There are massive pressures on managed IT service providers today—leading to a new chapter in MSP evolution. The speed at which the M&A market is consolidating and the growing IT skills gap are just a few examples. And because of this, we’re seeing an increasing separation between those MSPs who are quickly growing and succeeding, and those who are being left behind.
To be part of this former group, though, the key may be to leverage the Master MSP model. On a recent TubbTalk podcast, Richard Tubb was joined by Paul Dippell, the CEO and founder of Service Leadership, to discuss how today’s fastest growing MSPs are using this model, and why.
What is the Master MSP Model?
Building a profitable MSP business on your own is hard work. This is why many MSPs offload certain functions to a third-party partner—or a Master MSP, you might call it—like Continuum. By leveraging this relationship with a Master MSP, the owner is then able to dial up capacity incrementally, contract by contract, without taking on more risk or paying for more headcount.
Why Are the Fastest-Growing MSPs Using the Master MSP Model?
To answer this question, Richard Tubb hosted Paul Dippell of Service Leadership on his podcast to talk about his recent research into Master MSP use and the surprising results he found. Here are some key takeaways from the episode.
Q: Do Continuum partners have a higher operational maturity level (OML) because they are Continuum partners, or do they become partners because of their higher OML?
A: I think the answer is both. I think, if I may flatter you for a moment, you took a look at your MSP business and went: ‘Man, there’s a lot to this. Maybe the first thing I shouldn’t do is go build my own room full of blinky lights and big monitor screens. Maybe what I should do is go sell some stuff,’ so you chose to go with a Master MSP.
If you look at most MSPs today, they’ll tell you they’re struggling to grow. They’ve spent a ton of time building something to sell, and it’s getting pretty good, but they need to sell some. They say, ‘If a Master MSP can do a good enough job for me, maybe I’ll let them bear the risk of that for the duration of the project, and I’ll go sell some stuff and see if I can get it off the ground.’
Q: In your opinion, why do Continuum partners grow faster and have higher performance? How do they use Continuum specifically? How much of their managed service offering do they actually share with Continuum?
A: To answer the question about why they’re able to grow faster: I think it’s a couple of things.
One is that they’re spending more of the revenue on sales and marketing. The relevance there is, if they’re not using the Master MSP, they’ve got payroll to cover. That’s a scary thing, because we all know as business owners that not being able to cover payroll is pretty much the end of the world. Business owners tend to be very conservative financially in order to make sure they can keep paying their people. If I’ve got 20 or 50 people in my company and two thirds of those are technical because I’m not using a Master MSP, I’m going to husband my cash and be a little more conservative on what I’m going to spend on sales and marketing. When I can take two thirds of those two thirds people and push them over to the Master MSP, then I don’t have as much payroll to cover and I feel from a risk management standpoint that I can spend a little bit more on sales and marketing.
Another reason they’re growing faster is they can incrementally add customers without this ‘herky-jerky’ motion of, ‘I’ve got to hire another guy before I bring that customer on.’
Want to listen to this full episode? Tune in below:
Why Continuum Partners Grow Faster
Looking at the data, Continuum partners achieved gross margins on managed services that were on average 8 percentage points higher than their non-Continuum peers. And, Continuum partners recorded Adjusted EBITDA figures that were on average 7 percentage points higher than their peers using other platforms.
These findings clearly illustrate the advantage of Continuum’s business model as MSPs strive to grow their business and increase profitability. When MSPs take advantage of outsourcing certain functions to a Master MSP like Continuum, they’re able to control costs, strategically allocate resources, focus on important business initiatives and optimize profitability.
See for yourself how Continuum’s transformative business model can do the same for your MSP business!
By Carlos Borges
By Ray Vrabel