Think Long Term to Supercharge MSP Growth
Turning Vision into Reality with a Plan
Ten years is a long time. Breaking down a vision for a decade from now into shorter-term actions is critical to actually making real progress toward that objective. Begin narrowing your horizon by determining a three-year target. It’s a long enough stretch that any unexpected bumps can get smoothed out over time, but close enough to envision the steps required to get there.
Then it’s time to get more granular with a one-year plan, followed by quarterly action plans with very specific tasks and deliverables. Carving out time for this planning is a key step–if you’re not willing to set aside an entire day for strategizing, how serious are you about that 10-year vision?
Do some pre-work to make sure you have the necessary data to really analyze and project business performance out into the future. Looking at the previous year’s financials, you should have a solid grasp on revenue and gross margins by category, new MRR sales and churn. If you don’t have ready access to this data, then it’s time to update your accounting and tracking practices so you can make properly informed decisions.
Now it’s time to calculate and benchmark your key metrics. Average seat price is an indicator of maturity and how much customers value your services, and top performers now average $20 to $25 more than two years ago, thanks to additional security offerings (hitting the $175 per month range).
Average MRR per client should average more than $3,500 per month per client. If you’re coming in below that, then your clients are too small or you’re not getting enough per seat.
Tickets per end user per month is a great indicator of quality and efficiency. MSPs average .5 per month, but top performers see half that amount with .25 per month per user.
Finally, calculate your MSP’s “turning point.” Only once all your operating expenses and overhead are covered by recurring revenue are you truly in a position for growth.
With these numbers in hand, it’s time to figure out what must happen this year to grow at a pace where that three-year target is attainable, whether it’s adding clients, bumping up pricing or increasing efficiency. Then break things down further to determine what specific things must occur this quarter to reach the annual goals.
And remember that plans don’t just sit on a shelf once they’re done. Progress should be tracked weekly, continually making course corrections to keep problems from festering or from shiny objects distracting the team from the primary short-term objectives.
Upping your Game to Make Your Dreams Come True
MSP owners can bring their visions to life if they’re willing to turn their MSP businesses into finely tuned growth engines. Increasing the benefits to customers warranting higher per-seat prices is part of the equation, as their willingness to pay is a better indicator of how they value you than any net promoter score. The more your MSP becomes their Virtual CIO, the more entrenched and treasured your service becomes.
Boosting sales efforts to put more prospects in the funnel inevitably leads to more customers, which is equally essential to boost MRR. But it’s IT efficiency that drives profitability. Seamless workflows, contextual information, IT automation, RMM, PSA and IT documentation are the lifeblood of MSPs maximizing their returns.
For much, much more on creating a plan for MSP growth, watch this free webinar on Strategic Business Planning for 2021 featuring TruMethods’ Gary Pica.
Dan Tomaszewski is senior vice president, Channel & Community, Kaseya.
This guest blog is part of a Channel Futures sponsorship.
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