Anyone who’s been around the channel for any length of time has probably seen the spikes in demand for MSP services whenever businesses “rightsize” their operations. Companies shed personnel, but the work requirements linger, so they frequently turn to MSPs to carry them through. MSPs score more business, the companies save money, and everyone’s happy. Or are they?
In reality, these layoffs are creating a cottage industry powered by displaced professionals looking to sustain income until they land their next gig. This creates a dangerous competitive landscape for boutique MSPs (1–5 person teams) because many of these “pop-up shops” charge much lower fees and, worse, typically lack the technology tools, insurance policies and processes of more established firms. While astute decision makers will likely pick up on these deficits and the related liabilities, others may be swayed by the perceived lower cost — and potentially suffer the consequences as a result.
Add to this the trend of a slowing economy, and boutique MSPs are under fire like never before to distinguish their skills, capabilities, and overall value. While raising rates to compensate for anticipated diminished returns may be tempting, boutique MSPs should revisit how their services are structured instead. Doing so takes the emphasis off labor rates and per-user/device pricing models that diminish the overall value of MSP services.
So, how can MSPs weather the storm better during economic uncertainty? Try these five recommendations:
Define “support.” Sure, that’s a tough one, but other industries don’t seem to have a problem with this. Consider business insurance. Ever pay attention to those quarterly exclusion notices? Do the rates go down? No. Are new providers engaged? Also no.
It’s time to examine how support services are defined – and how they differ materially from projects.
Start charging for activities like onboarding and off-boarding employees. Those aren’t support tasks – they are projects. Anything that isn’t support is either a project or an opportunity. Figure out the amount of time, on average, it takes to manage one-off projects. Make a list of them and assess a flat-rate charge per incident.
Get creative. Many MSPs work against a monthly block-hour contract. Offer to deduct the flat-rate time equivalent. Think of using airline miles for a flight as a comparison. The goal is never to convince the client to stay; it’s to make them never think about leaving, even if someone else puts the thought in their head.
Build relationships. This may seem obvious, but how many MSPs do it with intention? It’s too easy to “ignore” clients with smoothly running operations. But “out of sight, out of mind” is a real thing. And that can lead customers to wrongly equate this “absence” with low value, wondering if this “cost” is necessary.
Reach out to clients regularly even if they’re not experiencing any issues. Ask why they do things the way they do. Listen and then strive to understand their processes. Might there be a better way to do this through technology? This process shows interest in their business and could lead to incremental sales opportunities they will value because it addresses a pain point they may not have even realized they had.
Contact current vendors. When times are tough, it’s seldom isolated to one stage of the channel. Vendors are equally invested in stabilizing revenue (especially when it might be tough to grow it). Reach out to them and start a conversation. Think of it as the flip side of building customer relationships. Let them know how things work within the business. Explain why those processes exist. Ask how they can support the model. Only then can real progress be made.
Most vendors genuinely want to help because it’s a relationship, not a retail sale. And now is not the time to change the tech stack because of price. Plan for that and review the compliance aspects those changes may affect.
Reach out to fellow MSPs. It’s all about networking. Peers are no exception. Many MSPs are guarded about sharing details related to their client roster. Don’t be. One size does not fit most. Not all clients are a good fit. Some fellow MSPs can help with or even absorb the problem clients. That way, everyone still looks good with the client because they’ve been presented with a positive, viable solution.
Established business owners realize there ARE two sides to every story, and many times, it wasn’t the previous MSP that was the problem. MSP owners, especially “engineer” owners, love solving problems and continually count on peer input when trying to solve them — and that can only happen when there’s a relationship with like-minded people. Be that connection.
Become more active in the community. Pay attention to the allowances afforded through memberships like The ASCII Group, TMT, and others. Many offer invaluable benefits like vendor conflict resolution, among others. Review all the perks available through both channel and local groups. Get insights from media outlets. Even vendor-sponsored events like Pax8 Beyond, ConnectWise’s IT Nation, Kaseya’s ConnectIT, and Microsoft’s Ignite are beneficial. Check out local and neighboring chambers of commerce. Join a BNI group. Be seen. Easier yet, ask existing clients if any of their peers are having the same issues they are and if there may be any opportunities to connect with them. Everyone talks. Everything is connected.
To weather economic challenges, MSPs should build intentional client relationships, redefine support services, get creative with billing, engage with vendors for mutual benefit, network with fellow MSPs, and actively participate in community and industry events.
