Go Back To Business Basics To Survive
While talk of doom and gloom swirls throughout the business world, managed services providers are in a good position to survive economic downturn.
Business Solutions, January 2009
Through his experience working with some of Zenith Infotech's 2,500 IT service providers, Saluan has heard a lot of optimism. "Our partners are looking at the upcoming months as a time to attract new clients, grow their own private-labeled businesses, and increase their sales with complementary offerings that yield good margins while adding very little, if any, overhead," says Saluan. While most of the MSPs Saluan works with provide data protection, remote monitoring, management, and remediation of client networks, any MSP can consider these suggestions to avoid failure in this economy.
"Regardless of your technology, this economy still presents new buyers," Saluan says. "Businesses small and large are looking at trimming IT costs while maintaining a high level of productivity." To take advantage of that, Saluan warns MSPs not to be satisfied with just holding on to their current client base. Instead, plan for the reality that, due to their own slowed cash flow, a certain percentage of your existing customers will not continue services. Make finding new clients a high priority. "You should be spreading the gospel of 24/7 data access and protection and proactive remote management," says Saluan. "It's absolutely critical to employ growth strategies that include outbound calling, formal referral programs, e-newsletters, hosting technology events, and direct mail. Don't look at dramatically cutting your selling, general, and administrative [SG&A] costs. That's everyone's first inclination in a downturn. This will lead to a slow death for your company. Just make sure costs stay in line with your revenues on a percentage basis."
While 'find more clients' seems obvious, when times are tough, it's easy to become preoccupied with keeping existing clients and let finding new accounts slip to the background. Instead, reexamine your marketing and sales programs and look for new opportunities to get your name out into the market. Saluan also reminds MSPs to consider new verticals for untapped opportunities. This may involve tweaking your selling materials and website to speak to verticals that are recession-proof (e.g. healthcare, government, education, and professional services such as law). Data access and protection are critical for these verticals, so lead with these solutions. Target new verticals with direct mail and outbound calls. For existing accounts, your sales team should remember — out of sight, out of mind. Saluan stresses that VARs must be dedicated to maintaining constant touch with those customers you have and want to keep.
Every business needs to closely examine receivables and take steps to work with clients if payments are slowing down, but especially MSPs. Now is the perfect time to look at your billing processes, make sure they are precise, and then follow up with the clients that are falling behind. Keeping your revenue flow steady may mean offering your clients financing or leasing options, but Saluan warns to tread lightly in those areas and make sure you're not taking too many risks and self-funding these items. After examining your business internally, look externally to your vendors and distributors for support. "Work closely with vendor partners to achieve efficiencies," says Saluan. "Talk to them about whether cost reductions or risk sharing is available." He also recommends strengthening your relationship with distributors that can support you with leasing programs, credit lines, efficient delivery and warranty solutions, and marketing programs.
Lastly, Saluan says to take a deep breath, plan for the worst, and never stop working to bring in new clients. "It isn't going to be smooth sailing for anyone, so position your organization for success with the lessons learned from the last downturn," says Saluan, who adds one last reminder: "Don't let your team use the economy as an excuse. Someone is buying managed services in your market today; you just need to find them."