Efficiency is a fundamental aspect of any growing business. Achieving operational efficiency is especially critical in the Managed Service Provider (MSP) world due to the highly competitive nature of their environment. To drive home this point, the average MSP profit margin dropped 17 percent in 2018, which is quite significant in an industry that is poised for record growth in the next five years.
There are various reasons behind the shrinking margin in the MSP industry. These include high competition, failure to adopt new technology, poor pricing strategies, high operational costs, and more. However, operational costs are one of the factors that MSPs can certainly control and use to create sustainable growth.
Cost reduction measures, however, do not always have to arise out of necessity. Even successful businesses engage in cost-saving measures to streamline their business operations and enhance efficiency. In this article we’ll take a look at five effective measures MSPs can take to shrink costs and boost their growth.
1. Prepare a Master Budget
Any measure of cost reduction requires determining the expenses your business incurs regularly. When running an MSP business, it’s easy to get tangled in its day-to-day operations and miss out on the big picture. Budgeting helps businesses monitor business activities regularly and helps MSPs gain a good understanding of their current financial situation.
With a well-planned budget, MSPs can control the finances of their business by identifying current commitments and future needs. MSPs need to calculate their revenues, administrative expenses, overheads, marketing expenses, sales expenses, and support expenses when preparing their budgets. This helps MSPs identify where they spend too much money and explore ways to bring it down.
2. Attract and Retain the Right Talent
While some companies certainly do a great job of finding and retaining talent, most companies struggle to attract the right talent to their organizations. The hiring process is usually a costly affair for any organization. Identifying, hiring, and retaining the right talent can contribute greatly to your business growth.
Creating compelling job ads, using the right recruitment channels, and introducing referral schemes in your organization can go a long way towards attracting highly skilled employees. Highly-skilled technicians can leverage the power of the remote monitoring and management (RMM) tool and manage more endpoints to improve the overall efficiency of the MSP.
3. Use the Right Tools
MSPs use a wide array of tools to provide IT services to their clients. Commonly used tools, such as Remote Monitoring and Management (RMM) software, Professional Services Automation (PSA) software, and an IT documentation tool, must work cohesively together to provide visibility into various workstreams being managed. Most importantly, MSPs need to embrace technological changes and use the latest tools available in the market. This way, they can increase customer satisfaction and boost their business growth.
When MSPs get tools from different vendors, they create disparate systems that do not work well together, thereby leading to inefficiency and higher operational costs. By subscribing to a complete solution that brings together RMM, PSA, and IT documentation solutions, MSPs can manage all the essential IT functions from a single pane of glass. This helps MSPs maximize technician efficiency and improve customer satisfaction.
4. Eliminate Redundancy
A cohesive set of solutions also plays a major role in eliminating redundancy in an organization. Successful MSPs incorporate a complete solution stack where their RMM, PSA, and IT documentation works together seamlessly. A cohesive solution eliminates redundancy by keeping MSPs informed about what their technicians are working on. Through this, MSPs can avoid snags like duplication of work and repetition of errors.
With IT documentation, MSPs can have up-to-date information on various workflows and processes. When performing complex tasks, technicians can easily access past incidents and avoid repeating again. This helps MSPs boost their efficiency and eliminate redundancy in their workflows.
5. Incorporate Scalable Solutions
Scalability is another important feature you need to consider when you are in the growth phase. MSPs should have solutions in place that can be scaled in order to help with their business growth. When you grow, you need to expand your business infrastructure to increase the size of your operations. This requires setup time, which could hinder overall productivity.
Your tools should be able to handle the additional work that comes with business growth. When an RMM solution is integrated with PSA, it significantly enhances PSA workflows and allows MSPs to scale quickly without adding any new resources. MSPs can also leverage the power of automation to perform repetitive tasks and scale quickly in a competitive environment.
By incorporating these cost reduction measures, you can grow your business and generate consistent profits even in a competitive market. Your cost-saving efforts should align with your business goals and help you stay on top of your competition. As you start implementing these ideas, you will discover new and improved ways to cut costs and boost efficiency.
To know more about strategies that can help with your MSP growth, download the checklist Boost Your MSP Growth With These 10 Effective Strategies