How to Sell Managed Services Agreements: MSP Tip Sheet

When you made the decision to evolve your business into an MSP, you took the first step towards growing a different kind of business. Congratulations on starting to build a company that will provide you with predictable revenue. This will be a significant change from your previously unreliable feast and famine billing model.

Prepare for Some Challenges – Including Client Churn

Author: Justin Gilbert, senior director, channel marketing, Zix AppRiver.

With some clients still paying for your “as needed” services, and your attention turned to finding and signing new managed services contracts, your client roster may suddenly destabilize. Your pay-as-you-go clients may begin to feel like a burden as they lower your margins and take up disparate amounts of your time. How do you divide the labor between your new fixed-fee clients and your legacy hourly or project clients? Do your managed contracts get your best, while your project clients get the rest? This is a common pitfall.

The Good News?

This is completely avoidable if you convert your current break-fix roster to managed services clients. The most common barrier to converting legacy clients from an hourly contract to a managed contract is the fear of losing your project revenue before you have replaced it with managed services revenue. While it may seem counterintuitive to your growth, keeping clients that are not aligned with your new business model will cause you to lose revenue in different ways – likely in ways that are less positive than an amicable parting of ways.

You can minimize instability by controlling the process and taking the following steps towards moving your roster forward with you.

  1. Communicate. Give your clients the information they need to make an informed decision to grow along with you. Explain the benefits to both parties clearly – how is it better for them, and why have you chosen to pivot?
  2. Never apologize for wanting to be consistently profitable. Having stable revenue makes you a better partner. Imagine needing support from a company that is understaffed constantly, or who just shuts their doors one day. You deserve to retire and put your kids through college – don’t tolerate clients who expect you to work for free or make special exceptions.
  3. Do not make special exceptions. Exceptions do not scale. It may seem counterintuitive to walk away from legacy revenue. Keeping every client who wants to keep paying time and materials only will limit your ability to add your more profitable new managed services clients.
  4. Approach one client at a time. Space it out in whatever way you can do so comfortably – but it should not extend past a year from the date you adopt the managed services business model. Give each client a six-month runway to convert to your new managed services agreement, or help them choose a new provider. This ensures you do not lose more than one client at a time, and ideally preserves your revenue as you replace it. Adding one new managed services contract monthly while converting or off-boarding one of your legacy accounts monthly is a very realistic goal.
  5. Use data to support your decision. Show your clients the difference between what they currently buy, and what they should be buying to protect their businesses effectively. Ideally, when you combine everything the client would need to buy and then install, update and support – hardware, software, security solutions, services – you can easily demonstrate how it makes more sense to buy your bundled managed services offering. Show them how much down time costs per user, and then across their entire business. Talk to them about security risks and why you are investing in new solutions that will protect them. Times have changed, your business is changing, and their business will need to change, too.

Start with your least profitable clients. You can practice asking for the business with clients that make the least amount of impact to your bottom line if they leave.

You Know Your Clients Best

How you approach each one is up to you, but keep in mind the following when you make your ask:

  1. Ask open-ended questions like “When would you like to begin the changeover?” instead of closed-ended questions like “are you interested in changing to this new model?”
  2. Ensure all stakeholders are in the room (or zoom) when you have the conversation.
  3. Get comfortable asking questions and then sitting in silence. When you ask a question, sit quietly until your client answers it. Do not make suggestions. Do not offer ideas. Let them think. Let them answer.
  4. Support your statements with the data you’ve collected across your accounts.
  5. Be okay with “no”. Remember, you’re giving them plenty of time to find a new provider, and a lot can happen in six months – including them not finding anyone they like as much as you. Don’t drop the ball on their service delivery – you still have a lot of opportunities to demonstrate why they should stay with you.

If a client decides not to stay with you, you still want this transition to go as smoothly as possible. Taking the high road with a client who is leaving is essential. Your goal is to be professional and helpful, making sure you avoid receiving bad reviews online, negative comments at networking events and facilitate an amicable parting of ways. You will want the door wide open when your clients discover the grass isn’t greener with another provider. You won’t want anything preventing them from deciding they’d like to come back and try your new managed services offering.

If you want to maximize your success at converting non-MSA customers into a reliable stream of recurring revenue be sure to check out the Zix MSP Masterclass. We cover bundling, marketing, and sales strategies to help you ensure you hit it out of the park the first time.

Author Justin Gilbert is senior director of channel marketing at Zix/AppRiver. Read more guest blogs from Zix/AppRiver here.

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