Increase the Success and Value of Your MSP Business
Brian Sherman / MSP Helpdesk
Virtually every business goes through periods of stagnation, from flat-lining revenue or client acquisition to a static service or product portfolio. Some of the most successful organizations go through periods where they plateau, when profits or sales may still be growing but the operations seem to be on autopilot.
It’s actually quite common for owners and executives to take a slight respite when things are going extremely well, slightly easing off the throttle and loosening their grip on the wheel. Corporate leaders often struggle harder when trying to keep up with the needs of a rapidly growing client base, which doesn’t leave a lot of time for them to focus on the future. As long as revenue continues to climb, there isn’t much urgency or motivation to work on future business planning.
After years of sales expansion and client acquisition, many managed services professionals are experiencing the “plateau effect” and realize they need to alter their operations to boost the momentum. Whether their end goal is to build greater business value for a future sale or retirement, or just to hit a predetermined annual revenue target, sometimes an MSP has to shake things up to get over the hump. The biggest obstacle to success is sometimes success itself, where owners become content with the “status quo” and stagnation sets in.
That’s the point when the company stakeholders often take a step back to review current operations, survey unmet client and prospect needs, and revise (or construct) their long-term business plan. Those decisions may include hiring additional managers and other employees, merging with or purchasing another provider or selling out to another organization. Plateaus are often precursors to greater operational issues, so rather than hit the proverbial wall, MSPs should note the signs of deeper issues and step up their planning processes. Believe it or not, the solutions are often simple, but in order to make the right decisions, they will need to take a deeper look at the market opportunities and their organizational strengths and weaknesses.
Value Options for MSP
Regardless of an organization’s end goals, the route should be thoroughly mapped with specific plans of action for all contributors. Every stakeholder should set aside time each week to fulfill their part of the company’s strategic initiatives, and keep their co-workers informed when obstacles or work schedules delay their completion. No matter how busy the operation is, by just setting aside a few uninterrupted minutes a day, MSPs can knock off a couple items on their weekly “to do” list. By the end of the month, all those activities can really push a project towards completion—without having to take work home.
By design, managed services growth is exponential; with recurring revenue contracts creating a steady, monthly cash flow that adds to the organization’s market value. Even if selling the MSP business isn’t in the strategic plan, as the company’s bank accounts grow, its prospects for success and expansion grow as well. Profits can be used to add employees and new services, and the organization’s financial situation will look attractive to suitors and potential investors (banks and individuals).
The easiest ways for MSPs to increase revenue potential and business valuation, while fairly simple to implement, often require a substantial amount of time and energy to make it worthwhile. Each organization has to identify the most applicable approach for their particular operations, as well as their specific market conditions and clientele. The three most likely ways to increase the value of an MSP business include:
- Expand the portfolio
Few MSPs provide complete IT support for every one of their customers. While offering that comprehensive of a service and product portfolio may be too costly for most providers, from a training and investment perspective, adding a couple profitable new practices may be an option. An assessment of current client needs can help MSPs identify the best prospects for expansion, such as the current top practice choices of mobility and managed print services.
- Target new vertical markets
A good way for MSPs to expand beyond their current customer base is to focus their efforts on a specific industry—but it takes a lot more than adding a specialized solution or service to be successful in a new vertical market. That good fortune only comes after a thorough assessment of the target audience needs, revenue potential, cost projections, and the potential competition. Trade associations and local business groups may make it easier to find the right prospects, but MSPs should take a closer look at the real opportunity before taking on a new vertical focus.
- Geographic expansion
Just as much time and energy goes into expanding an MSP’s coverage area. While new regions offer fresh business prospects, they may also bring new competitors and a variety of personnel issues. Before extending geographies, MSPs need to consider the costs associated with hiring employees, extending technology platforms, opening satellite offices and executing their new marketing plans. If geographic expansion makes sound financial sense, it can likely be repeated in new regions (with less of a learning curve).
No matter which option the stakeholders choose to grow their managed services business, with a solid business plan that holds each person accountable for their specific actions, the probability of their success will increase exponentially.