How to Manage MSP Growth Cycles
GMS Live Expert / MSP Helpdesk
Entrepreneurship is definitely not as glamorous and exciting as many people believe. There are definitely perks, including the freedom of being your own boss and the unlimited profits when things go as planned. But in the MSP community, for example, the workload and stress of supporting many clients’ business-critical systems can be quite overwhelming. A good thing is that a successful provider’s work never goes away. Of course, that can also be a bad thing when the work-to-employee ratio is excessively high. There are no shortcuts when building an MSP organization and managing the peaks and valleys can take a lot out of an owner.
The first few years of operation can be especially taxing, when employee headcount is low and client acquisition is crucial to a healthy cash flow. Simple mathematics is all you need to understand the dilemma many MSPs face: their monthly revenue numbers have to escalate quickly to cover their rapidly rising expenses. Investments have to be made before the business can sign its first client. Even if it’s a one person shop, an MSP has to pay the customary regulatory business start-up fees and secure the proper systems, and build the infrastructure necessary to grow the organization to a sustainable level.
Every new client moves a service provider that much closer to the next major investment. When the workload exceeds what a single person can handle, the payroll will have to expand accordingly. Sales and marketing activities have to accelerate to ensure the company has the cash flow to pay its current bills and prepare for the inevitable investment needs for future expansion. This proverbial MSP growth cycle is what forces many tech-savvy entrepreneurs to bring in professional business managers—or get that specialized skill training themselves.
Neither option is an easy one for IT services entrepreneurs, especially since these decisions are often made under duress and neither will help solve their short-term problems. It can take months to recruit and onboard a professional with solid management experience, and years to gain the educational training needed to take the organization to the next level. Considering that 50% of businesses fail within five-years, according to the U.S. Small Business Administration, every new service provider should consider employing industry best practices to prevent overextending themselves financially and personally.
Alleviate Growing Pains with Collaboration and Automation
Rather than overwhelm their schedules and risk the all-but-inevitable burnout, many managed services entrepreneurs end up exploring other options that can bring some sanity to their expansion plans. Fortunately for providers, the managed services business model gives them great flexibility through automation and partner collaboration. You’re not in it alone—unless it’s by choice.
Just like the tools and third-party supplied serviced employed to manage customer systems and applications, MSPs should be leveraging technologies and business relationships to improve their own operations. That frees up time and resources needed to grow the business. While the options are virtually limitless, managed services providers tend to get the most “bang for the buck” by employing these methodologies:
- Implement (and fine-tune) a PSA (professional services automation) platform: these MSP business-critical applications can automate most (if not all) your client-facing routine processes and streamline a number of other back-office procedures. When correctly configured, they can save a significant number of billable hours, reduce the amount of lost ticket information and improve customer satisfaction. Most of all, they allow MSPs to focus more on their strategic plans and other activities that help them grow.
- Collaborate with a Professional Help-Desk Provider: these partnerships can help MSPs scale their operations and customers services as quickly (and as skillfully). With options including 24/7 support and various technical proficiencies, a high quality partner can quickly boost a service provider’s capabilities and relive a lot of the stress associated with expansion.
- Outsource other services: partner with others to boost specialized skills. When expanding into new vertical markets or taking on just one unique client, MSPs can leverage peers or third-party suppliers to significantly reduce investment requirements. Each provider organization can deploy its own limited resources and focus more time on tacking its own top priorities.
These activities can help you build an MSP organization that can prosper under almost every imaginable economic and market scenario, and weather most unforeseeable downturns. Whether you’re opening a new provider practice or just looking for industry-accepted best practices, each of these options will surely boost your company’s chances of celebrating its fifth, tenth, or even its fiftieth anniversary.