Three Tips: Managed Services Sales and Compensation

By Jim Hamilton 2

I have a neighbor who really gets into Christmas.  His house is covered with lights and ornaments.  The combination of bright lights and shiny objects captures lots of attention, even prompting a local TV crew to broadcast in front of his house.

This display of festive spirit and the reaction in the neighborhood made me think of a recent conversation with an MSP.  He said “I can’t stop my salespeople from chasing bright and shiny objects.”

When he saw the puzzled look on my face, he explained that he could not break his sales team’s habit of chasing large one time sales and their payouts. A Managed Services contract that pays smaller amounts over a period of time could not compete with flashier one time sales, even if the payout was greater in the long term.  So what’s an MSP to do?  Here are a few ideas from our website on leveling the playing field for Managed Services contracts with their brighter and flashier cousins.

1. Differentiate between Contract, Project and Product Sales: To influence the right kind of behavior, you must have a different comp plan for Managed Services, project and product sales.  Now this may seem obvious, but many MSPs attempt to incent their sales staff with a one size fits all comp plan.  The result: unexpected behavior and undesirable results.

2. Consider Paying Commission on Full Contract Value: This makes your Managed Services contracts into bright and shiny objects in their own right with a large one time payout and incents your sales team to sell longer and larger contracts.  While this sounds like an easy fix, this strategy does put new cash flow demands on your business as well as higher business risk associated with cancellations.  To mitigate these risks, consider charging a one time “getting started” fee and be sure to include a cancellation fee in your contracts.  Some MSPs even go as far as allocating the first x number of monthly payments to their sales staff depending on the length of the contract.

3. Base Commission on Margin: Managed Services results in higher service levels and lower operating costs, producing higher margins than break/fix contracts and product sales.  As a more profitable business you can afford to pay relatively higher commission, making even landing a small Managed Services contract attractive to your sales team.

Guess what I saw on my street last night? Yup, another house full of lights.  People are always attracted to bright and shiny objects, so to influence the right type of behavior, make your Managed Services contracts bright and shiny.  You can learn lots more on this topic at www.MSPPartners.com by watching our IPED webinar entitled “Variable Compensation Plans for Managed Services Businesses.”

Jim Hamilton is executive director of MSP Partners. MSPmentor is updated multiple times daily. Don’t miss a single post. Subscribe to our Enewsletter, RSS and Twitter feeds.