5 Ways to Increase MSP Profitability in 2022

Add high-margin services, then upsell and cross-sell. Many MSPs begin by offering core services such as remote monitoring, business continuity and security. While these service staples provide a sound foundation to an MSP program, there are more services MSPs can offer. Services such as unified communications (UC) and desktop as a service (DaaS) are in high demand, as many end customers are seeking ways of leveraging and managing a hybrid workforce. Other potential add-on services include mobile device management (MDM), video surveillance as a service (VSaaS) and email security. Once you add these services to your line card, it’s time to up-sell and cross-sell these to your existing customers.

Bundle and white label your services. Many MSPs bundle their solutions, and the most successful MSPs do so in a way that leaves no room for service gaps. MSPs who don’t work to mind the service gaps with existing customers risk leaving the door open for another provider to come in, earn trust and potentially gain the right to steal away their portion of the solution. Building on the previous advice of adding services, create comprehensive bundles designed to address the specific needs of your target market. Then, if possible, white label the bundles to build your brand rather than that of the vendors you carry.

Say goodbye to unprofitable customers. Sometimes the easiest way to increase profitability is by reframing or eliminating unprofitable customers. Assuming you’re operationally mature enough to have accurate and detailed data on your existing customers–and have the confidence necessary to take this bold step–the rewards can be reaped very quickly. Use your reporting tools to identify which customers consume most of your time, and then seek to understand why. If they have antiquated hardware that’s repeatedly failing, it may be time to force them to upgrade or drop them as a customer. Not every potential customer will be the right fit for your services. If, after an evaluation, you identify a handful that consume the bulk of your time while not contributing an equal amount to your revenue and profits, you’ve got a solid case to establish a new service plan or plan your exit.

Outsource complex or low-margin areas. Just because you can offer a service in-house doesn’t mean you should. For example, while building your own NOC (network operations center) or SOC (security operations center) might seem like the right idea, startup costs alone can have you playing catch-up with profitability for some time. Additionally, hiring and retaining qualified specialists isn’t cheap. Take a close look at your services and identify which can be outsourced to a vendor or other trusted partner or peer better equipped to provide the service. The same rule holds true for low-margin services: If you can outsource the service for the same or better result, and not be required to spend your own time and resources, it might make financial sense to do so.

Review existing vendor partners. MSPs should occasionally review existing partner agreements and evaluate new partners. The goal is to ensure that you’re getting the best service, solution and support for your customers at a fair price. Quick aside when it comes to evaluating existing contracts: Take a close look at hidden fees in the licensing model—they can add up in the long run.