The definition of invigorate is to revitalize, energize, revive, and enliven. That’s the as-a-service model, isn’t it? That’s what a recurring revenue stream can do for your business. It can revitalize and even revive a struggling company to change from month-to-month or day-to-day financially to being in a position of predictable revenue for planning and growth. It can energize and enliven business owners and employees stuck in a “ho-hum” business model and way of working.
What’s the opposite of invigorate? Tire. That’s the break/fix model, isn’t it? Tired. Trying to make a living on the that model just gets more and more difficult. The break/fix model of yesterday barely works today, and won’t work tomorrow.
VARs we’ve interviewed that have embraced services and recurring revenue streams haven’t looked back. In this issue, you’ll find an article on Chris Rumpf, a restaurant IT VAR who embraced services because his business was failing. “Instead of automating business processes to reduce costs for ourselves and our customers, we just kept raising our prices because we never seemed to make enough profit margins,” he says. Sound familiar?
Chris stepped up his company’s game with merchant processing and selling Hardware-as-a-Service (HaaS). Additionally, he uses remote monitoring and management (RMM) to sell proactive maintenance services to his customers. Adding automation functionality and additional monitoring services enables Rumpf to charge five times more than he used to charge previously. “Right now, 90% of our operating expenses are covered by recurring revenue, and within the next 5 years, 200% should be covered,” he reveals. That’s awesome stuff. That’s what you’re aiming for as well, right?
Assuming you want to experience, for yourself, all the benefits of this model, you’ll have your work cut out for you.
At last month’s Channel Transition’s event that Business Solutions held in Philadelphia, a variety of experts in the as-a-Service model shared their tips, best practices, and trends that you should be aware of. Here’s a quick summary:
If You’re New To Services, Start Small And Ease Into The Model
Rumpf, mentioned earlier, wasn’t in a cash position to make every deal a HaaS deal. Rather, he calculated what his business could handle and started there. For you, maybe it’s only one deal a month and you grow from there. Also, consider selling services to new customers only. Indeed, you might have trouble convincing old customers to begin paying you on a monthly basis. Then again, you might have some customers that could benefit greatly from proactive maintenance. The point to all this is that there’s no hurry. Take your time and do it right!
If You Already Offer Services, Add More
Sounds simple, but many MSPs get stuck with what they currently offer and don’t look ahead. You could be offering network security, antivirus, antispam, mobile device management (capitalize on the BYOD trend!), NOC, managed print (who doesn’t have printers and copiers?), HaaS, Software-as-a-Service, Infrastructure, and so on. Backup and recovery is a great one, too! In a previous issue we interviewed Omnipotech and found that the company’s gross margin on its BDR services is 90 percent. Many vendors offer a variety of solutions. As you test a vendor, make sure you try out everything, whether you use/sell it immediately or down the road. There’s always more you could be offering.
Reduce Expenses, Have A Business Plan, And Get Close To Your Finances
In other words, run a tight ship. Before writing for BSM, I was part owner of a VAR in Erie, PA. At our peak, we had 23 employees. We were modeled by the company’s founder like the dot com companies of legend. We had lots of young people energized to be using technology to solve problems. Additionally, like the dot com companies, we also had hacky sack, nerf guns, a toy box, and video games. It was a fun place to work with lots of distractions designed to increase productivity but really just created distractions. Generally speaking, the company was poorly run, despite the talent. Things were good and easy when the money was pouring in from one big customer, but when that customer went away, the poorly run company started to struggle.
I liken this to break-fix companies that did great when margins were great, but today, eroding margins mean struggling businesses. This is one of the reasons the as-a-service model is so appealing. But it’s also a reason why the smart solutions providers who adopt the model have a few things in common. Leading MSPs are intimately aware of their finances, they’ve reduced expenses, and they have a business plan for growth. To do this model well, you need to be running efficiently.
Part of this is knowing which customers are profitable and which aren’t. Automation can help here (more later). Panelists at Channel Transitions recommended that attendees are better off overcharging customers than undercharging. They shared horror stories of having to go back to customers after discovering they weren’t charging enough to be profitable and increase their rates. It’s easier to lower your rates with customers than have a conversation about raising them.
Focus Less On Technology, More On Solving Customer Problems
Successful MSPs don’t sell technology to their customers, they sell things like security, peace of mind, and proactive management, all to avoid downtime. Gone are the days of going in and pitching speeds and feeds. Selling technology allows customers to shop you on the internet, looking at the line items of technology you’re providing. When you sell a vision of stability, free from costly downtime and problems. Customers won’t find that line item on the Internet.
Also, spend more time with customers looking for opportunities. Panelist Steve Rutkovitz shared that his company does roadmapping, which gives customers an opportunity to talk about their businesses, challenges, and ask questions. Rutkovitz also creates a matrix of all his company’s services and all his customers to see how much penetration he has with each customer. Doing so uncovered thousands of opportunities for upselling.
Automate As Much As Possible
Fully embracing PSA (professional services automation) and RMM tools will allow you to scale, be more efficient with less people, and better manage and service your customers. We featured Platte River Networks a few issues ago and learned that the automation of routine maintenance immediately reduced a burden on the company’s field techs. Additionally, the MSP identified that techs were spending too much time with some customers that had legacy hardware.
Automation can help with reporting as well. It’s important to provide customers with reports that illustrate all the work that you’re doing. You don’t want to do a great job over 12 months and then have the customer want to quit because no problems have occurred.
Talk, Share With Peers
You’re reading this magazine because you want to learn. People attend conferences like Channel Transitions because they want more for themselves and their companies. Join organizations like CompTIA, ASCII, HTG Groups, RSPA. These are organizations designed for helping you grow and be more successful.
In the Oct. 2013 issue of INC magazine, there’s an interview with George Stephanopolis who gives advice on interviewing people. Rather than asking people what they do and have them go on autopilot with their response, he asks them why they do what they do.
Why do you do what you do? My guess is that it’s either to make money or help your customers. The As-a-Service model we’ve been focusing on so much can help you do both better than any other model.
Channel Transitions is sponsored by: AVG Managed Workplace, Mercury, OKI Data Americas, GFI MAX, ModernOffice Suite, and Harbortouch with industry association partners The ASCII Group, CompTIA, and the Retail Solutions Providers Association (RSPA).