Starting an MSP or managed service provider business can be a very lucrative move. The global MSP market was valued at just over $200 billion in 2019, and it’s expected to grow to almost $500 billion by 2027. In the North American and European markets, survey respondents said they would be spending 11% of their IT MSP budgets on managed hosting and backup storage, with 10% on support and maintenance. This demonstrates a healthy market with a lot of potential for providers.
But how do you access this market? How do you get started with your MSP business? Take a look at our MSP startup guide and business plan template to learn more.
What Is an MSP?
What is an MSP exactly? A managed service provider is a company that provides ongoing support and management services for its customers’ IT systems. This MSP will take responsibility for specific aspects of their client’s businesses, providing monitoring and support services to these clients. Working proactively, the MSP will prevent any disruption or downtime for the client’s systems and services before they occur.
What Is the Managed Service Business Model?
The MSP offers what the client does not have — generally, the time, resources, and expertise required to manage their systems and IT infrastructure. They may choose to deliver this via a subscription pricing model, in which the customer pays a contracted price each month to receive a pre-determined level of service.
Steps for Starting an MSP Business
Starting an MSP business begins with a degree of preparation and groundwork. Carrying out due diligence at this stage will give you a solid foundation upon which to build in the future, providing the conceptual framework for your MSP business plan.
Decide on Your MSP Business Strategy
This is the guiding principle by which you will develop and build your managed services business. While you are unlikely to be able to draft a complete business plan at this early stage, you should have an idea of the direction you want to go in with your MSP startup, and you can use this to flesh out your ideas.
What kind of service you will be offering
Will your MSP focus on a specific vertical or industry, or will you be offering a specific platform for your client’s tech stack? Will you be delivering consultation services, or will you operate as a managed security service provider (MSSP)? There are a number of different potential directions for your MSP in business.
How you will market your MSP
There are many factors that determine how much it costs to start an MSP, but with the right approach to marketing, you can recoup these costs quickly. Put together a marketing team with a strong background in sales, as well as experience, knowledge, and expertise in the tech industry.
How you will manage your clients
As your client list grows, you will need to be able to manage these customers in the right way. Which software platforms will you use to achieve this? Will you offer membership tiers, perhaps providing dedicated account managers to higher-level customers?
What kind of SLA requirements you will include
The service level agreement, or SLA, outlines your responsibilities to your clients and the scope of your services. This forms the basis of the relationships you develop with your clients, as the SLA provides ground rules and expectations from both parties. You can add more detail to this SLA later in your preparation, but start by outlining:
- What service parameters you offer — How much uptime can you guarantee? What are your hours of support?
- Your troubleshooting process — How quickly will you respond? How long will it take you to achieve a resolution?
- Contract breach terms — What happens if you cannot achieve what you promise? What are your compensation limits?
- Multi-party expectations — What can the client expect from you? What does your MSP need the client to do?
Define Your MSP Business Model Level
You will need to determine whether you will be offering a low-, medium-, or high-level set of managed services. Which level you decide upon will depend on the scope and size of your MSP business project.
- At a low level, you will be working with small businesses and organizations with up to a few hundred employees. You may decide to offer managed services on a remote basis, drawing upon digital networks to support your clients.
- At a medium level, your duties will increase. You may need to provide installation and upgrades, as well as security patching services. Your clients may include medium or larger-sized businesses.
- At a high level, you will offer boutique, tailored MSP solutions to clients of any size. Typically, this will involve close and personalized levels of support.
Build a Pricing Scheme and Revenue Stream
There are a number of different ways you can choose to set your MSP pricing model to market your services to your clients. You may opt for:
- Pricing per user: You may decide to charge for each of the client’s employees you provide services to.
- Pricing per device: For some managed services, a service charge for each device may be more suitable.
- Pricing per level: Many MSPs offer different levels of support. Decide on the pricing structure for each level.
- Flat rate pricing: The simplest model is to offer a flat rate for your services.
- Pricing on demand: You may opt to allow your clients to pick and choose the services they want, when they want them. In this instance, you’ll need to decide how much to charge for each particular service.
Make Sure Your Software Is Up to Scratch
With your preliminary planning complete, you will now need to make sure that you are ready to start accepting clients. This means having the right software tools at your disposal.
- Customer relationship management (CRM) software — We’ve touched on the importance of this above.
- Remote monitoring and management solutions — Helps you with operating and managing client’s IT infrstructures remotely.
- Enterprise resource management (ERP) software — Ensures you have all the resources you need to fulfill your SLA.
- Helpdesk and support software — Gives you the platform on which to provide high-level support and assistance to clients.
Put Your Team Together
Your hiring strategy is a big part of your success as an MSP. Your clients need to know that you are able to provide an industry-leading outsourced service — one that they would not have the resources or expertise to handle in-house. In other words, you need expert personnel on your side.
In the beginning, you and your partners may be able to handle this. You are experts in your chosen field after all. However, as your business grows, you may find your resources are stretched too thinly.
Position Yourself as a True MSP
There are many best practices to grow MSP business and advantages of starting up in managed service niche. You’ll have a solid stream of revenue from long-term subscribers, and you can grow your reputation by delivering a top-quality service. However, there are challenges too, which is why you need the right support from the outset.
Managed IT Services Business Plan FAQs
How to start an MSP business?
Starting your managed service provider business requires the right plan.
- Start by deciding on your MSP strategy — defining what kind of service you will be offering and how you will market your MSP.
- Next, decide on your MSP service level and define your pricing scheme before putting together your software infrastructure and your team.
How to build a managed services business?
With your business plan set, you need to begin bringing in your first clients. Start small — building an MSP business is all about fostering goodwill among your clients and generating a solid reputation. Focus on client relationships and the quality of your service delivery. It’s better to achieve great results for a few clients than mediocre results for a lot of clients.
How much does it cost to start an MSP business?
There is no definite answer to this question.
What you would have to take into consideration when assessing initial investment is the money you will require to cover the following aspects:
- Technology (MSP software and hardware)