The #1 Thing You Can Do Right Now to Increase Profits

By |2019-08-20T10:11:18-07:00August 16th, 2019|
Updated: August 20, 2019
  • #1 Thing to Increase Profits

IT Glue’s 2019 Global MSP Benchmark Report is jam packed with insights, but as with any research, there are always points where you want to dig a little bit deeper. The purpose of the Report is to determine what the key success factors genuinely are in the MSP space—what matters and what doesn’t—according to hard data. Based on this, it’s pretty clear what one of the fastest ways to move the needle on your revenue and profit growth is: eliminate churn.

Churn is Evil

Churn is simply the percentage of your revenue that you lose each year—customers who for whatever reason leave. Obviously, you can’t control if a customer goes out of business, so eliminating all churn entirely isn’t realistic, but MSPs who hold churn under 5% of annual revenue are far more likely to see revenue growth than MSPs who have a churn rate over 10%. So as far as our data shows, the single most important thing you can do for the health of your business is to reduce churn.

The math on this is remarkably simple. For every dollar you churn, you need to replace that much with revenue growth, just to break even. In a world where most MSPs struggle with lead generation and sales, anything you can do to reduce the need for sales & marketing expertise matters.

MSP #1 MSP #2
2018 Revenue $1,000,000 $1,000,000
Churn 3% 15%
New Revenue Add $150,000 $150,000
2019 Revenue $1,120,000 $1,000,000

 

So what can you do to bring down your churn rate? There are a few key actions, and the more of these you do, the more likely you are to experience low churn rates.

De-Commoditize

The service mix that you offer is huge. If you offer only commodity services, you can expect higher churn rates (not to mention lower margins) because your clients will fixate on price. When you find ways to be truly unique among your peers, your clients are more likely to recognize that unique value, which makes it harder for them to leave knowing there are things you do that nobody else does.

You don’t have to be wildly creative or reinvent any wheels to be unique. David Robertson, a speaker at GlueX, offers some fantastic advice about differentiating through small innovations.

Prove Great Service

It goes without saying that you need to deliver great service, but too many MSPs think this differentiates them. It doesn’t. Any MSP can deliver great service, and most are pretty good. The key is that your clients know about the great service you provide. Conduct regular SLA reviews, or quarterly business reviews, and highlight your big service wins. This evidence serves as insulation against competitors’ claims that they can do better.

Tell them how you’re doing it, too. This way, if a competitor comes along and starts talking about their service, your clients have the tools and talking points to demand proof. Don’t put your clients in a position of evaluating you against a competitor in a knowledge vacuum. Top-performing MSPs have long reported the value of IT Glue in sales conversations, and we’re seeing the same thing now with Network Glue, too.

Roadmaps!

The proactive mindset is such a critical part of managed services. When you talk to your clients—and you should do this regularly because their feedback is invaluable—make sure you always have a roadmap. The scope should stretch out three months, six months, or even a year. This does several great things. First, it allows you to align your plans for them with their own operational plans. Second, it gets big ticket items on their plate before they plan their next budget cycle. Third, if they know how you’ll be there for them each step of the way to support their plans, they are a lot less likely to be swayed by competitors. If they aren’t really sure what you’ll be doing for them next quarter, that makes switching easier. Make sure you work together with your clients to have a roadmap.

Listen

Listening is so important to reducing churn that we have to say it twice. If your customers feel that you’re ignoring them, they are more likely to churn. Simple as that. It’s not even a matter of doing what they say—you listen more like a doctor, where they tell you what’s wrong and you advise a course of action to make things better. Even if what you tell them isn’t what they want to hear, just the fact that you took the time to listen and respond with empathy, is critical to reducing churn.

The 2019 Global MSP Benchmark Report is packed with insights, so if you haven’t read it yet, now’s the time!

Download the 2019 Global MSP Benchmark Report

 

In the meantime, we’ll be spending the next several weeks digging deeper into some of the bigger insights, to help take the data and turn it into actionable takeaways for you. Keep checking back each week to learn more. Cheers, and happy documenting.

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