs to shift their business model from technical services to consulting. Instead of providing MSP services, they analyze and study the business requirements of their clients and tell them how to design their IT infrastructure and what tools to use. Their mission is to help clients maximize the potential of their enterprise through properly configured IT systems.
Many MSPs with a well-established business let smaller MSPs use their infrastructure for a fee. By doing so, they can generate revenue from an existing system. Alternatively, small businesses benefit from having access to a well-maintained and sophisticated platform. They can start their business without having to invest heavily in infrastructure. It's a win-win situation for everyone.
An SLA is a contract between a client and an MSP that specifies service terms, responsibilities, issue-escalation mechanisms and penalties for missed targets. Additionally, SLAs include metrics used to measure the performance of the partner MSP. A contract is drafted to ensure that all parties understand the terms and to prevent disputes. An SLA should include:
Describe all the products and services your MSP will provide to the client in detail.
Performance expectations and metrics used to measure it are mentioned in this section. To grow, MSPs must monitor KPIs such as financial metrics and service desk metrics. A recent IT Glue Survey revealed that 75% of respondents who tracked KPIs reported revenues of over $1 million while 52% of respondents who did not track KPIs reported revenues under $1 million. What side would you prefer to take?
As a business partnership advances, disagreements and conflicts are not uncommon. An SLA contains guidelines on how to manage these issues. It will also describe how incidents should be reported, escalated and resolved. It is essential that clients and MSPs name contacts that can be contacted immediately if something goes wrong. When things go wrong, this will guarantee a quick resolution. Both MSPs and clients have responsibilities. Regardless of the circumstances, each party must be aware of its roles and responsibilities.
Automation and advanced IT management tools enable MSPs to keep an eye on their clients round the clock. Despite this, clients should know who to contact in case of an emergency. This section should also specify the hours of service.
You should have your SLAs reviewed by a lawyer before finalizing them. In addition to the contract details, they will review information about contract exclusions and indemnifications that could cause disputes later.
Besides helping you keep your MSP free from disputes or confusion when your client leaves, having clear terms for termination can make the process easier.
The SLA should detail all costs, including those for providing the standard service (whether it is computer-based, end-user-based or on-site) as well as the costs that could be incurred for issues outside the scope of the regular service. This could include emergency repairs or enhancements. Typically, this would be an indicative hourly rate. The average hourly rate for IT professionals in the Americas region is $101 to $200. This can range from $250 on the high side to $50 on the low side. In addition to the fee that you'll receive for your services, SLAs include the changes you should expect when services are modified. The SLAs should be clear and well-written. Although these are some of the standard features you should include, many finer details will vary based on your agreement with each client. Ensure that the SLAs are easy to comprehend and free of jargon so as not to cause confusion.
When developing client relationships, it's best not to over-promise. Don't make any promises you can't keep. This will hold you in good stead with your customers and help you build your reputation. Clients sometimes make demands that are quite difficult to meet. You can help them set the right expectations by educating them. It is better to under-promise and over-deliver than to over-promise and under-deliver.
It is also important to clearly outline the responsibilities of both the MSP and the customer to prevent issues from arising when the customer delays a task required for the MSP to perform their service. These issues often arise at the setup and onboarding stage, so it is best to preempt any such issues with a clear division of responsibilities.
How should you plan your business operations and pricing strategy to differentiate yourself in a competitive market? In this section, we will discuss topics geared towards making your MSP profitable.
In general, revenue is directly proportional to the number of customers you have. However, this isn't always the case. Client retention requires time, money and effort. The cost of retaining some customers may outweigh the revenue they bring in.
Routinely reviewing your client base will allow you to identify which customers have an adverse effect on your profit margins. If your contract with them is up for renewal, it could be advantageous to consider negotiating new agreement terms.
Taking the time to analyze the costs of each client is a wise move. Without close monitoring, it can be easy to fall into the trap of losing money on contracts, especially those negotiated when the business was young and you were keen to get customers on board.
A good customer service strategy can set you apart from other MSPs. Every day, thousands of new companies appear in the MSP sector, making it more competitive. It gives clients more bargaining power but puts MSPs in a bind when it comes to customer churn. Managing customer churn is a serious issue within the MSP industry, impacting profitability. It is caused, in part, by poor customer service.
By adding the recurring revenue from your billable employees to the monthly amortized costs of your infrastructure, you calculate your cost-of-service delivery. Divide the figure by the total number of endpoints or users to calculate the average cost per endpoint or average cost per user. Your profit lies between your actual cost of service and the price the customer pays. Your total cost should include everything from software licenses and hardware to operational costs and one-time fees.
Many MSPs slash their service prices in response to intense competition. As a result, they lose profit margins and find it hard to raise prices again. Try to justify the cost of your product instead of lowering it. To achieve this, emphasize the value of your brand and differentiate your products.
By selling on value rather than cost, you can maintain excellent service levels as well as give your services a perceived value in the market. In fact, some customers do lose respect for any supplier – not just an MSP – that continually lowers prices to win business. There is a feeling that if they can truly deliver at a lower price, why did they start out by offering a higher one?
About a quarter of 1,000 MSPs surveyed globally have a gross margin of 11% to 20% for cloud services while about 65% have a gross margin between 6% and 30%.
A company that wants to improve efficiency and profitability should streamline its operations. When you streamline your business process, you'll be able to achieve more with fewer resources. A survey of 1,000 MSPs found that only 16% of respondents had more than 100 employees whereas 63% respondents had less than 26 employees. Ensure your work process is simple, efficient and fast. Utilize all the tools you have available to the fullest extent so that you can maximize their efficiency in your business. Invest in upskilling your workers and make sure they know the responsibilities expected of them. Upskilling your employees can have a cascading effect on your bottom line. You'll see a significant increase in productivity when your team performs at optimum levels.
Business will have its ups and downs. You might feel tempted to expand after a few customer wins, but expansion comes with a price. Look at your resources and capabilities before deciding to expand. Scale up with each customer rather than getting ahead of yourself. Also don’t let the bad days thwart your ambition.
Clients typically start their MSP partnerships with simple network and connectivity services. As they scale, they require additional services such as storage, SaaS or cybersecurity. Your next step should be to upsell your other products and services once you have established a rapport with your clients.
Focus on your high-margin products and consider bundling them with your standard offering. This will decrease the cost of acquiring customers and increase profits. Cybersecurity is one obvious area where there is a demand and where customers are willing to pay for comprehensive services.
As an MSP, you might prefer specific hardware and software brands. Regardless of your choice, you need to review your vendor pricing and licensing deals regularly. By doing so, you'll be able to detect hidden costs. Always keep your eyes open for new vendors. You may find a better deal elsewhere. Developing into an astute entrepreneur begins with noticing and repairing these small cost loopholes.
The Pulseway MSP Toolkit is designed to help our MSP partners fine-tune their business model, generate leads and increase their revenue. The toolkit is built directly into the Pulseway platform and gives MSPs instant access to a vast library of tools, templates and information such as:
Using real-time self-assessment tools, MSPs can compare their pricing strategy and service offerings with their local competitors. Click here to explore the toolkit.
Profitability is the top concern of every MSP owner. But how can you, as an MSP owner, increase profitability while keeping service prices competitive? There is no single answer to this question. What works for one MSP might not work for another. But cracking the code usually involves working with the same ingredients, namely services offered, service pricing, location of the organization and customer needs. Staying abreast of a few pricing do's and don'ts will help MSPs increase their profit margin.
MSPs offer a wide range of services depending on their size, financial stability, location, expertise and demand. MSPs located in technology hubs and big cities could earn a better price by providing more services since demand is likely to be higher. On the other hand, MSPs located in less crowded regions could do better by offering basic services like remote monitoring and management.
The location and customer demand patterns should play a determining role in helping MSPs decide on a pricing model. A list of too many products will only increase your costs and could add friction to the sales process if your prospective clients are primarily small businesses with only basic IT requirements. Some simple market research could help you determine the demand for specific services in your area and direct your service development efforts.
A structured approach to bundling your services will have a significant impact on the success and profitability of your organization. It will not only differentiate you from your competitors but also impact your revenue and cost. A high-value bundle offers customers maximum value while giving you maximum profitability.
Industry research with 1,000 MSP owners and technicians across 50 countries found that half of the MSPs reported more than 10% growth in monthly recurring revenue (MRR) over the past three years. More than a quarter of firms (28%) reported MRR growth of 6% to 10% while about 16% reported MRR greater than 20%.
Market trends alone are not enough to design bundles. You must also consider the needs of customers and the economic environment. Ask yourself the following questions before adding a service to a bundle:
MSPs differentiate themselves more by the quality of their services than the services they offer. To state an example, the demand for cybersecurity managed services is high and is only likely to increase as more companies look to protect themselves against crippling cyberattacks. In such an environment, offering cybersecurity packages that are more resilient than your competitors will help you do better.
Additionally, this also answers question number two. MSPs that do not offer cybersecurity tools may be setting themselves up for failure. Cybersecurity services are in high demand, and MSPs can record higher revenue and profitability by offering this service. Another service area for which demand could rise is compliance. Increasing cyberattacks have led governments to tighten compliance regulations for IT infrastructure. Today, more MSPs are recognizing the value of providing compliance services to their clients. It has been reported that a majority of MSPs that don’t offer compliance services plan to add these services within the next two years.
Now to answer the last question. Some services, such as hosting, are capital intensive and require a heavy commitment. Although you might do well outsourcing these services to another MSP initially, the long-term impact of this practice on your profitability is not encouraging. Regularly review services that you outsource and evaluate whether investing in them will give you better returns in the long run.
There is a lot of talk about upselling to existing customers. The cost of sale to a new customer is typically around five to six times higher than selling to an existing customer. Before you add a service to your MSP, conduct market research to learn how many customers need that service. If you upsell the new service to your existing clients, it can be a profitable move.
Knowing your clients' IT infrastructure and their needs allows you to anticipate their demands and add services accordingly. It’s easier to sell a service that your customers need than trying to convince them to buy something they don’t understand. You can also draw on your knowledge of the industry to inform your clients about the new services that will make their organization more secure and efficient.
No two days are similar at any company. No matter how efficient or streamlined your MSP is, there will be days when work will swamp you like an avalanche. Contracts should specify the amount of work you’ll do for your client. It should also include charges and costs for any extra work that you are likely to do for them for exceptional cases. This is directly related to the productivity of your technicians and the efficiency of your service. If you need to hire more hands or invest in technology to get more results, then the costs for these contingencies should be spelled out in your contract and discussed with your clients.
The key to eliminating unplanned work is efficiency at work. Take steps to standardize work procedures and streamline your business operations so that you remove as many challenges as possible to your business growth. Also, try to anticipate contingencies that could derail the workflow. Planning can save a lot of money and time.
Some ways to eliminate unplanned work are by standardizing device configurations, standardizing policies and procedures, testing major patches before deployment, reviewing ticket logs, taking proactive steps to secure devices and systems using multifactor authentication, and automation. It is also important to review any unplanned work after it has happened to see if changing existing services could have avoided it.
The success of an MSP depends on its ability to price services correctly. There must be flexible pricing to accommodate the diverse needs of customers. We will discuss some popular MSP pricing models in this section.
It's the simplest and most common pricing method MSPs use. It is also easy for customers to understand. The MSP charges a flat fee for each device they manage for the client. It can include laptops, servers, printers or any other devices that need to be managed. The MSP sees revenue growth every time a new device is added.
Pricing per user is similar to pricing per device, except the MSP charges the customer a flat fee per user. The appropriate model depends on the customer. They could be small but have lots of endpoints. Ideally, you should settle for a model that works for the customer but gives you a realistic chance of future growth.
According to a global survey of MSPs, about 34% managed fewer than 500 endpoints, 53% managed between 500 and 5,000 endpoints, and only 5% managed more than 15,000 endpoints.
The foundation of value-based pricing is rooted in the idea that a service is priced based on the value a client derives from it. Many MSPs have found that many higher valued services find more takers than lower-valued services.
When determining the value of a service, you must consider the needs of the customer as well as your efficiency and expertise. You can get more value for a service than your competitor if you have more experience in that vertical or have positive feedback from other customers to share.
The size of your MSP will also determine the value you base on your services. SMBs will usually look for small and medium enterprises to meet their needs. However, as they expand, they might move to a bigger MSP who can offer them more products and better service maturity and experience.
Value-based pricing typically involves an MSP charging a single flat fee per client for the services it provides. There is no disclosure of the price of individual services in this instance. MSPs are actively adopting a value-based pricing model in response to the increasing number of clients outsourcing their IT requirements to them. It is a profitable pricing model for MSPs.
Under this model, an MSP only monitors a client's network and systems, and alerts them when problems are encountered. Budget-conscious clients prefer this service because it is cheap. As time goes by, MSPs can offer their customers additional services and encourage them to opt for a value-based model.
It is a subscription-based business model that is found in other industries as well. In this scenario, MSPs group their services into various bundles. These bundles are then tiered based on what they contain. The more comprehensive a tier, the higher its cost. MSPs typically offer three to four tiers. Individual services represented less than 11% of total revenue in a survey of 1,000 MSPs whereas Managed Services (subscription model) represented more than 50% of total revenue for a quarter of MSPs.
In this model, MSPs customize packages to fit the needs of each client. While it is good for the customer, it could mean margin erosion for the MSP. According to the survey mentioned above, 91% of MSPs believe that adding new services regularly is essential for their business.
The MSP market is crowded and each new company is devising innovative ways to market itself. The question is, how do you grab the attention of clients and make your MSP stand out? Here are some helpful pointers to get started:
The best way to differentiate your MSP is to deliver efficient and reliable service. This will keep your revenue and profit margins high and keep your customer churn low. If you target a specific area or vertical, good service will translate into word-of-mouth recommendations — the cheapest form of marketing!
You will have better prospects for your MSP if your range of services and expertise is broad and deep. More services mean more options for your customers as their needs grow. It is important that your customers feel you can grow with them. It would be a shame to lose them to a larger competitor when they are on the cusp of becoming more lucrative.
As technology evolves, so will customer demand and needs. For MSPs to stay modern and efficient, they must update and invest in the right technology. The right tools will assist MSPs in offering more services to their customers. Pulseway’s industry-leading mobile app is great for small MSPs with only one or two staff members since it allows them to fully function from anywhere at any time, meaning faster resolution for your customers.
A strong pricing strategy will help your MSP grow. You can increase your profitability by offering multiple pricing options to your customers.
According to an MSP industry survey of 1,000 MSPs, the average size of managed services contracts is less than $1,000. For about half of the surveyed MSPs, the average contract size is between $1,000 and $5,000 per month. About 3% reported that their average monthly contract was more than $10,000 a month.
Onboarding plays a crucial role in strengthening the relationship with your customers and establishing a tone for future interaction. If the onboarding process goes smoothly, your clients will feel satisfied that they made the right choice by choosing your tools.
A customer's onboarding includes everything from the point they accept your offer to the moment you start providing your services. There is a lot of documentation and paperwork to be done during this stage. Having an effective and streamlined onboarding plan will ensure that your clients face as little friction as possible during the process. A hassle-free onboarding process can also help reduce churn.
Our team has put together an essential checklist of seven steps for successful client onboarding. Before you begin the onboarding process, you should provide your client with a detailed timeline of how long it will take for each of these steps to be implemented.
Here is a link to our comprehensive onboarding checklist and listed below is a quick overview of the seven components of client onboarding:
Make sure to download the free checklist to know about each of the steps in detail.
An MSP contract details the responsibilities and services the MSP will provide. By putting the terms and conditions in writing, MSPs protect themselves in case there is a disagreement. The contract needs to be detailed and understandable. Let’s look at the elements that need to be included in a contract.
Growing your MSP business will increase costs along with revenue. Therefore, even if your business grows, your profitability will remain the same — or worse, shrink. However, by improving business efficiency in your workflow, you can boost profits without increasing costs. Let's explore some of the steps you can take to grow your business sustainably and profitably.
Without careful management, your costs will always outpace your income. Make sure you create a master budget detailing all your costs. Be sure to track every expense so you can identify the areas that require improvement.
Your employees are your greatest asset. IT professionals with the right skills can take full advantage of tools and software to boost productivity. The result will be higher profitability. A few talented people can accomplish more than a mass of average ones. Pay your talented professionals well so that they remain loyal to you.
About 46% of respondents to the IT Glue Benchmark Survey cited hiring good techs as the biggest challenge facing MSPs in 2021. This is up from 20% in the 2020 follow-up survey and indicates that the industry is more robust now and on the growth path.
As a result of the widespread shortage of skills in IT, skilled staff may be difficult to find and expensive once you do. Do not be tempted to cut corners and go for the cheapest option. Alternatively, do not throw money that you cannot afford at the problem. You can entice people with flexibility and a positive work culture.
Hiring will take time, so plan the process carefully — you won't be able to find the right candidate immediately. Often, you will end up with the wrong candidate if you rush into hiring to replace an employee who is leaving. Also, don't forget to pay attention to your current team to keep them happy.
MSPs use a variety of tools to run their businesses. Because technology is constantly evolving, MSPs should upgrade to the latest tools to make their jobs easier and deliver better service to their customers. Some of the common tools MSPs use are RMM, ticketing systems, service desk software, project management systems, billing systems, CRM and so on. Pulseway’s RMM tool has established itself as a reliable and powerful option for MSPs seeking a user-friendly and intuitive solution for managing their businesses.
In the context of MSPs, an NOC refers to network operations center services. NOCs are third-party units that take over some of the workloads of MSPs so they can focus on their core competencies. As an MSP's workload increases with more clients, they may find themselves almost entirely focused on customer support. In addition to overburdening technicians, this results in fewer hours for marketing and sales, which is detrimental to business growth.
To ease the pressure on their technicians and reduce workload, MSPs can outsource some non-critical endpoint management tasks to NOCs. NOCs may even manage the service desk, resolving common problems, and channel only the most critical ones to MSPs.
NOCs provide services at an affordable rate, so opting for them is a much more cost-effective option than hiring additional staff or buying new technology. NOCs grow your MSP without affecting margins, making them a great service.
The role of marketing and sales is crucial for business growth and for customer acquisition as well. However, MSPs are prone to cutting costs in these segments to improve margins. While certain cost cuts are understandable during times of uncertainty, MSPs need to carefully execute their marketing and sales strategies within the limited budget if they want to grow to the next level.
Whether you are starting a new MSP, moving from a break-fix model or experiencing slowing growth, finding customers is always a challenge. An MSP will shut down quickly if it does not attract new customers or loses existing ones. Industry research shows that acquiring more customers will be the primary challenge for many MSPs in 2021.
Taking steps to win new customers and retaining existing ones is something an MSP should prioritize. Here are some pointers to keep in mind:
Having a well-maintained website increases your chances of being found by potential clients. Make sure your contact details are clear so you can be reached easily. Additionally, you should have a strong presence on social media sites where potential clients can learn more about your offerings.
An unmaintained online presence will only get lost in the clutter. Obtain a list of potential customers and send them marketing emails regularly. They will remember you when they constantly hear about your products. Using emails is an excellent way to establish your presence.
Referrals from existing clients are the easiest and most cost-effective way to acquire new clients. If your current clients are pleased with your work, they will recommend you to their peers. And word of mouth is the best form of advertising there is. Don't hesitate to reach out to your clients for referrals.
If your MSP business has hit a plateau, merging or acquiring another MSP could help you grow further. Your company will gain instant access to the talent, resources and clients of the acquired company. The 2021 IT Glue survey indicates that almost 32% of respondents are open to the M&A idea while 14% are ready to pursue M&A opportunities actively. This shows that the market is recovering and MSPs are seeking to capitalize on emerging business opportunities.
In any case, acquisitions should be made only after careful consideration. In the absence of synergies, an acquisition may result in heavy expenditure with little return on investment.
The MSP market is becoming so competitive that finding a niche has become essential. Any savvy entrepreneur will determine the niche they want to specialize in before starting their business. MSPs can find a niche based on the services they offer or the location they serve.
You could specialize in cybersecurity, network management or any specific service if you decide to pursue the service path. If you live in an area where, for example, the tourism or hospitality industry is thriving, you could design your service to cater to them. If you have a niche, you will be better prepared to compete and grow.
Ever wonder how MSPs manage hundreds of thousands of clients with only a few employees? They use tools and software that make it possible for them to map and manage their client networks remotely. These modern tools leverage the power of automation to help MSPs run multiple tasks at one time. These tools also have smart analytical features that collect and study data from various devices to give a true picture of the health and functioning of a client’s IT infrastructure.
MSPs use a bunch of tools not only to manage the infrastructure of their clients but also to run their business operations smoothly. Of the many tools available, the RMM tool is the mainstay of MSP owners. Let’s look at the features and benefits of an RMM tool as well as a few other tools that are critical for the smooth running of an MSP and its business.
An RMM tool is the foundation of any MSP business, helping it manage clients remotely. RMM tools are packed with functionality that helps MSPs in their day-to-day activities. Apart from managing endpoints, an RMM tool also alerts MSPs when a problem is detected and, in some cases, even automatically remediates certain issues based on predefined workflows. RMM tools are easy to deploy, helping you get your client’s account up and running within minutes.
With Pulseway's IT management software, you can manage and troubleshoot your clients’ workstations, servers and network devices from anywhere in the world. Some of its functionalities are:
PSA tools help MSPs streamline their business operations so they can manage all their clients and related tasks from one centralized location. Instead of rummaging through files on your computer,
PSA lets you access client documents like SLAs, contracts and ticketing details all from one place. With Pulseway's business management tool, you can focus on meeting and winning customers instead of wasting time on mundane tasks like preparing invoices and bills. Here are a few advantages of using the Pulseway business management tool.
An essential feature of an MSP is to safeguard the data of clients from natural, human-made or cybersecurity threats. As a result, MSPs back up client data in multiple locations, like on the cloud or on a hybrid backup, so that it can be easily retrieved after an incident. With the increase in remote working, it can be a challenge ensuring that all user data is backed up and retrievable in case of disaster. Pulseway Cloud Backup integrates seamlessly with the proprietary RMM tool, allowing you to back up files and folders from any end-user workstation, whether it is in the office or remote. You can schedule backups, recover data and monitor the status of backup jobs.
On average, a server's ongoing support and maintenance fee ranged from $26 to $100 per month. About a quarter of MSPs in the Americas charge $4 or more per user, per month, for SaaS data backup.
Your MSP arsenal should include strong cybersecurity tools. Companies are taking cybersecurity seriously, especially since stories of new and sophisticated cyberattacks pop up almost every day. You will be better positioned to acquire new clients with state-of-the-art antimalware and antivirus tools in your kitty. Cybersecurity tools are very sophisticated and keeping your client information safe will be easier with them.
In 2020, the cybersecurity services segment accounted for over 54% of market revenue. It is expected to keep its leading position throughout the forecast period of 2021 to 2028 according to Grand View Research.
Pulseway has integrated two of the most popular AV solutions — Webroot and Bitdefender — into the RMM platform, making it is easy for you to manage and monitor the security of your customers' environments.
Documentation plays an important role in an MSP and includes documenting IT process protocols, troubleshooting protocols, client passwords, third-party integrations and so much more. Things can get chaotic without a streamlined documentation process. You should invest in a document management tool to streamline your company's documentation processes and increase employee productivity.
Pulseway offers a range of tools to help MSPs deliver a five-star service experience to their customers. We highly recommend you check out a demo of Pulseway to see its capabilities first-hand. We are sure you will be delighted.
