Scale An MSP Business: The Five Hard Truths
Scaling an MSP is never easy. For 10 years, I followed every industry mantra, bought all the automation tools and hired, lost and trained techs over and over again. But I just couldn’t seem to scale in a sustainable way.
In 2012, at the peak of my frustration, I decided to take a look off-shoring and outsourcing. It was an eye-opening experience which freed me from the IT industry Kool-Aid I’d been addicted to. It allowed me to transform my MSP into a totally saleable business – and gave me the opportunity to launch Benchmark 365 and help other MSPs and ITSPs benefit from the model.
Here’s the 5 biggest lessons I learned about scaling an MSP.
You can automate all you like, IT is still a labor business
I bought all the tools, wrote complicated scripts to save time on support and invested heavily in PSA (helpdesk) software. There was just one problem. We still needed people to drive the tools and handle the helpdesk calls. Unfortunately, the more I looked at scaling up these roles – the less profitable we became. The model just didn’t add up.
Many MSPs fail to hit scale almost entirely because of HR problems and labor costs. Recruiting, training, losing people and re-hiring is a constant battle for most IT providers.
Heading offshore gave us a competitive advantage in hiring resources with redundant capacity in every single role. This has since been proven out by our Benchmark 365 partners who are able to tap in to that capacity every day (and night!) while saving at least 50% on labor costs.
Sales is what drives an MSP to scale
There are two types of MSPs – those that focus almost entirely on sales and those who don’t. Guess which ones have bigger companies and bigger profits?
10 years in the trenches doing tech support and managing people left me with very little experience in sales. I was too busy running a tech business to truly master the art of selling and as a result our revenue had stalled.
After shifting offshore, I was able to turn my energy away from monitoring incoming tickets and fighting fires to listening to sales podcasts (the Advanced Selling Podcast is a really good one) and reading books from expert sales mentors like Jack Daly.
Putting sales first led to 100% year on year growth and our MSP is still growing today. Our partners report similar results. After about 3 months of getting their offshoring model set and spending time on sales, they report considerable financial growth and profitability.
Customers want results, not personal relationships with your helpdesk guy
Back to HR. The most common issue I had with staff was the fear of losing a poor performing employee because a customer really liked them. This is nonsense. Scaled up businesses operate on well-defined processes backed up by great people not the other way around. Customers don’t keep coming back because someone is nice to them on the phone. They come back because you deliver exceptional results day in day out. In other words – speed, competency and consistency. I learnt that by having a scaled up, highly trained team you can deliver exceptional results 24 hours a day no matter who sat on the helpdesk.
So that’s the helpdesk. But there’s one relationship you should never take for granted and that is the one between YOU and your customer. Spending time with your clients in the board room or catching up for coffee is what continues to solidify your relationships now and into the future. But the only way to make time for this is to get off the helpdesk.
The MSP game has changed forever
In 2012 the writing was on the wall for me. Either radically change my business or face diminishing returns. The threat of cloud and Saas and the commoditization of technology was just emerging. But today the threat is real for all MSPs. SaaS providers are eroding the business model and pricing competition continues to intensify.
In order to survive, much less thrive you cannot keep running an MSP the way you have. You don’t have years to build up a team to wow your customers anymore. You have today. And today it’s about speed, access to a much wider range of skills and access to lower cost people solutions.
Those who get their helpdesk humming and labour costs under control are jumping ahead of industry trends, generating new revenue streams, beating out competitors on price and activating the new solutions that will keep them ahead.
You CAN scale an MSP
The global IT services market is valued at a staggering USD$985bn. Let that sink in.
Whether it’s getting customers to cloud, helping businesses with cyber-security or positioning your vCIO services it’s all there for the taking.
The only thing getting in the way of scaling your MSP is you. Stop hanging on to old customer support models and cost structures. Most importantly, acknowledge your business will only grow when focus 90% of your time on sales and building relationships.
So take a moment and think about what old ideas are getting in the way of scaling your business. Thinking disruptively, anticipating the future and creating a business model that can adapt and scale quickly is the only way to thrive in the long run.