Recurring revenue is the Holy Grail for managed service providers. Unfortunately, it is the area of the business that most MSPs struggle with. They either can’t sell enough new clients, don’t attract the right types of clients, or can’t command the right price.
I have devoted the past 20 years of my life to understanding, mastering, and teaching others the keys to growing recurring revenue. I began as the owner of an MSP that grew to over $500,000 a month in recurring revenue and was eventually acquired. As the president of TruMethods, I have coached more than 1,000 managed services providers over the past five years on how to grow MSP sales and profitability.
1. Don't sell technology
Typically, customers don't care as much about individual features such as patch management, anti-Spyware, anti-spam, backup, endpoint security, monitoring, cloud computing, and Software as a Service (SaaS) as we do. What they care about is how IT systems management impacts user productivity, decreases risk, and keeps costs under control.
Their biggest expense is human resources. If you can explain how your technology solution translates into better utilization of their employees and greater productivity, you can show them through tangible benefits why managed services are so critical.
2. Sell "Your Company Way"
Let's do a thought experiment: If a customer told you that they wanted the best possible IT support available and that money was no object, what would you do? What people, processes, and technology would you deploy to achieve the best possible results?
The answer to this question should be the basis for your managed services support offering. Your support offering or offerings should deliver "Your Company Way." This is the unique approach and perspective you have developed based on your years of experience.
Imagine you were hiring a builder to build your dream home, and you contacted two builders to provide you with estimates. The first builder you meet with spends an hour showing you his brand new saw, talks about how fast his nail gun can operate, and why his extremely expensive laser levels are better than the old fashioned bubble levels.
The second builder you meet with outlines his process starting with understanding your needs, planning the build, and managing your expectations every step of the way to ensure that your dream home is built. Which would you choose? Would you really care about all of the tools the first builder used?
Seems like a silly analogy, but I get to see a lot of offerings and hear a lot of sales pitches. Most sound like builder number one. Selling "Your Company Way," your process, and your unique approach resonates more with business owners because it achieves the end result they are looking for: lower IT costs, predictable results, and a partner they can turn to for advice.
3. Raise your price
I hear all the time about how managed services is becoming or has become a commodity and other companies are pricing their service so low that you can't compete with them. And I'm sure you're thinking, "It's easy for you to say, but my customers in my market would never accept higher prices." Blah, blah, blah.
If you survey the top MSPs around the world, you will find one thing in common—their prices are going up, not down. The hundreds of MSPs that are members of my coaching program will tell you that their prices have gone up along with their ability to close new deals. Why is that?
It's simple; you can't deliver quality support by pricing your managed service offering too low. You are not saving your customers any money by undercharging and then delivering a watered-down product. If you truly believe your approach to managed services is the best investment for your customers, then you should deliver a complete solution and charge accordingly.
4. Have a sales focus
I speak in front of IT providers at many live events each year. During these events, I poll the audience to see how many people have a goal of increasing their managed services revenue, and normally over 95 percent of the hands in the audience go up. Then I ask how many people have a dedicated resource focused only on adding new managed services agreements. Very few hands are raised.
Managed services agreements are not something you add as just another thing you offer, next to servers, firewalls, PCs, and block time agreements. If you want to be a successful MSP, you need to dedicate resources to focusing on increasing managed services revenue.
- Dedicate part of each day to adding new monthly recurring revenue.
- Start a process of reviewing activity each week toward adding new monthly recurring revenue.
- Move low value activities off your plate (i.e. getting a quote for new hardware) and find other resources to handle those tasks.
- Set goals and hold yourself accountable.
Make the change today
Achieving dramatically different results requires taking dramatically different actions. More of the same won't get it done. The answer is not as easy as adding some new technical feature or as simple as hiring the right sales person.
Here are a few things you can do today to impact your results:
- You need to focus on changing how you package your support offering and relate its business value to your customers and prospects. Mistakes made in this area will reduce or eliminate your chances of success.
- Raise your prices! If you don’t charge enough to deliver the right results, your belief system will never change. I have a saying, “We care too much about our clients not to charge them enough.”
- Find people who are doing or have done what you would like to do. Seek out coaches and peers achieving the results you aspire to. One of the most important things I do for the members of my coaching program is to create a community in order to help each member raise their expectations.
- Start today: This is the gold rush for MSPs. More recurring revenue is being sold at a higher price today than ever before. Don’t wait to get started.
I have developed a simple process for increasing recurring revenue. To learn more about this process, join me and Intronis on Thursday, June 25 at 2 p.m. ET for the webinar, How MSPs Can Sell More Recurring Revenue.
Gary Pica is a pioneer in the managed services field. His company, Dynamic Digital Services, was 'early to market' in the MSP arena and quickly became one of the fastest growing MSPs in the country, with over 7,000 endpoints under management. Now, as President of TruMethods, Gary Pica shares the key ingredients that revolutionized his business and helps IT solution providers reach their full potential.