So you want to start an MSP business but don’t know where to begin. The high growth potential of the managed services market leaves the industry ripe for disruption but you are probably not the only one who noticed it. Starting and running a business can be equal parts rewarding and daunting in this competitive environment. This post will help you make the right first steps.
Everyone wants their startup to be the next Zappos or the next Uber.
There is a reason we love to root for the underdogs—we love the stories of fightbacks, of the startup-in-a-garage going on to become the largest search engine in the world.
We see ourselves in them. By winning against every conceivable odd stacked against them, they show us it's possible.
But you look at an established industry with established companies and wonder how you can ever compete with them. Will the disruptive state of affairs work for you because there is so much new to do, or against you because everyone has been there and done that?
Our philosophy is simple—everybody has to start somewhere.
So if you play your cards right, you will be able to muscle through even in a red ocean market. In the managed services space, there are a few critical components that could either take you places or tip you off. Pay attention to them.
1. Develop a value-added offering
Go for depth rather than breadth: Even industries with entrenched players can be disrupted if there is room to add value. Most big companies tend to stagnate after some time. They’re big, clunky, and too dormant to adapt to the opportunities of tomorrow. So when you start an MSP business or transition from your break-fix services, don’t pick a popular idea and run with it. You will never be able to compete with the industry biggies offering what they offer.
Develop a product offering that solves a specific problem based on a vertical, client base, or domain. Track records suggest that MSPs have a higher chance of succeeding when they specialize in a vertical. If you build your product around a vertical and the problems specific to it, you begin to understand the customer pain points better than anyone. Simply put, develop a unique value proposition that sets you apart, and ahead of the competition.
What big companies have as one of their verticals is your only vertical, and naturally, clients in that space will migrate towards you for the exclusivity you offer.
2. Become a business-savvy techie
Business side of things can’t be an afterthought: It’s not rare to hear an MSP say, “I can do a brilliant tech job. All I need is to know how to get started on the business side.” MSPs are led and piloted by hardcore techies, who know their way around technology and engineering like the back of their hands. But we can’t say the same for the business side of things.
That’s a skill entrepreneurs in the MSP world need to develop. Without at least a high-level understanding of how the business side of IT works, you can’t build a product that sells. Which is precisely the end goal. At every step of your product development, put on your business hat to understand what the customers want, how to add value, and how to maximize the marketability of the product. Or get a consultant to tackle the business challenges early on.
Related reading: How to sell managed services to SMBs
3. Develop the means you need to land clients
Learn to sell: There is a question never too early to ask when starting a business—How do you plan to land clients?
Let’s take a red pill here. No idea is foolproof. No idea sells itself.
The greatest affirmation that you’re doing something right is having people pay to use your product. Start by understanding the industry best practices. How do MSPs usually sell? Do they network with influencers? Do they do outbound? Does social media marketing work? If all of these work, where to begin?
Putting your name on the map should be the first step. Get out of your office and run some events. Attend trade shows. We tend to forget people buy from people. So make some real connections, find and fulfill their needs, make a sale, get referrals, and repeat. Word of mouth has always been the most powerful form of marketing for any industry, more so the MSP industry. If someone likes your product, get a testimonial, gather social proof, and showcase it.
Related reading: MSP sales 101
4. Focus on a good pricing strategy
Tailor your pricing to your unique offering: MSPs generally find pricing their greatest challenge when starting out. Because there is no right or wrong answer when it comes to pricing. It is fluid. You need to come up with a pricing model tailored to your unique offerings and value addition. Per-device, per-user, and fixed are some of the commonly followed pricing models.
But developing a pricing strategy is more than choosing one of the above. How much should you charge for your product? Some entrepreneurs tend to think setting the lowest price in the industry could get them clients. This is an unsustainable way to run a business, and clients who came to you just for the pricing may quickly switch the moment someone undercuts your price.
Create a sample target list and request users to try out the product. A/B test your prices. You will understand what customers in your vertical expect and how your product measures up.
5. Create vendor relationships, not mere partnerships
Vendor relationships matter: Businesses usually rely on vendors to provide them with the tools and resources they need to support their clients. They handle operations critical to the smooth functioning of your business, including ticketing and cloud backups. All successful MSPs will have strong vendors who’ve got their back. Vendor relationships can’t be transactional, for they play a long-term role in your business.
Focus on creating mutually beneficial relationships rather than mere partnerships.
Above all, enjoy the ride
There is no formula for startup success. You win some, you lose some. However, having these points in mind can help you steer away from the obvious pitfalls and toward smart business ideas and viable goals.
But starting up is one of the most enriching experiences you can have. So enjoy the ride. You ask how? Develop an underdog mindset, add value, and don’t be afraid to make a few mistakes along the way—after all, that’s the best competitive edge you can have.