MSP Growth Requires New Outlook About Contracts, Business Models, Say Experts

CHANNEL PARTNERS CONFERENCE & EXPO/MSP SUMMIT, LAS VEGAS — What does it take for an MSP to reach the upper echelons of growth and profit?

ItCon’s Leah Freiman

Leah Freiman said she knows. As CEO of ItCon, a New York-based MSP, she places great emphasis on projecting her business into the future. That means not letting problems like the pandemic get in the way of making money for MSP growth.

“What do I need to do to constantly be on top of the market?” Freiman asked. “You can’t just settle down and say that you’ve got it.”

She was one of three experts who spoke at the Channel Partners Conference & Expo in Las Vegas Monday during their talk, “Unlock the Secrets of Fast Growth,” for MSPs and MSSPs. The panelists’ companies were all top MSP growth performers among the Channel Futures 501 Rankings.

Planning for the Future

TailWinds’ Daniel Herrera

Daniel Herrera, CIO of TailWinds Technologies, echoed Freiman’s sentiments.

“One of the things we did on the sales side is that we doubled down. So, I had our sales team start doing a lot of Zoom calls, sending more emails, just picking up the phone and calling prospective clients. And so, we actually added $2 million in revenue during the first nine months [of the pandemic] from an increase in communications standpoint.”

Part of making sure the future is promising is revisiting KPIs and metrics. Herrera added that his company built new dashboards so that every department understood exactly what they must do. All the speakers emphasized the importance of not ignoring metrics which, even if they’re undesirable, are critical to helping an MSP move forward.

New Charter’s Mitch Morgan

Future-proofing a company is dependent on strategic investments, which is what Mitch Morgan, CEO of New Charter Technologies, discovered.

“At New Charter we’ve got an equity partnership in the 18 companies that we brought into the business over the course of the last 24 months. They range in size from $5 million to $20 million in revenue and all of them are best in class. We’ve been able to achieve 20% year- over-year MRR growth these last years.”

Morgan said 12% annual growth is the new benchmark in terms of success in the major services market.

He made the point that growth wasn’t completely about establishing the right contracts, either. Like Herrera, Morgan relied on a comprehensive sales plan that involved digital marketing.

“The first person that we hired besides me at New Charter was the director of digital marketing,” he said, adding that the company implemented an enterprise instance of HubSpot.

Changing Business Models

The panelists agreed that to be lucrative in this field means reassessing how one charges for services. Many MSPs have an all-you-can-eat business model for services that proves disadvantageous for growth. The experts found clients understood the need to change business models as MSPs’ work becomes more complex, especially when having to tackle cybersecurity challenges.

“I cut my costs tremendously by charging clients for each product and yes, I have an upsell on those. I’m making a lot more money per client and I don’t have to raise my fee as much because this sort of did raise my fee.”

These business changes may be helpful to spur growth, but MSPs face a major challenge that may hinder this success: lack of talent.

This forces a conversation about the repricing of services.

“Labor costs are just going through the roof and availability of labor is a huge issue for all of us,” Morgan said. “This gives us permission to have those really direct conversations with our clients and look at services.”