Growth for MSPs can be elusive. There are many reasons for this and they are often tied to very specific reasons that apply to each MSP individually. That makes sense because every business is unique, however there are a number of common challenges many MSPs face, and with those challenges, a number of steps each MSP can take to increase their profitability.
As with most tactics and techniques in business, these ideas aren’t exactly rocket science. They are not difficult to understand, but what IS difficult is the consistent implementation of these few ideas. Be sure to keep these mind as you manage your business and always look for ways to increase your profitability.
Let’s take a look at a few of these.
1. Outsource your help desk
We bet that you would be hard-pressed to find a more expense-heavy and troublesome area of your MSP business than the help desk. Your clients need this service, and your help desk is crucial to providing a high-quality service offering. However, it can be incredibly expensive and time-intensive to staff and maintain a help desk in-house. It’s nearly impossible to predict when issues will arise, which makes it very hard to staff enough technicians to provide a high-level of service, while trying not to have too many techs that it ends up costing you money.
Outsourcing your help desk is an option that every MSP should consider. This is much more scalable for your business because you can pay for what you use, rather than face the risky staffing dilemma. This also eliminates the cost of managing and staffing your help desk, which can be a full-time job on its own.
2. Integrated RMM (remote monitoring and management) and NOC (network operations center)
Increasing your profitability means finding ways to become more efficient. One of the main benefits of using an RMM platform integrated with a NOC is increased efficiency, which leads to higher profits for your business.
Some ways an integrated NOC helps increase your efficiency is:
- Adding manpower to your tech team without needing to staff new technicians
- Consolidation of tickets – allows for faster resolution time
- 24/7 ticket resolution – can resolve tickets throughout the night without you needing to staff
- Critical ticket escalation to your technicians – your techs don’t need to filter through hundreds of tickets for the most important ones
- Increased network monitoring capabilities
- NOC technicians always up to date with RMM software
A NOC allows you to increase your tech team’s capabilities and more easily take care of mundane tasks of daily maintenance. Efficiencies in your business mean improved experience for your customer and more profitable offering for your business. Choosing an RMM platform with an integrated NOC is a good strategy for increasing your efficiency and your profitability as an MSP.
3. Utilize scalable products
Cost management is a key component of building a profitable business – and one of the best strategies for managing costs is paying only for what you use. Don’t take on the risk of fixed costs when there’s no guarantee for making that money back.
Using tools that allow you to pay for what you use makes it much easier to build a profitable business. When you know how much it will cost to use, you know how much you need to charge for it in order to stay profitable. If you take on a large up-front cost, you put your business at risk of taking a big financial hit. Utilizing tools that are scalable allows you to build a more scalable business, and makes it easier to become profitable.
4. Sell monthly recurring contracts
Just like using scalable tools makes it easier to be profitable, so does selling monthly recurring contracts. It’s much easier to predict your revenues each month when you sell in monthly recurring contracts, rather than one-off projects. When your revenues are predictable, you can plan your costs accordingly to maintain your profit margins. However, if you are selling one-time projects or devices, your revenues fluctuate and it’s very difficult to keep consistent profits.
For some IT solution providers, this may require you to shift you business, model. However, it’s a key step in growing your profits and your business. Make sure to incentivize your employees in a way that fits this new business model.
No matter what, it is hard to keep finding new business each month to keep cash flow rolling, but selling monthly recurring contracts will help ensure you have consistent revenues each month. Working toward an annuity model is the way to go for better and more profitable business in the future.
5. Minimize churn
Churn takes two forms: the churn of employees and the churn of clients. Both can be incredibly costly for your business and eat into your profits drastically.
Minimizing Employee churn
The more consistent your workforce is the better your profits will be. When your employees leave, you need to find replacements. However, this means taking the time to find, hire and train a replacement, which directly adds to your costs, thus affecting your profit. It’s hard to find and train new people and your business suffers from this yo-yo effect. As a result, your customer satisfaction (do you use a Net Promoter Score approach?) can suffer greatly.
Minimizing your employee churn allows you to decrease recruiting costs and helps build a more profitable business. It’s worth paying your employees slightly more if it means keeping them around and keeping them happy.
Minimizing client churn
The other side of churn is the coming and going of customers. Keeping customers long term allows for stronger and deeper relationships, which usually turn into more and more business – especially if you’re selling monthly recurring contracts. It costs money to find new customers (marketing efforts, paying sales people and onboarding the customer). The longer you can keep customers around, the more profitable they will become for your business and the more you can spread out the cost of their acquisition.
Make sure you’re always checking in on clients and not getting too remote as their vendor. Spending additional time and money to keep customers happy is well worth it, as it will lead to more trusting and more profitable customer relationships.
Churn can be one of the biggest hidden costs that MSPs don’t recognize. Minimizing churn can be one of the most effective strategies that MSPs (and businesses in general for that matter) can do to increase their profitability.
As a business owner, you should always be looking for ways to become more profitable. These are just a few points of many that can be addressed that will help make your MSP business more profitable than it is today. Are you currently doing these things? Can you start doing them soon if you aren’t? Don’t think that the status quo is always a good thing. Change can lead to a better, more profitable business model. Try some of these options a try and see how they impact your managed services business.
By Meaghan Moraes
By Gretchen Hoffman