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MSPWorld 2015: How to grow your MSP business practice

At MSPWorld 2015, the president of Locknet Managed IT Services gave guidance on scaling up small MSP business practices and overcoming the challenges.

LAS VEGAS -- At MSPWorld 2015, session speakers and attendees tackled several timely issues impacting managed services providers (MSPs), which ranged from the current cybersecurity landscape, modern sales and marketing techniques, and the mainstream reputation of the managed services industry. But the conference addressed some enduring business management issues, as well, such as how to grow an MSP business practice.

In the session, "Growing Beyond the 10-Employee-Size MSP: Why MSPs Hit the Ceiling and How to Beat it," Peter Kujawa outlined a number of steps MSPs must take to grow their organizations and talked about why MSPs typically get stuck at the five-to-10-employees size.

Kujawa knows the MSP business well. As president of Locknet Manged  IT Services, an MSP based in Onalaska, Wis., and a division of EO Johnson Business Technologies, he has helped grow his business to where it is today. Locknet currently has about 55 employees, and oversees about 8,000 desktop users and about 1,800 servers.

Understand why you want to grow. "Why do you want to get bigger?" Kujawa asked MSPWorld 2015 attendees. Is it to make more money, to do more for your clients or to build up your company so you can sell it?

The investments that MSPs must make to grow are expensive, so MSPs should figure out what their ultimate goal is and why they want to achieve it. For some business owners, the goal might be to make $100,000 in a year, while others might not feel successful until they make $100 million. "It doesn't really matter what that number is. It matters what that number means to you, because once you hit that, your willingness and appetite to take on risk and additional investment is going to change radically," he said.

Pick a 'swimming lane.' As you develop your offerings, identify your target customer, or "swimming lane," and stay committed to it, turning away clients that don't fit your target. "It's going to be tempting to go outside your swim lane, but don't do it," he said. "It will kill you. It will hurt you later and impede your ability to grow. Learn to say no."

Build your offering. "The first lesson that we learn [is]to design products you believe in," he said. "As you know, there are no two equivalent managed services products. … When you're designing your managed services offerings, they don't have to -- and really, they shouldn't -- look like the managed services offerings of every other company in town."

He encouraged MSPs invest in a good, well-written service-level agreement (SLA) early on, as well. SLAs shouldn't just cover the terms of what you're going to do or not going to do for a client, but also protect you in terms of liability.

"Don't ever do anything for a client … until they've signed an SLA and you've got that SLA on file," he said. Otherwise, you take on liability that you shouldn't take on.

Transition to dedicated support. Transitioning your clients to calling a dedicated support is tough, but worth it, he said. He advised that MSPs make the transition sooner than later, because "the more clients you bring and train under the model of calling your engineer directly, every one of those clients is another client that you're going to have to retrain later," Kujawa said.

In terms of training technicians for the support center, one of the lessons Locknet has learned is to predict your growth and hire six months ahead of that growth. "Growth is expensive, but we've found that if someone is going to be effective in a support center, they have to have three to six months of ramping up. That's when we go through a full training program before they're actually able to do the job well."

Start using systems and processes early. Kujawa recommended that all MSPs, regardless of their size, have professional sales automation software. "These [products] are built around our businesses," he said. "Use the integrations that they offer. The integrations that both products have now allow you to scale your operation as you get a lot bigger."

He also said it's important to have someone on your team do project management for your engineers, as customer communication skills are not their greatest strength typically. A project manager or someone in this role can help communicate effectively with clients, coordinate a project's objects among engineers and salespeople, and close out the project when the engineers have finished.

Plan your work and work your plan. A plan is what's going to get your organization to the next level, he said. "Make sure all of your leadership team is involved in [the plan]. … Make sure once you have that plan, you go over with it with all of your employees, so that they understand why you're doing that. Reinforce those goals and measure progress off of them."

If you're not sure where to start, survey your managed services clients and use that feedback, Kujawa suggested. Locknet surveys its clients annually, asking clients to provide feedback on its support center, engineers, salespeople and overall operations.

Hire technical staff. Locknet has built its hiring process to make attitude and organizational fit the primary consideration. "The skill sets are secondary. … What's important now [technically] we can train and send people to training," Kujawa said.

He said Locknet follows this four-step hiring process:

  • Phone interview: On phone interviews, Locknet learns about the basic information about the candidate, as well as critical information, such as the person's compensation expectations. Plus, the phone interview allows the company to learn about the candidate's phone presence.
  • First interview: A hiring manager and one other Locknet member meet with the candidate and do some basic testing for technical qualifications.
  • Second interview: Kujawa and another Locknet person meet with the candidate and ask questions to help determine the candidate's attitude, work ethic and cultural fit.
  • Observation sessions: The candidate spends an hour shadowing one of Locknet's support leaders in the support center. "At the end of that hour, we're going to talk to that leader. That leader is going to have a veto authority over hiring that individual," he said.

Locknet encourages and pays for training, and gives employees bonuses for certifications, he said. New hires are required to sign noncompetes and confidentiality agreements.

What you're selling in managed services is trust. You're not selling technology.
Peter Kujawapresident, Locknet Managed IT Services

Build trust through marketing. "What you're selling in managed services is trust. You're not selling technology. You're not selling the specific bells and whistles. All of that stuff is important, but your message needs to be built around trust."

According to Kujawa, MSPs can instill that message by making enough of an investment in marketing to look professional. This investment would include a good website, collateral and businesses cards. "When you're small, you don't have to look small," he said.

He also said to write your company's narratives to depict it as "big," learn to get customer testimonials and get certifications.

Hire salespeople. Some MSPs that already sell managed services without the help of a salesperson might conclude they don't need to hire one. "You need to hire a salesperson," Kujawa said. "How do I know? What excites you more: Is it getting a quote signed for a new client or solving a real complex technology issue for one of your existing clients? … If you're a technical person, it's probably the second one."

"If you're going to be a growth organization, you need to get serious about selling," he said, adding that this requires you to approach sales with respect. "A great salesperson is just as professional and every bit as capable as your top-level engineer that you've got, and they've got an equivalently difficult skill set to replicate."

He also said that your compensation plans must align with your organizational goals and strategies. "It should be a celebration when a salesperson brings in a big deal. It should be a great day for that salesperson, for that [MSP business] owner and for all the employees in the organization."

Watch out for red flags. Pay attention to red flags that come up in conversations with prospects and walk away if necessary. "Some clients don't deserve your greatness," he said. "Don't be afraid to fire them if they're not paying their bills or listening to what you're telling them to do. Some clients are great for your top line, but they kill your bottom line. They suck up your resources and also hurt your employees' morale."

Get help. Kujawa told MSPWorld 2015 attendees that associations, such as MSPAlliance, and peer groups, such as HTG Peer Groups and Service Leadership Inc., exist to support MSPs through a variety of business challenges. He suggested using tools like Service Leadership's SLIQ, which benchmarks MSPs and all its different processes, and gives an operational maturity rating. Consultants can be helpful, too, he said, as long as MSPs remember to take consultants' feedback with a grain of salt.

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