When most MSPs start out, finding new customers is usually handled by the founder. No one understands the SMB’s IT pains better, and besides, there usually isn’t much cash on hand to put towards sales. However, for some, over time an incredible thing happens. The MSP goes from surviving to thriving!
The entrepreneur evolves into the president of a company; the MSP becomes a team of talented people, with clients to boot; and the office may even evolve from room at home to a professional store front that clients can visit.
This is when some presidents start to think differently about their role; it’s a mindset shift that sparks the MSP towards a path they’ve never been down before.
In the coming weeks, I’ll be sharing tips to help MSP leaders navigate this change in mindset. Before you head down this path, there are important factors, and questions, to consider, that will benefit you and your leadership team as you make decisions.
Let’s start with a simple but often overlooked first step: setting sales goals.
Why You Need to Start with Sales Goals
Sales planning for an MSP is not so different from marathon planning for a serious runner.
A well-executed marathon depends on how it is defined by the runner. Similarly, a well-executed sales plan depends on MSP’s definition.
For example, let’s consider my wife – the marathoner of our family.
Her main goal is to run a marathon in each of the 50 U.S. states and her secondary goal is to run each in 3:40 or less because, for her, that is a comfortable and respectable pace.
My goal was totally different than hers. I wanted to run just one half-marathon and a “good race” meant running faster than my wife’s marathon pace!
Sharing our goals ahead of time forced us to be accountable and this resulted in more discipline, and ultimately, good results. Recently, in the Hilo Half-Marathon in Hawaii, I finished in 10th place overall at an average 7:30 mile pace as opposed to my wife’s 8:21 mile pace. She came in 3rd overall for women in the full marathon and under her 3:40 target! Having clear goals is not just a tool for empowerment, it’s a tool for accountability and discipline.
Questions to Ask When Setting Sales Goals
Far too many MSPs are quick to outsource lead generation or hire new talent in this area without a clear understanding of expected outcome. Here’s a simple series of questions that may assist in arriving at demystifying those goals.
By how much do you want annual revenue to grow for your MSP in three years?
For example, maybe in three years you want to grow MRR by $2,000,000 or maybe $1,000,000 is more achievable given your size today.
Your goals are your goals! You can play with these figures, but just think about your business today and your life, and how growth would impact everything in business and life.
Next, reverse engineer your revenue into metrics that lead generation professionals can target.
What percentage of that sales growth do you expect from new clients vs, existing clients?
For example, if your growth goal is $1,000,000 in three years and 75 percent is expected from new clients, then $750K represents your sales goal from new clients and the $250K from current clients.
How many new clients do you need to achieve your sales goals?
For example, take the $750,000 and divide by the average annual revenue per new client. Below we’ll assume that a new client brings in $30,000 in annual revenue.
$750,000 ÷ $30,000 = 25 new clients are necessary to achieve your goal in three years.
How many opportunities do you need to achieve your goals?
This is where new client aspirations are reverse engineered into the decision stages, they had to pass through to become clients.
I bet you’ve heard of the sales funnel before. That is what we’re building here, a sales funnel for the three-year sales goal.
First, we need to estimate the average closed-won ratio. What is that for your business? It refers to the percentage of the opportunities that convert into a new customer.
What is considered an opportunity? Typically, these are defined as sales qualified leads who agree to speak to you, be it over the phone at first or maybe through a video conference. Sales qualified means they are a good potential client in terms of their industry, size, and location.
Most MSPs have never tracked their closed-won ratio before, and the tendency is to assume that closing warm referrals is equal to closing all opportunities regardless of their source.
It’s not the same! A referral is a HOT opportunity. Closing them is easier because HOT opportunities have acute IT pain and someone, they trust referred you already.
Do not make that mistake of matching close rates for referrals to close rates for leads sourced from marketing. Instead, assume that the close rate for marketing sourced leads will be lower than what you are accustomed to.
For example, if you assume your closed-won ratio for warm referrals is 25% then maybe assume a closed-won of 15 percent for leads who were not handed off by an acquaintance.
Therefore, here’s how you can use that 15 percent conversion to arrive at how many opportunities you need.
25 new clients ÷ 15 percent close rate = number of sales-qualified leads you would need.
This calculates out to 166.66, or let’s just keep this simple to put it at 167 over the next three years.
In conclusion, when goals are clear, MSPs can reverse engineer them into smaller milestones that they can aim for and track. This creates alignment with goals and reality; it turns hopes and dreams into tangible things in the real world.
Photo: pim pic / Shutterstock