posted by Lee Rozeboom on Monday, September 10, 2018 in Unified Communications and IT Blog

During this year’s annual webcast series with Service Leadership, Paul Dippell dove into his data once again to pull out some ways MSPs can drive growth. While most Solution Providers are looking for ways to grow, not all are able to accomplish it at the rate they want. Interestingly enough, according to the Service Leadership Index©, the MSPs who are growing fastest are also the most profitable.

MSP Growth Rate Drivers by Profitability

In green are those companies who are the highest ¼ of profitability, yellow are those with median profitability, and in red are those companies in the lowest ¼ in terms of profitability.

The data shows it’s untrue that MSPs must sacrifice profitability to drive growth. The takeaway is that Paul urges MSPs to find low-cost ways to drive growth, instead of only relying on marketing dollars for growth.

Watch the Part 1 Recording

Six Low Cost, Fast Impact Growth Drivers

Paul shared the following six low marketing cost drivers MSPs can apply to their business to see results quickly. Plus, I included how financing can help you in these areas.

Retain customers so you don’t have to replace them.

It costs very little in terms of dollars to create a great customer experience. It does, however, require your business to spend a great deal of time understanding what makes a great experience and apply that across all practices. According to Paul, the average MSP in Q2 2018 won 3 contracts, and lost 1.4. (Note: Paul discusses in depth the difference in good turnover and bad turnover, and that you must spend time finding the right customers for your business.) That said, one way to decrease customer turnover is to tie their Managed Service contract to a finance agreement. In these cases, a customer would have to replace their equipment if they fire you, making the decision that much harder.

Make it easy for the customer to get started with you.

How often does a cost barrier prevent customers from getting started with you? How about getting the client’s environment supportable? Many times we hear from Solution Providers who give their client a proposal for their Managed Services monthly fee. The customer seems pretty open to the proposal, and then they drop the bomb: to get their environment supportable the customer needs to come up with $50,000.

Whomp, whomp, whomp. That didn’t go over well.

If you want a simple way for the customer to get started with you, try taking the upfront investment you require and finance it over a few years. We recommend matching the term to your Managed Services agreement; we typically see 3 years.

Add Product Resale

Your customers can’t run a business without IT hardware. While less hardware is required than ever, it is unlikely that they do not need any. Are you forgoing the opportunity to be their IT equipment provider? If so, you may be leaving the door open for competitors to come in and provide that service. It takes time and skill to identify the right hardware, source it, and configure the gear, which creates the risk that you’ll lose the Managed Services sales, too.

During the webcast, Paul points out that selling more products is the “easiest way to add EBITDA to your bottom line.”

Dive Deeper into MSP Opportunities with Product and Resale Financing

Make it easy for the customer to grow.

MSPs who are growing fast are selecting customers who are also growing fast. In fact, Paul points out that if a customer grows 15% in user count and you provide your products and services to those new users, your organic growth target is met!

How can financing help? It’s simple. By using financing to pay for their technology acquisitions, they can use their cash for growth generating activities. Like what?

What Expenses do you prefer to use your business cash for?

According to a survey we did of technology buyers, they use their cash for marketing and advertising, headcount, and inventory.

Cross-sell: Make it easy to buy 100% of your offers.

Have you ever heard the statistic about how much cheaper it is to keep an existing customer than to acquire a new one? One way to keep your customers is to continue to sell them your new and improved offerings. This is another way to keep competitors out. Paul’s recommendation is to have the goal that 100% of your customers buy 100% of your offers.

Financing enables your customers to quickly and painlessly add on new hardware sales. Plus, if you are offering HaaR, we can quickly increase how much Managed Services dollars we are collecting on your behalf.

Ask for referrals.

This is a critical, low-cost way to get extremely high quality leads. Build a process that ensures you ask your tenured clients to refer you to other decision makers within your desired market (geographic or vertical) and reward them for those referrals.

Not going to lie, whether or not you use financing doesn’t make much difference here. I’ll just point you back up to the first point where financing helps you create an excellent customer experience, potentially leading to more referrals!

Taking Action: Grow Today

What’s the whole point of these six items? Paul says inevitably you’ll have to spend marketing dollars to grow; however, he urges MSPs to delay marketing spend if the model isn’t working. “Always fix the profit model first, then grow,” Paul points out during the webcast.

If you want to take Paul’s advice and add financing to ultimately influence your growth trajectory; we put a tool together that assesses where you are in the maturity of financing and Hardware as a Service (HaaS).

We compiled best practices for top MSPs who have implemented financing into their business and, with the help of Service Leadership, developed a custom Operational Maturity Level© (OML) assessment tool.

Hear first-hand the steps one MSP took to increase their OML and get on the fast-track to higher revenue and greater stock value in part 2 of the webinar series.

Register for Part 2

We are offering free assessments to those who attend our webcast series. With the assessment you’ll receive recommendations on new ways to drive MRR growth in both new and existing accounts by applying a few best practices and evolving your business to sell more profitable contracts.

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About The Author

Lee Rozeboom, Vice President of Strategic Relationships, is responsible for establishing and maintaining relationships with those with influence in the Unified Communications, Low Voltage and IT markets. Lee will also serve as an outward facing voice for our organization and provide oversight and guidance to the Data team. In his previous role, Lee served as the Vice President of Sales for the MSP division. He has been involved in lease financing since 2006. Prior to joining GreatAmerica in 2006, Lee was a Financial Planner, holding his Series 6 and 65, for Northwestern Mutual Financial Network. Lee received his Bachelor of Science in Finance and Marketing from Babson College in Wellesley, MA.

  1. best practice
  2. financing
  3. managed services
  4. technology
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