Some 19 per cent of the 200 European MSPs surveyed at DattoCon 2017 and 16 per cent of 1200 MSPs canvassed by Datto in the United States and Canada are, apparently.
But, why do so many MSPs find it difficult to achieve the growth they project? What are these ‘growing pains’? And why are some MSPs seemingly immune to them?
The managed services market is buoyant and there seems to be optimism across all regions. For example, 50 per cent of MSPs in EMEA are expecting growth of between 10 and 25 per cent this year.
Source: Datto report – ‘How MSP are you?’
Yet, not everyone will achieve their projected growth.
Six commonly experienced ‘growing pains’ may help to explain why.
1. Maintaining the positive cash-flow/investment needed to scale up
When you add new clients or introduce new services, your up-front costs increase immediately as you take on more technicians and potentially additional skill-sets. And it’s not just a matter of your wage bill going up. You have to invest in training these new people and equipping them to do their job. You may even reach a point where you outgrow your office-space and have to upsize.
These people growth costs are absorbed as new customers are onboarded and, after a few months, become profitable. But then you hit the next ‘pinch point’ and off you go round the loop again.
Takeaways:
Read our blog to find out how partnering for NOC and Service Desk can help you to grow profitably by offering a pay-as-you-grow model, with predictable, controlled OPEX.
Read this case study to find out why former centrexIT CEO, Eric Rockwell, partnered with Inbay to include 24/7 NOC for monitoring and remediation in order to take his service delivery to the next level.
2. Managing staff recruitment/retention/training
‘Staff’ topped the Datto challenges list in its own right with 31 per cent of respondents seeing it as their main challenge in 2018.
Predicting when and where you might need more staff is not easy. It is tempting to wait until new sales roll in before you bring additional resources on board. Unfortunately, this risks you being left short-handed, with service delivery suffering and customer satisfaction levels falling.
Recruitment and staff retention problems are unlikely to go away anytime soon. According to CompTIA demand for the required combination of technical and soft skills will exceed supply in 2018 for the following reasons:
Top 5 Factors Contributing to a More Challenging Hiring Landscape in 2018
- Competing with other tech firms for talent
- Finding workers with the right soft skills
- Finding workers with expertise in emerging tech fields
- Rising salary expectations
- Insufficient pool of talent in region/locale
Takeaway:
Read our blog to find out how you can access specialist resources on-demand (and so avoid the ‘hire or hold off’ dilemma), reduce staff recruitment, maintenance and training costs – and, with your engineers ‘liberated’ from routine maintenance tasks, give them the opportunity to acquire new skills and work on specialist projects, making them less likely to be tempted away by a better offer.
3. Lack of time and resources to manage growth
Your days are probably already filled with overseeing service delivery to your current customers, fire-fighting, endless emails and phone calls – and you may very well be the main sales person for your company too.
That’s a hefty to-do list before you even begin to plan and execute your growth strategy.
Things may be compounded if you are one of the MSP business owners who find it difficult to delegate responsibilities. It can be hard to resist delving into the detail if you believe that’s the only way things will be done ‘properly’ – but it’s not a sustainable model for a growing business.
Takeaway:
Read our ebook to discover how to make sure you invest your time and resources in the right opportunities.
4. Operational inefficiency
The way you manage the business and the tools you use in the early stages of business development will probably not be adequate to support the next growth phase.
As a small company, you are likely to operate on a word of mouth basis, using informal processes.
As you grow, however, a constant need to reinvent the wheel and a reliance on someone’s opinion of what needs to be done in a given situation will inevitably result in inconsistent service delivery – as well as a lot of wasted time and resources.
High growth MSPs stress that good processes and procedures, set down in writing and with clearly defined roles, are an essential prerequisite to scale successfully. These processes should be applied to all aspects of your business, from answering a customer call on the help-desk, through onboarding a customer, to your sales and marketing.
Takeaway:
Read our blog to find out how taking a lean approach to your MSP business can help you to make your operation more efficient, leading to improved customer service delivery and higher margins.
5. Overestimating your capabilities
It’s all very well to set ambitious sales targets, but are you able to onboard new customers successfully at the same rate? It is important to know your limits – even if this means slowing down the sales pipeline.
Increasing customer volumes for current services or taking on more complex customers can be challenging: service levels for existing customers must be maintained while new ones are onboarded. Existing staff may need to be retrained, new skills recruited and go-to-market strategies developed – all without impacting your current service offering.
Meeting all of your sales targets means little if your profit margins are hit as a result of inefficient internal processes or excessive customer onboarding costs.
One of our own high-growth MSP partners purposely restricts onboarding to two new clients per month, because he is confident he can achieve that successfully.
Takeaway:
Read our blog to find five quick wins for reducing waste and improving operational efficiency in your MSP business.
6. Inadequate sales and marketing
Sales/marketing was cited as the top business challenge for MSPs today according to 26 per cent of the 1200 MSPs canvassed by Datto in the United States/Canada and 22 per cent of the 200 European MSPs surveyed at DattoCon 2017. According to the US research, many MSPs are struggling to implement a strong lead generation strategy in their marketing plan.
Like any other part of your managed services business, sales/marketing needs to be properly resourced, with lead generation part of a wider process (rather than a series of isolated campaigns) where marketing activities drive the initial contact and engagement, nurture interest and ideally also pre-qualify leads prior to sales people making contact.
You need to know the numbers too: how many leads do you have to feed into the sales funnel to produce the required number of signed contracts to meet projected monthly revenue targets.
Takeaway:
Read our blog to discover an easy process for calculating this figure and a reminder of what else you could be doing to improve sales and marketing effectiveness.
Are growing pains preventing you from becoming a high-growth MSP?
There appears to be an increasing gap between high-growth MSPs who are capitalising wholeheartedly on the new business opportunities – and their lower-growth counterparts who are not taking full advantage.
Whether you are scaling up for volume growth or just looking to take on a couple of new clients every month, your potential could be restricted by some or all of the growing pains outlined above.
Sadly we can’t offer a miracle cure, but we can point you to our recent blog that identifies ten ways to move forwards to profitable growth – you may find these useful In addressing your own growing pains.
Contact us if you would like to find out how partnering for NOC and Service Desk can help your managed services business to grow.
