When it comes to success in business, luck has little to do with it. In fact, the most successful managed service providers (MSPs) have put processes in place at virtually every level of their business to optimize efficiency and maximize profitability. But what exactly are these processes and best practices? What can you do to focus your efforts and accelerate your growth trajectory in 2018?
At Navigate 2017, Continuum CEO Michael George outlined seven habits that the most profitable, growth-oriented MSPs in the industry all seem to have in common. Designed as actionable skills you can put to use immediately in your business, these seven habits of highly successful IT service providers are proven building blocks for success in a modern managed IT services business. Each of the seven posts in this special series will explore one habit in greater detail. In this post, we’ll explore the basics of a process-driven approach to metrics, and the advantages available to MSPs who use them.
Habit #1: Maintaining a Metrics-Driven Approach to Running Your Business
By nature, entrepreneurs are inherently intuitive, smart, hard-working and tend to have good instincts. When these traits are leveraged properly, they can enable someone in managed IT services to build a business that generates $1-2 million in revenue in a relatively short amount of time. However, entrepreneurs encounter new and different challenges when they attempt to grow beyond that size.
It quickly becomes impossible to spend all of your time in all of the places that require attention, making sure that right objectives are being focused on and the appropriate resources are aligned to the proper areas of your business. At this stage, many businesses (and business owners) feel like they’re “doing the right things,” but they just aren’t making the progress or finding the results that they’re looking for.
Even worse, some companies will continue to grow, but they will do so with a bad set of fundamental economics in their business—an unhealthy approach that will eventually lead to negative results.
To overcome these pitfalls (or, to eliminate the issue before it develops), it’s critical that you establish the right metrics for your business in order to understand where it is successful, and where performance is struggling. Identifying the right levers for growth, profitability and sustainability is essential, as is being judicious and disciplined about how data is leveraged while you work toward managing your business based on these metrics.
As we know from the Service Leadership Index®—the largest scale, longest running and most accurate benchmark of solution provider financial performance, operational maturity and value creation, worldwide—virtually all businesses today are performing these functions to some degree. However, not all of them are executing a metrics-driven approach properly—leaving them unable to see the gaps in front of them because they aren’t focused on the core aspects of their business that matter most.
To achieve that level of visibility, you’ll need to capture marketing data to better understand your customer, profitability, financial data to forecast your EBITDA and more. You’ll want to develop a process to measure, track and analyze data across your organization. In looking at the different areas of your business, apply the following steps as a starting point in defining and understanding metrics, and how to effect change using them.
Create Clear Goals
Each area of your business plays a key role in the overall success of the organization and needs to have defined goals in order to realize that overall success. In reviewing the org structure of your company, parcel out goals for each group based on performance and progress that can be achieved in a specific amount of time (e.g., annually, quarterly, monthly, weekly, etc.).
Define How Progress Is Tracked
Every goal has unique criteria that defines what success and failure means. Once goals are created, it’s important to spend time outlining the data that will be produced, how that data will be collected and measured, and the specific scenario for success. For example, if a sales team’s goal is to increase revenue by 20 percent in Q4, define what data should be collected (is it accounts that are closed/won, endpoints managed, expected annual recurring revenue, etc.) and the specific numerical goal for each of these criteria.
Rome wasn’t built in a day, and your business’ goals won’t be achieved in that way, either. Break out each goal into smaller, achievable, data-driven segments that work towards the bigger picture. Therefore, a quarterly goal should have monthly and weekly milestones that should be achieved. At each milestone, evaluate if the current interval has been successful, and if anything needs to be modified to hit the larger goal.
Collect Data at Regular Intervals
Understanding the granularity and specificity of the data needed to achieve a goal largely determines how frequently it needs to be collected and reported. In general, tracking progress toward each milestone should be more frequent than the milestone itself, so that tactics can be modified or changed if necessary to achieve success.
Review Performance Blockers, Revise Processes, Mitigate Issues
If success is not achieved at any given milestone, use the collected data to analyze if there is an issue affecting the outcome. Is performance on track? Do processes need to be more efficient? Is there another issue that presents itself? Make decisions based on the data you’ve collected to steer your company’s actions on a path to meeting goals, and then review existing processes as needed to ensure issues do not arise again.
The purpose of metrics-driven goals is not only to ensure success, but to see where gaps and issues are occurring—as the data dictates—and to innovate, revise and adapt to meet the challenges your business faces. If you’re able to enact change on an organizational level, backed by metrics-driven decision making, then your business will be able to pivot when necessary to not only stay on track, but to grow where other companies might fall behind. That’s one habit we’d all like to have.
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