Last week, I attended Business Solutions Magazine’s ChannelTransitions event here in Boston and had the opportunity to hear from a number of great speakers who shared their thoughts on the IT industry and how the channel can take advantage. One of those speakers was Mike Monocello, Editor in Chief of Business Solutions Magazine. He spoke about the “As-a-Service” business model, its benefits and how to make it work as an MSP, VAR or IT Solutions Provider.
So what did I decide to do? Naturally, I came up with a cheesy pun and wrote a blog post about it.
Here are some reasons why you should be thinking about the As-a-Service business model and how to make it Kick-aaS for your business.
What is the As-a-Service Business Model and How Will It Help Me?
I figured I’d give a quick definition of the As-a-Service business model before getting into its benefits. Bill Ruffalo actually wrote about this on our blog a few months ago, discussing Why IT Services Must Follow the Software Model, definitely read this if you get the chance.
Ultimately, this model means selling your services on a subscription basis where they pay you a structured amount monthly, rather than a lump sum in one-time deals. You can still push hardware, although hardware margins are diminishing, but make sure to attach services to these deals that result in increased monthly recurring revenue (MRR).
Why is it so important to sell MRR? There are a number of clear business benefits, including:
- Predictable revenues – When you can accurately predict your costs and your revenues, it’s much easier to grow your business because you can plan for that growth. When your revenues fluctuate, it’s nearly impossible to build a growth plan.
- Proactive vs. Reactive – selling monthly services allows you to become proactive with your clients’ systems, and not reactive to issues that arise. This way, you help contribute to their business success. You’re not just a repairman.
- Increased Business Valuation – predictable revenue streams are crucial if you want to become an acquisition target or receive an investment. You need to prove that you can consistently make money, and that if you invest more on one end of the funnel, you churn out more profit at the other end. Businesses with monthly recurring revenues receive higher valuations and are much more likely to be acquired than those that vary in their revenues.
How to adopt the As-a-Service Business Model
So, you’re ready to kick-aaS with the As-a-Service business model. What are some tips for getting started?
1. Take it One Step at a Time
Make sure you ease into this model, rather than jumping right in. Making a change to your business takes time; it’s not a flip you can just switch overnight.
Allow your business, your employees and your clients to grow into this new model and learn as you go. There will be a number of unforeseen issues that arise that will need figuring out. Take that opportunity to learn and adjust what you’re doing
Rome wasn’t built in a day.
2. Equip Yourself With the Right Tools
Adopting this business model starts with the right tools. If your tools don’t allow you to pay monthly, then your costs won’t be monthly, and if your costs aren’t monthly, you can’t start charging monthly for your services.
Leverage tools that allow you to pay monthly, and only pay for what you use. This will make it much easier to scale your business and increase your MRR.
It’s also important to use tools that allow you to be proactive, instead of reactive. Obviously, that includes using a remote monitoring and management (RMM) tool, but be sure that that tool is helping your business, not hurting it.
If your technicians are spending too much time managing your RMM software, instead of managing clients, those are direct costs that aren’t helping contribute to your revenue.
Choosing the right tools that fits the As-a-Service business model is an important component of this adoption.
3. Focus on Time Efficiency and Tech Utilization
Again, it’s very difficult to sell MRR when your costs aren’t predictable. Your largest expense is most likely your employees’ salaries. If you/they are wasting their time, that’s money you’re simply flushing away.
Make sure that the activities they’re doing are focused on your clients and focused on driving revenue for you.
If they are spending too much time managing your RMM software, closing out duplicate tickets, answering mundane support calls etc., that’s not making you money!
Understanding your technicians’ activities and time efficiency is a key component of adopting the As-a-Service business model.
4. Focus on Business Value, Not Technology [External]
This is an area where a lot of MSPs fall short – they get too caught up in the technology and don’t focus on the business value when talking to prospects.
Your clients don’t usually care how it works, they care about what it does for their business.
Don’t talk about how your RMM software helps you with ticket remediation. Tell them how you can keep their network up and running so that they’re not losing money from downtime. If they’re concerned about HIPAA compliance, tell them how mobile device management (MDM) helps them stay HIPAA compliant, not how you install agents on employee devices.
Ultimately, your clients and prospects hire you because they want you to take care of their technology solutions, they don’t want a technology lesson.
Speak to them in business terms as it will prove the value of your services and help you close more deals.
5. Be a Business Owner, Not a Technician [Internal]
Number 4 and number 5 sound very similar, so I made the distinction between internal and external.
Externally, it’s important to speak to clients and prospects in business value. Internally, it’s important to be a business owner, not a technician.
Many MSP business owners get too caught up in the client's technical issues, which takes away from their time as a business owner.
As the business owner, your job is to drive growth, increase profitability, set goals for your employees and help execute on your business’s mission.
Most MSP owners got into the business because they are skilled technicians.
However, in order to take your business to the next level, you need to become a business owner, not remain a technician. This is an important step for any MSP, and important in the As-a-Service business model.
The benefits of the As-a-Service model are clear. If you’re not currently leveraging this business model, now is the time to begin taking action. The tips above should serve as a rough guideline for getting started in transforming your business. As technologies evolve, so too must your business strategies.
Don’t wait to start “kicking some aaS” in managed IT services!
By Gretchen Hoffman
By Meaghan Moraes