11 MSP Best Practices for Business Growth

Best Practices for MSP Growth

Managed service providers (MSPs) play a crucial role in optimizing business operations and ensuring data security for their clients, which is essential for enhancing efficiency and reducing downtime. You can find a lot of great information on how to run a better MSP business, but sifting through it to find the nuggets can be daunting. To spare you the trouble, we’ve put together an index of managed service provider best practices that will help you zero in on the good stuff, fast.

Consider these 11 MSP best practices as “thought starters” that point you in the right direction.

 

Finance & Admin

1. Invest in a solid MSA to qualify for insurance and lower premiums

An MSA (master service agreement) governs all your interactions with clients and protects you if something goes wrong or a dispute crops up. Increasingly, insurance providers are looking for your business to have a solid MSA in place for you to qualify for a policy.

Once in place, an MSA protects your insurance policy from getting hit, which can help lower your insurance premiums. For tips on what to include in your MSA and how to make it easy for clients to sign off on it, listen to this podcast episode with technology lawyer Brad Gross.

 

2. Shop your cyber insurance policy

Having a great MSA is one way to help lower your cyber insurance premiums. Another way is to make sure you’re shopping your policy to as many carriers as possible. Insurance carriers have varying experiences and perceptions of what your risks are, so their prices can differ significantly. Wes Spencer of FifthWall, a technology-focused venture capital firm, cites one MSP who saved $15,000 on an insurance policy just by getting multiple quotes.

 

3. Learn how to understand and manage your cash flow

Sales and revenue numbers are great. But if you’re not paying attention to cash flow — the timing of money flowing in and out of your business — your MSP can still flounder. Spend some time learning how to read your cash flow statements, then looking at ways to improve it. This webinar from accountant Rayanne Buchianico is a great place to start.

Bonus: Grab the free cash flow management spreadsheet Buchianico offers when you watch the webinar.

 

4.Put all your clients on direct debit payments

One incredibly effective way to ease cash flow stress is to put all your clients on direct debit payments. Automatic payments help ensure a consistent schedule of cash inflow to help cover your expenses. It also eliminates late payments and reduces admin time spent chasing clients down to pay their invoices.

To switch clients to direct debit, consider offering a small discount as an incentive, and make it a requirement in new contracts to maintain healthy cash flow as your business grows.

Client Engagement & Service Models

5. Don’t be afraid to take hourly break-fix work

Some people will say having all your clients on AYCE (all you can eat) contracts is the only way to be a “real” MSP. Andy Cormier, an MSP industry veteran, says that simply isn’t true. From his own experience growing a thriving managed service provider business, he recommends embracing hourly work as one of your MSP billing models.

Hourly work can feed managed services contracts by leveraging project work to migrate customers onto managed services agreements. This method can lead to extraordinary closure rates and increase customer lifetime value. Additionally, hourly work can serve as a low-liability proving ground when hiring new technicians, allowing you to evaluate their competency and interactions with clients without risking your most profitable accounts.

 

6. Avoid fixed pricing

Another best practice Cormier recommends to managed service providers: Avoid using fixed pricing so you can fuel growth and maximize profits. By adopting a flexible, sales-driven mindset, you can better assess each customer’s unique needs and create custom pricing packages accordingly.

This approach prevents undervaluing your services and ensures you’re not leaving money on the table. By recognizing that not all customers are created equal, you can better capitalize on potential business opportunities and avoid the limitations imposed by fixed pricing models.

 

7. Review your client base annually

Sports teams regularly trade out players to have the best chances of making the championships each year. MSP consultant Erick Simpson suggests your MSP should do the same. By reviewing and winnowing down your client base annually, you can allocate resources more efficiently, focus more time on A and B clients to foster stronger relationships, and avoid the morale-draining issues that often come with C clients. As your managed service provider business matures, the annual review also helps you focus on maintaining and growing the profit margins you’re targeting.

 

Operational Efficiency

8. Minimize unplanned work

On a managed services contract, minimizing or avoiding unplanned work is the key to maintaining healthy profit margins. The first step is to determine how much time you spend putting out fires and why.

ProdigyTeks, a Chicago-based cybersecurity and managed IT services provider, assessed reactive work by categorizing their tickets into four types: business projects, internal projects, changes, and unplanned work. Once the team saw the amount of effort going into unplanned work they determined ways to automate frequent tasks, help clients self-serve instead, and work upstream to avoid the issues altogether. The result? Higher efficiency, service quality, and customer satisfaction.

 

9. Use scripting to automate as much as possible

For any MSP, scripting can become a superpower. Invest some time in building your scripting skills, or leverage community script libraries to boost efficiency. From basic cleanup tasks to security checks to repetitive onboarding activities and beyond, there’s a script for almost everything you need to do.

 

10. Consolidate tools

Software bloat is real. According to the 2023 SaaS Management Index report, the average small business of under 500 employees has a tool stack of 172 apps. It would be interesting to see how MSPs measure up, but our guess is you’re running a lot of stuff, and constantly switching between dashboards. As much as possible, pare down your stack to all-in-ones and integrate the rest.

 

Culture

11. Value and protect your mental health

Success means nothing if you—or your team—crash and burn along the way. Working as a managed service provider is a high-stress endeavor, so it’s especially important to put safeguards in place to manage mental health. That can include setting your own goals rather than letting others tell you how your business should operate, taking regular vacations, and having open conversations about your challenges.

 

Get more MSP best practices

If you’re ready for more best practices to make your MSP business more efficient, profitable, and enjoyable to run, check out the complete list of MSP best practices and tips.

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