Guest Column | January 6, 2014

How To Build A World-Class MSP

By Alex Rogers, CEO, CharTec

When I first began the transition into managed services with ARRC Technology in 2007, I had one thing in mind: to build a successful and fruitful life for myself and my family. This is a common goal that I’ve noticed among many business owners. In my journey of expansion, I learned a few tidbits along the way that helped me to build my managed services provider (MSP) into the world-class status that it holds today. Here are some suggestions to use to follow suit:

  1. Monthly Revenue Stream: When making the switch to managed services, the most enticing factor for business owners tends to be the promise of monthly recurring revenue (MRR). Who doesn’t like a guaranteed cash flow? But your MRR is one of the defining features that helps or hinders your business from moving onto the next stage. Average MSP’s often struggle to maintain a consistent MRR and charge an average service price of $100. This results in about $100,000 of revenue per employee and a net profit margin of only 14 to 16 percent. World-class MSPs tend to sell services with average prices of $120 to $160 and leverage $150,000 per employee or higher, resulting in a net profit margin of 25 to 35 percent.
  2. Business Planning: Every business needs a vision. It provides a starting point where employees, managers, and executives can meet and build a framework for making decisions, create long-term and short-term goals, and conduct new hires in the manner that fits with the company’s environment. The excuses, “I’m too busy,” or “There is no time,” are irrelevant — there is always time to plan for growth.  When there is a clear end goal in mind, it becomes easier to steer your business into the profitable waters of managed services.
  3. Industry Awards: The old adage that you shouldn’t care what others think or say about you stops here. It’s one thing to claim that your business is spectacular, but when others say it about you, then you instantly build credibility. In looking at all of the MSPs that are considered world-class in status, many if not all of them have received some type of channel-specific award. Whether it is the Business Solutions Best Channel Vendor Award, Channel Insider Bull’s Eye Award, or being listed in the MSP Mentor 501 class, industry awards separate your business from the sub-par and are a testament that you are doing something right and relevant in the channel.
  4. Level Of Partnership With Industry Vendors: While we often go into business alone, as we expand and grow, we have no choice but to look to outside sources for support and new value resources. This is where solid industry vendor partnerships come into play. Invest in joining with vendors such as Microsoft, IBM, VMware, or Dropbox for business partner programs in order to secure residual revenue potential and more credibility among your peers. In addition, channel partnerships allow you to offer more solutions in your stream, ultimately increasing your earning potential and pushing you closer to the that world-class ranking.
  5. Business Training And Education: A key characteristic of world-class MSPs is consistent investment in business training and improvement. No matter how knowledgeable we think we are about a subject, there are always new things to learn — and the same can be said for business practices. Whether it’s by attending industry events, becoming a partner in an MSP training source, or through constant literature-based education, there are many opportunities for gaining new insight and best practices to incorporate into your business management.
  6. Unique Products: It’s no secret that in the world of managed services, there are basic services that most IT service companies tend to offer — like backup solutions, live remote assistance, 24/7 help desk, and IP surveillance services. While these are great solutions and sure-fire money makers, they don’t provide a lot of leeway to set your business apart from your competitors. You might be thinking that the quality of service or the attention to detail that your staff provides your clients makes your business a standout. While that could very well be true, your competitors are probably thinking the same thing. By incorporating a unique offering into your business, you give your business an obvious advantage over your peers.

Every business should strive to become world-class. While the journey might seem like a long road ahead, if you stay focused and determined to succeed, you will be able to reach unsurpassable business heights. You’re already headed in the right direction by reading this publication!