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Top 7 Managed Services Provider Best Practices to Promote Business Growth

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The demand for managed IT services is soaring as more and more organizations continue to adopt new digital enterprise solutions, such as the cloud, big data, blockchain, IoT, and automation. Managed IT remains the fastest and most cost-efficient way for businesses to implement and utilize these emerging technologies. In essence, IT outsourcing levels the digital playground for both large and small institutions.

For these reasons, the global managed services market is expected to grow at a 12.7 percent CAGR between 2021 and 2028. According to Datto’s 2020 State of MSP Report, nearly all the MSPs surveyed registered significant revenue growth over the last three years.

The Problem with MSPs

This market growth trend is obviously good news for MSPs. But it comes with a caveat. The growing demand for managed services also means that businesses expect more from MSP solutions. Managed IT providers have to up their game to remain competitive and relevant in an evolving business landscape. Today, many MSPs are struggling with:

 

  • Cybersecurity issues
  • Competition from vendors and other MSPs
  • Customer acquisition and retention
  • Finding talent
  • Managing internal operations
  • Maximizing revenue and profits

What’s Keeping Managed Service Providers Up at Night?

What’s keeping managed service providers up at night?

Fortunately, several managed service provider tools and practices can help your MSP business overcome these and many more challenges. MSP monitoring tools, RMM software, ERPs, automated patching, and PSA ticketing systems can seamlessly streamline your MSP processes, from customer interaction and service delivery to financial management.

In short, MSPs need to be more efficient and strategic in helping businesses to adopt solutions that truly bring value. Here are five MSP best practices to set your brand apart amid the mounting pressure to perform in an increasingly competitive industry:

Invest in MSP Automation Tools

Managed IT services usually seem labor-intensive, but they’re not — or at least they don’t have to be. Most mid-sized MSPs operate with just a handful of employees; even some top-ranking service providers depend on just a few hundred workers. Trimming down HR cuts costs, reduces risks, and relieves the headache of dealing with high turnover rates.

The staff size can even be used to determine how well an MSP business is doing. “Leverage” is a performance indicator that takes the total revenue divided by the total number of employees. The fewer the workers (relative to the income), the higher the leverage and performance.

 

Measuring Leverage

Number of employees
Annual service revenue
Leverage
Unrealized profitability = US$500,000
Average MSP
10
US$1,000,000
US$100,000 per employee
Top Performing MSP
10
US$1,500,000
US$150,000 per employee

The secret to a limited staff is substituting human labor for automation. MSPs have a virtually limitless variety of IT business management tools at their disposal, from remote monitoring and management software to MSP help desk software. These can easily automate everyday IT management tasks without compromising service quality or customer satisfaction. If anything, automation enhances speed, accuracy, and efficiency.

Cultivate High-percentage Entry Points

MSPs depend mainly on recurring revenue from subscription-based clients. So, it stands to reason that you’d want to contract as many services as possible for each client from the start. However, this is not the best approach to grow revenue nor retain customers.

Very few new customers will jump to an all-inclusive managed contract. They’ll first want to test the water, establish trust, and verify your credibility before delegating more of their IT services.

Try not to be too aggressive when onboarding new subscribers. Work at their pace and don’t go after anything they’re not ready to offer yet. You could even intentionally limit your scope for new entrants. After establishing a growth-focused relationship, then you can table discussions about possible service expansion scenarios. Gradually expanding existing clients’ accounts through staged growth can yield as much revenue, if not more, as acquiring new clients.

Focus on a Specific Offering

The MSP niche is highly competitive, so some providers try to cover as much ground as possible. However, being a “Jack of all trades” only gives you a superficial competitive edge, if any at all. One of the best ways to stand out in any business environment is to stick to a particular industry, offering, or area of expertise.

Some of the big-ticket MSP services right now include:

  • Cloud computing services
  • Cybersecurity and compliance
  • Data protection and backup services
  • Professional IT support services
  • Digital marketing
  • Web and app development

Pick any one of these verticals and narrow it down even further to carve out a compact technical niche. Although this doesn’t mean that competitors won’t follow you, focusing on a distinct offering will make you a master of the trade. Specialization increases your market efficiency and effectiveness. For instance, you can work all your processes down to a system and refer to previous experiences when developing solutions for new clients. This even makes it easier to automate tasks using MSP tools. Plus, customers can quickly form brand associations if you’re not all over the place.

Develop and Document Repeatable Processes

Although each customer is unique, you still need to provide consistent services across your entire client base. It might be possible to deliver a unique experience for each customer if you’re only working with a few subscribers, but this quickly becomes impractical at scale. The trick to handling multiple clients is sticking to a predictable, structured, and well-documented service delivery path.

A consistent service delivery model means that employees do not have to learn or do anything different with each new signup. This minimizes room for error, builds incremental experience, helps establish a stable organizational culture, and makes it easier to train employees. Don’t think of consistency as a way to suppress creativity. You can continually update your workflow processes to include new ideas and improvements whenever needed.

Recruit and Nurture Talent

Even with the best MSP tools, you still need a sufficient and adequately skilled talent pool for the business to thrive and expand. But finding qualified candidates to fill IT positions is quite a challenge. The problem is, the global labor market is going through a severe talent shortage that’s only worsening with time.

The Future of Work: The Global Talent Crunch report forecasts that, if left unchecked, the labor shortage could reach 85.2 million workers and cost the world economy $8.4 trillion in unrealized revenue by 2030. Tech is one of the hardest-hit commercial sectors by the widening skill gap. By 2030, the IT industry could be up to 4.3 million workers short.

Change your hiring and onboarding processes to take advantage of the ever-shrinking IT talent pool. More importantly, work on retaining and improving your existing workforce since new hires are not always guaranteed. Besides, it’s cheaper to keep an employee than hire a new one.

According to CompTIA, most organizations have a renewed focus on worker resilience. Some of the talent retention strategies that seem to work include:

 

  • Upskilling and personalized learning
  • Attractive career development options
  • DEI initiatives
  • Workplace flexibility
  • Human-AI hybrid team models
MSP Employee retention trends to watch

Devise a Fair Pricing Model

Managed service providers often grapple with the dilemma of setting the right price points for their services. Pricing is always a delicate balance between value and cost. If the price is too high, it will put off potential customers; set it too low, and you may lose money or associate your brand with a “cheap” connotation.

Before writing any price tags, evaluate all your direct and indirect expenses and determine effective ways to minimize your service delivery costs without compromising quality. One of the easiest ways to cut costs is by leveraging automated MSP management tools. MSP automation tools such as RMM tools can drastically drive down operational costs by speeding up workflows and minimizing human input. Automation lets you do a lot more with much lower overheads compared to manual processes.

After optimizing the service delivery costs, study your target audience, your brand’s position, and parallel competitors to calculate the optimal price point. Understand your service’s worth to the market and how much clients are actually willing to pay for it. From there, develop a pricing model that includes all the payment and subscription packages relevant to your niche. Depending on your offering, you can go for per-device, per-user, or tiered pricing – choose whichever combination best suits your customers.

Pick the Right Partners

All channel players, including value-added resellers (VARs), original equipment manufacturers (OEMs), MSPs, and system integrators, work hand in hand with various tech providers. Whether it’s big tech companies such as Microsoft, IBM, CISCO, and Amazon or upcoming tech start-ups, you have to choose your partners wisely. The MSP business is particularly sensitive to channel affiliations because the end-client has no visibility into these partnerships, yet they influence so many aspects of the final managed service offering.

Develop productive, customer-oriented relationships with organizations whose partnership programs align with your client’s expectations and your business goals. Be careful not to position yourself as a tech reseller. Instead, develop and brand your own service delivery model.

Here is a list of crucial considerations to make when choosing the right tech partner for your MSP service:

  • Dependable technology
  • Solution reputation and competence
  • Responsive 24/7 support
  • Aligned cost structures
  • Comprehensive reporting and metrics tracking tools
  • Market dominance and brand authority

Summary

Growth can mean different things, depending on who you ask. For most businesses, MSPs included, growth translates to an increasing revenue stream and expanding client base. But that’s not all that business growth entails. As an MSP, set your sights on achieving more meaningful, mission-oriented goals. For instance, if you offer managed security, introduce businesses to cybersecurity solutions that not only protect their assets but also help them grow digitally.

Going above and beyond with service delivery starts with streamlining your organization’s internal workings. To drive sustainable growth, design a considerate customer acquisition and expansion system, a value-based pricing model, and stick to a manageable niche. Additionally, maintain a steady supply chain by teaming up with the right partners and augmenting your staff with automation. This may be a lot to take in, but success doesn’t come easy.

Action1 can help you out on the automation front. We provide flexible cloud-based RMM for MSP that encompasses IT assets management software (ITAM), and security patch management. Try out our free RMM tools or schedule a demo to learn more about our range of solutions designed to enhance and grow your MSP Business.

July 27, 2021

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