4 Things an MSP Should Keep in Mind When Positioning Itself for Growth

The MSP market is experiencing rapid growth, but that expansion isn’t being experienced equally by every player. Some are seeing modest gains while others are rapidly expanding their business.

High-performing MSPs stand out from the crowd because they do things differently–or better– than the other companies vying for the same slice of the pie. Instead of complaining about the competition, MSPs can borrow from their outstanding peers and adopt some of the habits and practices that can separate them from the pack and set them up for growth.

In our annual survey of MSPs, we took a deep dive with those experiencing average annual monthly recurring revenue (MRR) growth exceeding 20 percent to learn what is setting them apart (and above) the competition. Here’s what we found–and what other MSPs can borrow.

 You might assume the MSPs seeing the greatest growth are also the ones with tons of employees out selling their solutions and providing amazing customer service, but it turns out that extra headcount isn’t the necessarily the secret ingredient to accelerated revenue growth. In fact, one-third of the fastest growing MSPs have fewer than 10 employees.

Granted, a smaller company typically requires less of an increase to show a higher percentage of growth than a much larger company. This is particularly true for newer MSPs: In some cases, adding a single customer could be enough to give them 30 percent growth or more in one year.

Smaller, younger MSPs are acutely aware they cannot compete on size and thus are investing in their businesses in a way that prioritizes efficiency as well as identifying and adopting solutions that enable them to maximize the output of the staff they have by reducing their reliance on repetitive, manual, unoptimized tasks.

 When parts of the business are essentially running on autopilot, these MSPs can dedicate their staff to the activities that truly grow the business and don’t just keep the lights on and their customers’ servers humming. High performers use automation for mundane, time-consuming work to significantly increase the number of endpoints under management without having to hire a corresponding number of employees.

Another way high-performing MSPs are creating more efficient operations is by selecting products (such as PSA and RMM solutions) offering top-notch integration. These companies prize integration since it eliminates friction in day-to-day operations and simplifies the lives of staff. They believe integration of core MSP applications directly increases their bottom line because it creates efficiencies and optimizes employee utilization.

 IT outsourcing has evolved from nice-to-have to standard operating procedure for many companies. Once they get a taste of how great it is to rely on an MSP for these services, they want to offload even more to their trusted providers while they are simultaneously amassing even more and diverse technical needs.

All MSPs are finding themselves pushed by these market demands to offer an increasing number of services, and high performers are no exception. In fact, they are meeting the challenge and seizing the opportunity by offering a wider array of options than their less impressive peers.

Infrastructure monitoring and maintenance are obvious table stakes for any MSP these days, and the high performers we looked at were more likely than average to offer RMM, OS patching and antivirus in their solutions portfolio. But where they really stood out was in what else they had for their clients to select from.

Identity access and management, cloud services, client assessment, intrusion protection and prevention, audit and discovery, and dark web security monitoring were all offerings far more likely to be found on the menu of high performers than other MSPs. This shows that they are anticipating customer demand by building out these emerging services more aggressively than a typical MSP.

By having more to offer, high performers meet two key goals on their path to growth. First, they limit churn by making sure they have what their customers want so they don’t feel the need to look elsewhere. More importantly, they are able to grow the average revenue per account by selling them additional services–which is critical as it’s much easier (and less expensive) to grow a current customer than land a new one.

 Many MSPs believe they need to compete on price and make it up with volume, but the high-performing cohort proves otherwise. While they’re not overcharging customers, they’re typically not the cheapest option, either. Instead, they rely on delivering quality for a price they deserve.

There’s no dominant model (it was pretty much 50-50 between per-user and per-device pricing), but what was consistent is that high performers tended to charge more per each device under management and each hour of professional services, which also means they have a higher average monthly contract size than the rest of the MSPs.

While this doesn’t mean every MSP should run out and raise prices, it does prove that customers are willing to pay a fair rate for superior service. Charging a reasonable rate can maintain (or increase) revenue for MSPs to help drive and maintain growth.

Making a Plan for Growth

 What all of these elements show is that high-performing MSPs didn’t just luck into their growth. Rather, they are consciously positioning themselves to benefit from changing market dynamics and evolving customer needs. Because organic growth is the primary driver for many of these high performers, they have had to both introduce additional offerings to expand their business with existing clients and figure out ways to effectively communicate their availability and value to their clients.

With a comprehensive offering and internal efficiencies thanks to automation and integrated tools, MSPs can increase their average revenue per customer without having to significantly increase their costs. Selecting and investing in technology that can facilitate this growth and expand their menu of options is key to responsibly adding new services without over hiring or creating a web of discrete point solutions that become difficult to manage as the business scales.

To learn more best practices from the top-growing MSPs, download our free ebook at https://www.kaseya.com/resource/building-a-bionic-msp-practice-best-practices-from-the-highest-growth-msps-in-the-world/.

This guest blog is part of a Channel Futures sponsorship.