It’s been said that acquiring new customers costs 5 to 10 times more than selling to a current customer. That’s important, because creating recurring revenue relationships with existing customers is the hallmark of the MSP. But as many of us know, some client relationships simply don’t make good business sense, while others help you grow your practice more successfully.
So how do you find clients that you’ll want to retain over the long haul? When identifying the traits of an ideal customer, here are three qualities to look for:
1. They are in constant growth mode. A customer that has its sights set on growth is always a positive sign for an MSP. As these businesses scale, they present you with opportunities to grow right alongside them. In addition, their growth can challenge you as an MSP to evolve your own business from a technological, professional, and best practices standpoint. Your goal should not only be to sell them additional managed services, but to serve as the trusted advisor or virtual CIO who will help them plan and strategize as their operations expand.
2. They know—and will tell you—their IT budget. When you begin to engage with a prospect, it’s important to ask about their budget early on in the conversation. It’s a warning sign if they sidestep the question, and even worse if the dollars they have to invest in IT don’t synch up with their needs or your pricing model. Most importantly, getting them to communicate or agree to a budgeted amount—even if it’s a range—will demonstrate their commitment to IT and the value they place on it. The bottom line is, don’t start working with a new client unless they can show you the money—at least in terms of an initial budget or by meeting your minimum spend commitment.
3. They view IT strategically. The ideal customer doesn’t view IT as a necessary evil, but as an investment that can transform their organization and make it more successful. As you meet with new prospects, it should be easy to assess if they want to approach IT from a proactive standpoint, with preventative maintenance and strategic IT leadership taking center stage. If they understand your services can help them optimize employee productivity, gain a competitive edge, and save operational costs, then it’s clear they are the type of customer you want to have. The right kind of customer will value your advice and will ask for your opinion, too. On the flip side are the reactive customers who will only call you when an emergency, such as an equipment failure or data loss, occurs. They are less than ideal and tend to be low margin and high maintenance.
If you come across prospects who only meet one or two of these three criteria, should you walk away? Not necessarily, but remember—they might require more time and effort than you bargained for, and bring you less profit and margin, too. That said, some clients can ultimately become the type of customer you want them to be, if you’re willing to make an investment in them. In addition, other factors can impact their value as a client, such as if they are on the rise in an industry you want to get a foothold in, or they have a promising business strategy that you want to be a part of. You may be more forgiving of their shortcomings if you can see the potential—but don’t lose sight of the risk, and continually work to mitigate that risk and manage it to protect your margins and liability.
In today’s competitive business environment, it’s no secret that prospects can pick and choose who they want to manage their IT. But, as an MSP, you have choices, too. The good prospects you’ll meet will want you to be more than an IT services provider—they’ll want you to be a part of their team and a trusted leader they can turn to as their business evolves. When you achieve a relationship with your customers that is truly a partnership, good things will happen for both of you.