The #1 Mistake MSPs Make – And How to Avoid It

They don’t have a business plan. It’s that simple. Some MSPs want to hit the ground running. To them, the thought of spending precious time documenting mission statements and financial projections seems like time wasted. Who has time for planning when your day is filled with finding new clients, bringing up new services, and hiring a tech or two?

If that’s you, please reconsider. It doesn’t have to be all or nothing. In fact, the most important part of any plan isn’t how complete it is. The most important part is that a plan exists at all ― that you thought through and documented some basic aspects of your business:

  • Identified ideal clients. The first year you’re in business, you may want to take any client that breathes and is willing to pay you money. However, you need to identify your ideal client and make actionable plans to find prospects who match your criteria. Here are a few questions to get you started:
    • What size company, both by revenue and employee count?
    • Which industry or industries? Are compliance regulations a plus or a minus for you?
    • Do they want cutting edge IT services, or just enough to keep the business going?
  • Defined business services scope. No MSP can be all things to all types of customers. You need to strategize on which services your market segment needs that you can offer and end up with a strong profit margin. Then be upfront with both prospects and clients on the services you deliver and how you deliver them. The best way to do this is to document the scope of your business services to minimize scope creep.

Of course you can take on clients who don’t fit the ideal model. But, with a plan, you are now making a conscious decision on a case-by-case basis. Taking on a non-ideal client is no longer something you do automatically because you don’t know any better. For example, perhaps you’ve decided to standardize on the infrastructure – including hardware, servers, desktop, edge devices, OSs, versioning – that you support. If a potential client has non-compliant infrastructure they are unwilling to change, you can still take on the client. However, you know how much of a premium to charge for managing non-standard systems so that you adequately cover the extra work and time required to manage them.

  • Established business objectives. What milestones do you want to achieve over the next year or two. If you don’t want to think five years down the road, that’s fine. But you have to look ahead at least one to two years. How many clients do you want to have and at what type of margin? What actions do you need to do today to reach that goal?

Some of your objectives may be around life/work balance. Take those into consideration as well. You wanted to become an MSP for a reason. If you don’t clearly state your objectives, you may never achieve them.

  • Outlined your preferred exit strategy. Many MSP owners can go along for five, ten, fifteen years before thinking about retirement. At the end of the day, there are only a few options – sell, merge, hand the business over, or shut down. Take some time to think these options through realistically, and identify which one you want to work toward. With your ultimate end goal in mind, you develop your business to move forward toward that direction. Then, when an opportunity presents itself, you’re ready to evaluate it and conduct thorough due diligence.

Of course technology, market trends, and client needs all change quickly. In fact, your own business and personal objectives can just as quickly change. No plan stays current forever. So, review your plan at least annually, even if you review and decide no changes are needed.

Don’t let getting it perfect get in the way of getting it done. Even if your final document wouldn’t win any prizes as the most thorough “business plan” of all time, make sure you think through and write down the most important aspects of your business. That way, the small day-to-day decisions you make won’t inadvertently lead you down a path you never meant to go.

Looking for more tips? Download your copy of MSP Guide to Growth, Market Evolution And What It Means For MSPs.


*Originally posted on MSPAlliance.

Posted by Miguel Lopez
Joining Kaseya in 2012, Miguel Lopez brings over 20 years of experience to his role as SVP and GM. In this position, he consults daily with Managed Service Providers (MSPs) to help them solve their clients’ business problems with technology solutions. Prior to joining Kaseya, Miguel served as the director of consulting services for All Covered, a nationwide technology services company that is a division of Konica Minolta Business Solutions USA Inc. In 2008, All Covered acquired NetCor Technologies, a leading MSP that Miguel founded and managed since 1997.
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