By Ben Spector
If they’re honest, most managed service providers (MSPs) will pitch their services to anyone with a pulse. Why not? Revenue is revenue, right? Wrong. The customers that MSPs choose to do business with will have a huge impact on profitability.
I know this from experience, having run my own MSP for nearly a decade before selling it successfully in 2020. I learned (the hard way, I’ll admit) that customers are not created equally. Some follow your advice with a comprehensive plan, rarely have issues and pay their bills on time. Some begrudgingly buy your no-frills plan, call you to fix things outside your scope and are chronically past due.
As you know, most MSP customers fall somewhere in between these two extreme examples. Still, they illustrate how you can end up with customers that are literally more trouble than they’re worth in monthly recurring revenue.
Don’t get me wrong, they might be nice enough people (friends even), but they disrupt your ability to deliver a consistent and profitable service. That’s because they’re not philosophically aligned with your business model, which is designed specifically to prevent IT issues rather than react to them.
Ideally, you want to find mutually beneficial customer relationships that will positively impact your bottom line. Too good to be true? No! You simply must be a little pickier about the businesses (and people) you serve.
Not sure where to start? Here are four strategies to get you moving in the right direction:
- Identify Your Ideal Customer Profile (ICP)
Most likely, you’re familiar with the concept of an ideal customer profile (ICP), or the type of company that wants to buy your services, stick with your company and recommend your services to others. An ICP includes characteristics like revenue, headcount, industry, budget, objectives and pain points.
The best way to create an ICP is to understand which companies are your best customers and which are your worst customers. Keep in mind: Best doesn’t necessarily mean the biggest companies or the ones that spend the most. Conversely, worst doesn’t mean the smallest or ones who spend the least.
Instead, look at the ones that are most profitable for your organization. That means asking a few other questions:
- Which customers are easiest to work with?
- Which customers place the greatest value on your services?
- Which customers stay with your company the longest time?
You can run the same exercise in reverse by asking:
- Which customers are most difficult to work with?
- Which customers place the least value on your services?
- Which customers churn most quickly?
With lists of best and worst customers in hand, you can look for commonalities to include (and avoid) to craft your ICP. Note that changes in your services, technology or business climate may require tweaks to your ICP over time.
- Qualify New Leads Against Your ICP
An ICP is a great way to quickly evaluate and prioritize new leads. If a prospect aligns with your ICP, then you can feel good about investing more time and effort selling them on using your managed IT services.If there’s no match, it’s likely to be a waste of time. Those with a partial match may still be worthwhile pursuing but knowing that they’re less likely and may take longer to close, you shouldn’t expend as much effort.
Qualifying leads is perhaps the most crucial part of your sales process. Take the time to investigate your customer’s current IT landscape, what their geography can offer, what their line of work might require, and whether or not they have additional IT partners.
Some MSPs skip this step thinking it’s a waste of time when they can just make a quick call, but it’s actually a time-saver. During this process, you’ll uncover which leads are a potential fit for your offering and which ones are not. In so doing, you’ve saved yourself the time you might have spent following up on leads that were dead ends from the start. Time is money, so start by spending time only on promising prospects.
- Connect with the Right Person with the Right Authority and Mindset
Even if the business you’re selling to seems like a good fit, your contact inside the organization might not be. Be sure that you are dealing with a decision-maker – either directly or indirectly – and that he or she can dictate or heavily influence the company’s IT spending.
Save yourself a lot of headache and time by confirming right away that your contact views IT strategically. If your prospect cannot see the importance of technology to their business, they will never be able to commit to the investment in managed IT services.
While part of your job as a solution provider is to educate prospects on the value of IT to their business, you also need to weigh that mission against the resources required to move them across the finish line to sign a services contract. If you have to drag them, it’s not worth the effort – especially when there are plenty of other potential customers who already get it.
- Stop Being All Things to All Customers (With Confidence)
At first, you may feel uncomfortable walking away from any potential business, but you’ll find targeting right-fit customers rather than trying to be all things to all customers creates a more productive, predictable and profitable MSP that’s poised for growth. Having the confidence to be selective about who you work with often makes prospects even more interested in working with you. Plus, your team will be less stressed, your customers will get better service, and you’ll be able to sleep easier at night! (And, you might be tempted to fire wrong-fit customers, but that’s another conversation for another day.)
About the Author
Ben Spector is an ex-MSP owner turned Product Manager for Zomentum, creators of the first Sales Acceleration Platform for the IT channel. He leverages his previous experience running a managed service provider (MSP) organization to shape Zomentum’s development roadmap. Spector spent nine years as Founder and Technical Director for U.K.-based SpecTronics, a successful IT managed service provider, which he grew to support more than 100 clients and sold in October 2020. Following the sale, Spector was introduced to Zomentum while consulting with a London-based MSP on service delivery and business processes. After the first demo, he was so impressed that he joined Zomentum to become an advocate for the MSP community in perfecting a platform to solve sales problems for MSPs.