Managed Service Providers' Formula for Success: 10 Best Practices

By Chris Preimesberger  |  Posted 2013-11-22 Print this article Print

With demand for cloud services of all types going nowhere but up, the need for companies to provide those services is going in the same direction. If you're looking for a promising area of IT in which to start a business, consider founding a local managed service provider (MSP) company. According to all the major IT market research firms, outsourcing trends in IT aren't going to taper off anytime soon. One firm, MarketsandMarkets, expects the market for managed services to grow from $143 billion in 2013 to $256 billion by 2018, at a CAGR of 12.4 percent from 2013 to 2018. But launching a new company certainly isn't a simple proposition. The U.S. Department of Trade and Industry estimates that one out of every five startup businesses fails within its first year of operation. The 10 tips offered here will help prevent you from becoming a business failure statistic and put you on the fast track to building a successful managed services practice. This eWEEK slide show is presented with expert perspective from Arvind Parthiban, marketing manager at ManageEngine, a division of Zoho Corp., which has a suite of more than 25 online business, productivity and collaboration applications.

  • Managed Service Providers' Formula for Success: 10 Best Practices

    By Chris Preimesberger
    Managed Service Providers' Formula for Success: 10 Best Practices
  • Read 'The Guide to a Successful Managed Services Practice'

    Before launching a managed services practice, check out "The Guide to a Successful Managed Services Practice." Written by an experienced MSP, this book includes intimate details about running an MSP company that will help you avoid common mistakes. This essential read provides useful information for executing the rest of the tips that follow. You can download a digital copy free of charge.
    Read 'The Guide to a Successful Managed Services Practice'
  • Join an MSP Association

    By joining associations, you can save thousands of dollars and countless hours using the available resources rather than re-creating everything from scratch. Associations such as CompTIA, MSP University, SPC International, The ASCII Group and MSPAlliance offer downloadable tools and resources used by best-in-class MSPs. The downloads include SLA templates, job descriptions, white papers and marketing materials, as well as thousands of hours of training for MSPs.
    Join an MSP Association
  • Develop Your MSP Offering

    Once you have researched your service options, identify which services will make up your MSP offering. Begin with a small solutions stack for the services that are most important to the user: monitoring services, remote support, backup and network security. As you grow your client base, you can take on more solutions. Avoid the typical tiered pricing model of gold, silver and bronze packaging, or a per-device pricing package. Customizing your offerings to the needs of your customers creates more value. When your clients feel your services are directly in line with their needs, they will feel confident about investing in your IT services.
    Develop Your MSP Offering
  • Choose Your RMM and PSA Software

    If there is any must-have software for an MSP, it is remote monitoring and management (RMM) and professional services automation (PSA) software. You can't deliver managed services effectively without investing in them. There are point products that offer RMM and PSA tools; however, integrating them with one another is a daunting task. Vendors such as Kaseya and ManageEngine offer both functionalities in a single tool with a seamless integrated value.
    Choose Your RMM and PSA Software
  • Choose Partners for the Additional Services in Your Solutions Stack

    A common mistake many new MSPs make is choosing the least-expensive options available, but those are not always the best solutions. Spend time checking out demos for the services you plan to resell. When choosing vendor partners, choose ones that integrate with your RMM and PSA platform and offer the best support and partner enablement programs to help you get off the ground and achieve success.
    Choose Partners for the Additional Services in Your Solutions Stack
  • Determine Your Pricing

    Next, come up with a pricing model that ensures a healthy profit margin. Create a baseline price that will give you a profit margin you won't go below when creating a proposal for a client. If you get good at qualifying your prospects during the first appointment, you can easily execute a proposal that focuses on value-based pricing and leads to MSP contracts at 200 percent or greater profit margins. To get an idea of what pricing should look like, visit to see pricing benchmarks from best-in-class MSPs.
    Determine Your Pricing
  • Develop a Marketing Strategy

    Probably the most important thing you will do as a business owner is develop a clear, documented marketing strategy to generate leads. Establish a marketing budget that will consume most of the initial budget allocated to starting your new business. Build a database of prospective customers, which might include buying a business list database, verifying the database information and obtaining email addresses for each contact. Your marketing strategy should include going door to door to introduce yourself to local businesses. Participate in networking functions to trade contact information.
    Develop a Marketing Strategy
  • Create Your Marketing Presence

    The most important item in your marketing arsenal is an effective Website that is focused on the needs of your customers and generates leads for your business. Don't cut corners. Invest the money to have your Website done correctly—and make it mobile responsive. Nearly 50 percent of all Internet traffic comes from mobile devices, and 70 percent of business owners read their email or execute calls to action from their mobile devices first. Once your Website is up, develop a media kit that contains business cards, educational white papers about technology solutions for businesses, case studies and testimonials.
    Create Your Marketing Presence
  • Engage in MSP Sales Training

    A common mistake new MSPs make is improperly qualifying leads, and that most often leads to catastrophic results. Engage in MSP sales training and practice your sales engagement by role-playing with a friend or co-worker. Many MSPs refuse to go through sales training. And they won't engage in role-playing their sales opportunities before meeting with a sales prospect, and for that reason, MSPs have the lowest closing ratios of all professional services.
    Engage in MSP Sales Training
  • Generate Leads and Close Sales

    In the beginning, expect to spend 80 percent of each day executing marketing and sales activities. It can take time to secure your first contracts, so don't give up. It doesn't take a ton of sales wins to be successful. The average managed services contract will be for $2,000 per month. If you close one deal per month, at the end of your first year of business you'll have a business earning $24,000 per month. If you get good at closing sales, you can close deals on a three-year contract, which will generate more than $800,000 in total revenue. Make a goal to close four to six deals per dedicated salesperson per month.
    Generate Leads and Close Sales
Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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