We are in the middle of a massive business transformation with small and medium businesses embracing technology in a way never seen before. With the help of technology, even small businesses are able to compete successfully with large corporations. This has fueled a surge in IT spending all over the world. Markets and Markets estimated that the global managed services market will reach $282 billion by 2023 with a CAGR of 9.3 percent.
While the growth potential is enormous in the MSP world, so is the competitive landscape of the industry. This growth forecast is bound to attract many new entrants to the MSP space. To keep up with the competition, MSPs need to be innovative in delivering service to customers and adopt various strategies that can help set themselves apart from their competitors.
Let’s take a look at a few key tips that can help MSPs boost their growth in 2020.
Leverage the Power of Automation
According to Kaseya’s MSP Benchmark Survey, the vast majority of top-performing MSPs operate with less than ten employees. These MSPs must manage their marketing, sales, support and administrative tasks with limited resources. And to top it all, they must manage their clients and resolve tickets as swiftly as possible as well. But how do these MSPs manage so much without compromising customer satisfaction?
One of the technology adoption trends witnessed in high-growth MSPs was automation. Top-performing MSPs leverage the power of automation to perform repetitive, manual tasks so they can focus on core tasks that contribute to business growth. For instance, IT documentation is an important but tedious task to perform manually, but by integrating an IT documentation tool with their RMM and PSA tools, MSPs can automate the documentation process and boost overall growth.
Price Your Services Right
Pricing is a critical factor in the MSP business. Your growth can be directly attributed to the way you price your products. Increasing the difference between your Cost of Goods Sold (COGS) and pricing can help you boost your margins and grow in a competitive market.
When it comes to pricing, there are different models such as a per-user model, per-device model, and tiered pricing model. There is no singular approach when it comes to choosing a pricing strategy. You need to evaluate the pros and cons of each model and pick the right strategy that can help you meet your business goals.
If you are struggling to price your services appropriately, you can check out our eBook on Pricing for Profitability to help you achieve higher growth.
Focus on Customer Retention
As an MSP, you do not want to lose a valuable customer. Acquiring a new customer requires a significant investment of your time and your money. However, it isn’t a good idea to assume that your existing customers are satisfied. According to Analysys Mason, only 38 percent of MSPs track customer satisfaction. It would be prudent to note that customer satisfaction plays a significant role in churn and your cross-selling potential.
Providing great service to your existing customers is a sure-fire way of retaining them. This requires meeting your SLAs without fail and responding to their concerns immediately. Communication also plays a huge role in customer retention as well. MSPs need to speak with their customers directly to understand their concerns and IT goals. With proper customer retention strategies in place, MSPs can boost growth significantly and make their business operations sustainable.
Focus on a Specific Vertical
In this competitive landscape, MSPs find it increasingly difficult to differentiate their services. Many MSPs try to gain a competitive edge by focusing on one service area (e.g. compliance) or technology. However, your competition will follow you irrespective of the service area you choose. The best way to stick out from the crowd is by competing on a business level by focusing on a specific industry or vertical.
MSPs that focus on a specific industry can gain an in-depth understanding of that industry and serve their customers better. Many MSPs have also now started to focus on specific verticals, such as healthcare, manufacturing, legal, finance, education and more. When you become a vertical specialist, your customers will look to you for advice on critical IT matters, for which you can charge a premium price for your services.
Don’t Rule Out M&A
Most modern-day businesses are always looking for a “one-stop-shop” solution for all their IT needs. MSPs consider mergers and acquisitions (M&A) to ensure their future growth trajectory. A 2018 report by Channel Futures estimated that nearly 53 percent of MSPs are considering a merger or acquisition over the next 12 to 24 months.
Consolidation is certainly a great strategy for MSPs to take their businesses to the next level. MSPs that are considering M&A should position themselves as an attractive prospect by increasing recurring revenue, reducing churn and improving scalability.
The potential for growth may be huge in the MSP industry but the competition is only going to get fiercer in the coming years. By incorporating the tips mentioned above, MSPs can maximize their potential and ensure sustainable growth.
To learn more about how to grow your MSP business in 2020, download the eBook “Practical Tips to Grow Your MSP Business in a Competitive Market.”