Recently, Markets and Markets predicted that the managed services industry will be worth $242.45 billion by 2021—creating a tremendous opportunity for anyone in the channel. As the managed services market continues to grow, we’re starting to see more and more IT providers switch from traditional VAR or break-fix models to a recurring revenue mindset.
To effectively help providers make the change to a managed service model, we recently read Managed Services in a Month by Karl W. Palachuk. The book had an interesting perspective on how to dive into a managed service offering without letting your old model hold you back. Whether you’re a VAR looking to move into the managed services space or a newer MSP, these tips from the book can help ease your transition.
Make a commitment to yourself
Moving to the MSP model can be quite daunting, but having a clear vision and plan can help you achieve managed services success. While it’s easy to tailor your offering to please one client, it’s far simpler to find multiple clients who fit into your ideal service model—but the first step is making a commitment to yourself.
“You don’t have to pick up every nickel you find,” Karl says, and likewise, you don’t need to take every job that comes your way. In the book, Karl points out that the worst habit of IT providers moving to the managed service model is not letting go of the break-fix jobs that come their way. Often, providers convince themselves that they will only do small break-fix jobs until their managed services pick up, but Karl sees this as a mistake.
“Every hour you spend working with break-fix cheapskates is an hour that could be used to find a managed service client willing to spend at least $1,000 a month with you,” writes Karl. He explains that if you’re serious about moving into the managed service model, you need to focus on areas of the business that help you grow, rather than focusing on small projects that provide a short-term income. “Believe in the vision and the plan,” Karl says.
Approaching prospective managed service clients
Once you’ve committed to making the change, you need to reflect on which areas your managed service practice should focus on—security, backup, or solutions that adhere to compliance standards? Create, revise, and print out a three-tiered pricing structure that shows what’s covered and what’s not. According to the book, this will be your go-to guide moving forward, so be sure to include details.
Now that you have your pricing structures and your plan in place, how should you approach your customers about the change?
Start by looking at your business data. If you use programs like QuickBooks, you can easily filter to determine where you make most of your money. The area you should really focus on is labor and billable hours. How much does each customer currently spend on a yearly or monthly basis on break-fix services, and how can they save by taking a proactive approach by moving to a managed service contract? This information will be essential as you start to approach customers about managed service contracts.
While you may want to approach your “best” customers first, Karl suggests starting with the ones who will be least likely move onto a managed service plan. While this may seem counter-intuitive, this approach allows you to practice pitching your best service tier to clients—and it may even surprise you that some will say yes or move to your second-best tier.
Never pitch anything below your gold tier, Karl warns. In the event a customer says no—and some will—go to the next tier and highlight what’s different. Respect your clients wishes, and at the end, remind them that you’ll no longer be offering break-fix services but would happy to bring them on as a client in the near future, if they wish. Continue to schedule appointments and work your way through the client list. This way, if your largest client says no, you’ll have a list of clients you’re already supporting, Karl says.
Moving to a managed service model isn’t easy. But, following Karl’s advice can help you cut ties with SMBs who aren’t looking to make an IT investment and instead focus your energy on growing a profitable managed service practice.
Managed Services in a Month
Build a Successful IT service Business in 30 days
By Karl W. Palachuk
206 pages. Great Little Book Publishing. $24.95.
Have suggestions for what we should read next? Tell us which book we should read next on our MSP bookshelf.
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