What MSPs Need To Know To Grow Their Business

By Christine Kern, contributing writer

A new white paper reveals the “Seven Habits Of Effective MSPs.”

According to the MSP Alliance 2016 Forecast, this year could be a banner one for MSPs who can leverage a host of emerging opportunities. The trick is to find yourself ahead of the curve — not chasing after it — with your competitors leaving you in the dust. So what makes an MSP successful? A recent Datto white paper, Seven Habits of Highly Effective MSPs, addresses that question.

While a significant portion of MSPs have seen at least 20 percent annual growth recently, almost half are growing at rates of 10 percent or less. At the same time, operating margins vary considerably among MSPs, with high-growth MSPs often finding their profits are not apace with revenue due to inefficiencies of scale. Others are seeing slower top line growth with much better bottom-line results.

Datto offers seven strategic tips for MSPs who want to optimize growth and profits by making the most of current macro market growth and out-perform their competitors.

1. Define and document repeatable processes. MSPs need to go beyond technical competency to ensure consistently replicable delivery, which can be a challenge for many MSP leaders. The key to this is standardization of the process by all members of the MSP staff. The white paper explains, “When it comes to an MSP’s desire to grow, establishing habitual processes and procedures is crucial. Neglecting this first step makes the following habits difficult to achieve and maintain.”
2. Be missional. MSPs need more than a profit motive to lead their companies to greatness: they also need a mission. “However they define it, high-performance MSPs almost universally connect their business model to a mission or vision.” Mission elevates brand, energizes culture, and drives direction.
3. Choose and maintain a technical offering focus. An MSPs focus should always be on making their unique offerings the best of the best. Don’t try to be all things to all people. A clear focus increases marketing efficiency and effectiveness and doing similar things for similar customers’ leads to higher quality and bigger margins.
4. Build recurring revenue. The market is changing, and recurring-revenue models are an important part of success. As the White Paper asserts, “Perhaps the most important principle to bear in mind is that a recurring-revenue model forces an MSP to focus more rigorously on customer satisfaction, since revenue and profits ultimately depend on retention and renewals.”
5. Cultivate high-percentage entry points. Top MSPs place significant emphasis on “building” stable recurring revenue over time. Thus, MSPs need a strategy that allows them to establish a base of trust and then expand account penetration over time.
6. Build a better talent pipeline. Successful MSPs know how to build the kind of team necessary to continue growing by recruiting for potential, nurturing and motivating, and establishing long-term retention rates.
7. Pick the right partners. The white paper explains, “Channel players have always had to choose their partners wisely. But the criteria MSPs apply to their technology partners differ from that of VARs and Sis in some significant ways.” Key criteria for MSP partners include solid technology, ease of use, responsive support, service-aligned cost structures, reporting and metrics, and solution completeness. MSPs need cost models that support their business model.