As an MSP, you are faced with continued growth and expansion of your business.  The industry has high growth predictions for MSPs; yet MSPs continuously face margin and growth challenges.  When MSPs first came to the forefront about 10 years ago, the concept was bleeding edge. Now, it’s the 2nd most popular way customers consume IT according to CompTIA.  Today, words and phrases like loyalty, customer attach, consumption, expansion and trusted advisor creep up in conferences and in your executive meetings.  You realize it’s time to pivot away from break/fix managed services to higher value offerings that your customers need and will pay significantly for. And in turn, the higher value offerings increase the value of your business.

As a bonus, transitioning to user based managed service creates volumes of opportunities from desktop management to offerings like service desk, line of business applications, device & company backup, file sync and cloud based apps.  You can migrate your existing customers into these new service offerings, which allow you to be a more trusted advisor and ‘stickier’ with each established client. So faced with this transformation goal, how do you expand new managed services within your existing customer base?

Here are some tips and tricks that will put you in the right direction the first time.

Tip 1: Identify the Right Clients to Focus Your Sales Efforts

Select your client base that you will most likely have success with.  Factors to use:

*Tier the customers into 3 categories of value to your business – high, medium, low so you know where to focus what services.      

*Select customers that will benefit significantly from new managed services.

*Select friendly customers at first and already profitable customers – who are likely to be strong testimonials for you in the future.

It’s important to look at your key metrics like Average Revenue per Unit, Average Deal Size, Lifetime Value, Customer Net Profitability and Retention Rates.  For smaller MSPs, your metrics may be more like Ticket Volume, Hours Billed, and Tech Utilization. Larger MSPs may want to look at Upsell Revenue, Organic Growth and Cross-Sell Growth.

Next look at the characteristics patterns of the clients.  

  • Does the client value technology in their business?  
  • Do they believe that technology supports or even relies on technology to delivery their product or service?  
  • Can you create a believable ROI that demonstrates cost savings?  
  • Do you have a key vertical where you continue to have success?  
  • Is there a situation clients face where you normally win new business?

Chances are yes answers to the above, and/or, a client (or set of clients) very dependent on technology will make a good prospect with the right business case.  This process of client selection (metrics analysis, client trends, and service offerings) can also be used on a quarterly or semiannual basis to evaluate your business.

 

Tip 2: Show the client the math behind why a particular Managed Service  makes sense.

In order to present and defend your business proposition to a client, you must fully understand why transitioning to a managed service makes business sense.  If a client pays you for a break/fix scenario, you can take some of that historical client data and create models to show how transitioning to a managed service would reduce the total cost of ownership of his/her entire IT estate.  

There are many ROI models you can use to develop a good business use case for why managed services are the right choice for your client.  If you’ve been working with this client for a good amount of time, you’ll have some data to work with already. Understanding how much a single instance of a user being down can cost a business can allow you to demonstrate the cost savings that can be had making this transition.  Consider this scenario and financial model from Autotask:

  • 8 hours of machine downtime x 1 employee = 8 hours of lost productivity
  • Add 50% of those hours to “catch up” time = 12 hours lost in total
  • With an average salary of $61/hr (75K/year) = $732 cost of employee downtime
  • Consider opportunity lost with missed sales or work not performed = $5000
    • Can be computed if you know annual revenue/employees
  • With a total of employee cost + opportunity lost = $5732
  • And add the cost of your break/fix service = $800
  • Total cost for one machine down = $6532

If you were to compare this to managing this one machine for $40/month, or $480 per year, you can clearly see that avoiding even 1 incident in a year will save the business over $6000 a year!

Now consider you have 20 machines to manage, with an annual cost of $9600 for all 20, if you have more than 1 incident across all 20 in a year, the service has paid for itself, where 2 incidents * $6532 = $13064 vs the managed service for $9600.

Then you can apply this same model to servers, with an even higher impact on opportunity lost where a single outage could cost upwards of $30k, suddenly a managed service that keeps that server up and running at $400 per month seems like bargain!  Avoiding even 1 server issue can pay for itself and 20 machines combined.

Trick 1:   Transitioning your engagement from per device to per user will also free up the internal IT teams for projects that they should be (or want to be) focusing on instead of break/fix emergencies.  This could give you resources for presales or new service offering efforts.

Trick 2:   Do you have a client that has had a bad break/fix experience?  Unexpected issues cost money and cause a high amount of stress.  You may be able to use that painful experience to your advantage if you can show them how a managed service will minimize downtime and avoid a high stress scenario in the future.

There are other types of ROI models that could help as well, here are a few examples:

  • Asset inventory savings through audits:
    • #PC’s * # inventories per year * time spent* tech rate
  • License Savings:
    • Avg cost of license * # unused license per PC * # of PC’s in use
  • Reduced Break/Fix Calls:
    • #PCs * B/F help desk calls * Avg B/F service cost * Est % reduction

Tip 3:  Interact with your customers more often and about different topics at least monthly if not more.

It’s time for you to step our of the server room and into the client’s boardroom or CEO office.  A 2016 CompTIA research study, Trends in Managed  Services, found that less than half of the MSPs they surveyed were talking to the customers about something other than immediate technical needs.  The concept of having a strategic conversation was most likely to be done by smaller MSPs on 

a monthly basis (49%), with larger MSPs taking a weekly approach (37%). Even still, most MSPs aren’t having a non-emergency meeting with their customers at all.  If you want to start expanding within these customers, you’ll want to start positioning yourself outside of the IT department and get in front of the rest of the executive team.

A key step for actively selling managed services to your focus base of existing customers is to connect with the key business leaders and influencers when there is no crisis.  CompTIA suggest that you commit to a regular cadence of meetings, and that you insist that both IT and other LOB executives attend. The best practice is for meetings to include both client needs/wants and a trusted advisor consultative approach to helping the client solve business issues with technology.

It’s also important give your clients ‘thought leadership’ topics – so they see that your company is on top of what industry ‘good’ looks like, and you continue to build credibility for your company. Thought leadership can be offered in the form of a blog series, a regular email update, or simply talking to them during your monthly business meetings about industry topics they care about. Many vendors you do business with have content you can repurpose and cobrand for your clients without too much effort.

Last, showing a target client a customer testimonial or client detailed managed service case study can be a critical technique for success.  If you can show a client how you solved another client of similar size, business, and business challenge; it helps build your credibility with a client.  Strong case studies also demonstrate that you understand key verticals and/or business challenge and resolutions in detail.

 

Tip 4:  Prepare to sell: Gain commitment from customer on an IT Assessment

Once you have positioned the new business meeting cadence to talk about managed services, you’ll want to prepare for those meetings. Key pieces of information you’ll want to share on a regular basis:

  • How much has the client spent with you over a recent period of time?
  • What are all the services you have provided for them?
  • What is the price per machine, user or server they are spending now?
  • What ROI models can you develop to share with them?
  • How much will they spend with managed services?
  • How much more value will they get from a managed services?
  • What additional business needs to you address by transitioning to a managed service?

There are 2 things that you should have as outcomes from your initial ‘managed services’ meeting.  The first is to have agreement on an initial assessment of their infrastructure and the second is to plan a date for the next meeting to review your assessment findings.  

An assessment is the logical next step because you can get an accurate picture of their infrastructure.  In addition to understanding their technical infrastructure, you can also interview business leaders, users and vendors to understand how they fit into the landscape.  This full assessment will give you a clear understanding of the IT estate, and identify any thing that needs to be done to ensure the systems are “MSP Ready”. An assessment gives you the opportunity to position a remediation project prior to launching the managed service as well as expose other IT needs that could lead to additional business down the road.

Trick:  Do you charge for an assessment?  While most MSPs will not choose to charge an existing client for an assessment, it may warrant some thought for new prospects.  Chances are if you are working with an existing client, you have a good idea of what they have in their environment and it will be a quick and easy assessment.  However, unknown environments could be more complex to fully understand. If you want to monetize an initial assessment, you could consider including it as a one-time fee for the first month of service.

 

Tip 5:  Close the Managed Service Proposal and Service Level Agreement

The second meeting should focus on presenting your findings from the assessment in a consultative fashion, as you validate the client needs and move to managed services with them.  You may start by talking business impact on what you found. For example, you may have found that their environment is not up to date, that there are security issues, risks for downtime, and effects on future plans the business has, like growth or new apps.  Compare this to historical data and show them the reduced business impact when systems are managed under your services.

Now that you have demonstrated your expertise, you might propose a remediation engagement with a service level agreement.   This could be two different agreements, or you could combine the remediation to be part of the first month of your managed service.  Your remediation engagement may include things like patches, improve security, streamline system availability, validate backups, and confirm operation/process.  Anything that needs to be done to ensure the managed services is smooth and you can meet the SLA.

Trick:  Once you have closed your Tier 1 (highest value) clients and have had the chance to fine tune some of your offerings and SLA’s, you can then circle back to your other tiers of clients and/or new prospects.

It’s important to review the current state of the customer, and chart out any challenges you see in the future for them.  You can also prepare a report that shows the customer concerns and any pro-active planning that could be done with additional services.  Anything that puts you in the light of a strategic advisor is what you want to highlight. Commitment to their overall business and becoming critical to their business means more than troubleshooting.  You must become proactive in helping your customers align technology with their business goals, and paving the way for their continued success using technology which also offers you many expansion opportunities for your business.

These Tips and Tricks for expanding managed services into your existing clients will put your business in the position to pivot and become more of a strategic advisor within your customer’s business.  That position of trusted advisor will provide more opportunities for new services and expansion of existing business, and ultimately allow you to meet your business goals.