Our MSP Fast Track Series of hangouts (or interactive panel webinars) continued last week with two expert MSPs addressing the challenges of establishing and scaling a profitable business model with our “3 Tips to Grow your MSP 3X” hangout.
Meet Our Panelists
The MSP (managed services provider) channel has seen significant growth in both new technologies and new players coming onto the scene. Jay McBain, Principle Analyst, Global Channels, Forrester, estimates that there are over 600,000 partners around the world when you include IT, telecommunications, and print and office equipment. That’s a lot of competition and noise to break through, especially for a small-to-medium sized MSP without a huge budget and tons of resources. This has forced channel partners to look for new and innovative ways to create and scale a profitable business model.
The Challenges of Managing an MSP Business
Both Don and Mark are highly successful MSP owners, who’ve experienced the challenges of building a business from the ground up and who’ve managed to successfully scale their operations for increased profitability.
One of the challenges when starting out was just knowing the numbers and being focused “on the business” rather than just being “in the business”. Don and Mark both felt that to overcome this challenge, they needed to learn a lot along the way about the basics of running a business. They mentioned things like learning to develop policies, procedures and documentation for client onboarding, tracking financial metrics and evaluating pricing and contract terms, knowing what “good” profit is and when to cut ties with clients who required a lot of time and attention, but didn’t generate profitability. Knowing these numbers and hiring people who can understand and report on them was important.
Addressing the Growing Skills Gap in IT
Hiring smart folks with the right mix of people skills and technical know-how is and has always been a challenge across the IT space which both panelists acknowledged. Mark, being from the UK, utilizes a creative approach to developing his talent from within by taking advantage of an apprenticeship program subsidized by the British government.
He found that by taking this approach, they were able to mold and develop young IT pros giving them the technical training they need on the job vs. trying to train someone experienced who might not be as willing to learn new skills. This was one way he was able to address the skills gap challenge the industry is facing. Perhaps in other countries, interns with experience could be brought on and trained. Both panelists also agreed that when hiring technical skills it is important and can be challenging to bring on techs who can interact with customers.
Leveraging Peer Groups
The concept of peer groups, online or in person, was something both panelists felt was key to overcoming the challenges of running a profitable MSP. They leveraged their network of other MSP and IT professionals to collaborate, solve similar problems and share ideas. It was through this approach that they were able to expand their knowledge base, get more diversity of thought and ultimately learn from others who had been through similar situations.
Find Your Sweet Spot
Don’s company started in telecom, so they had a natural inroad to additional IT business from their established customer base. Don found that as his business grew, it was a challenge to maintain the same level of service to his customers. He was stretched thin and knew something had to change.
He made the decision to split his company off into specialized teams based on industry vertical and skill set specializing in the legal and government sectors. By building expertise in these areas and becoming an expert in the right tech stack for their target market, they were able to better meet their customers’ needs and maintain a high level of service. Both panelists agreed that it was critical to find a niche especially in a crowded channel market and to not try and be everything to everyone.
Top 3 Tips to Grow by 3X
To wrap the hangout, I asked our panelists to summarize their top tips for an MSP to grow their business. In keeping with the hangout title, they shared 3 plus a bonus 4th:
- Know your numbers – (as we mentioned above) understand your finances, contract and pricing terms, profitable customers and know when to cut the cord on unprofitable clients. This will free up time and resources for more profitable engagements down the road. If you don’t have a good sense of the financial side of your business hire someone who does.
- Hire the right talent and be an expert in your niche – though the IT skills gap will continue to prove challenging for the industry, find creative ways to develop internal talent or mine local universities for internships and mentorship programs. Create a culture that smart, successful people want to work in and look for the soft skills that create great customer interactions. The technical skills can always be developed over time with training. Focus on learning and acquiring the best toolset for your market niche.
- Leverage your peer groups and strive for continuous learning – join a peer group (or several) and learn to network with like-minded MSP’s who understand and share your challenges, and who can offer advice and proven solutions. Keep the drive for continuous learning and don’t be afraid to take a leap of faith on a challenge, new technology or line of business.
- Commit to quarterly business reviews – hold QBR’s with your clients to share your value (learnings and successes) with them. Use the QBR’s to uncover additional project work and new revenue streams that may benefit both hour clients and your MSP.
To hear more on “3 Tips to Grow your MSP 3X”, check out the full hangout here!