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Many MSPs often struggle with creating an effective pricing strategy, whether it’s because they lack the time, resources or market research to do so, fear client resistance or churn, or some other factor. However, regardless of these challenges or trepidation, creating a thoughtful strategy is an essential function of becoming – and remaining – a profitable MSP.
In this blog, we’ll discuss nine key tips and strategies for optimizing revenue and margins to ensure scalable profitability.
How to maximize MSP profits
While every MSP’s financial situation is different, there are definitely common business strategies that are designed to help MSPs achieve profitability and long-term success. So, whether you choose to follow all of the tips below or pick and choose which ones work best for your business, we encourage you to use this as a reference point moving forward, as the tactics laid out here have been proven to work for many an MSP.
Analyze your costs per client
Understanding the financial dynamics of each client is crucial for maximizing revenue and profit margins. By analyzing the cost structure associated with each client, you’ll gain valuable insight into their profitability and potential for growth.
However, it’s important to keep a few things in mind when running through this analysis exercise:
Your most profitable customer isn’t necessarily your highest revenue customer. Pro-tip: Consider the profit margin of each customer to get a more accurate view of your profitability/by client.
Your least profitable customer might also be your most resource-exhaustive one that requires a lot of time, effort and attention to serve. Pro-tip: To alleviate this pain, consider making a strategic business decision to upsell lower revenue earners and release the least profitable customers who are likely causing issues in your operational efficiency and productivity.
Understanding the true cost of service delivery per client is pivotal in identifying areas for improvement and optimizing overall margins. And, it must be said, this process should not be a one-time activity. The industry, economy, market dynamics, customer finances and tons of other factors are constantly changing.
To that end, it’s imperative to regularly review and update your customer cost analysis to adapt to those aforementioned changing circumstances, as doing so allows you to stay an agile and profitabile MSP.
Reevaluate your billing models
Just as analyzing cost per client is not a one-time exercise, reevaluating (and if necessary, updating) your billing models should be something you repeat at regular intervals. Why? Beyond the factors we’ve already stated above (keep up with market dynamics and current state of the economy, etc.), regularly updating them, as needed, helps you identify and eliminate inefficiencies. Which, in turn, leads to better resource allocation and strategic business adjustments.
It’s a proactive approach that not only maximizes revenue and optimizes margins but also fosters client satisfaction and retention, ensuring long-term profitability and business growth.
And remember, client needs are never one-size-fits all – so maybe your billing model shouldn’t be, either. It’s common for MSPs to use more than one model to accommodate different types of clients and their varying needs. For example, you might want to combine/offer both block-hour and AYCE billing models to offer more flexible, tailored solutions that align with clients’ unique requirements and budget constraints.
Reassess the cost of services
Let’s face it – raising prices is never fun. But the fact of the matter is that it’s just part of being a business owner and more specifically, remaining a profitable MSP. Now, it’s not advisable to raise the price of your service offerings just for the heck of it; that’s a surefire way to turn away prospective clients and lose existing ones.
But what I am suggesting is to objectively look at, you guessed it, the economy and market landscape, and calculate if your current pricing and pricing strategies are up speed and keeping your revenue in the green every month (or quarter, year, etc.).
If they are, great! Keep it up. If you uncover that you’re breaking even or worse, in the red – it’s probably high time to increase the cost of some of your services. If you’re in the latter camp, don’t fret. There’s a strategic way to roll out pricing changes in a way that’s thoughtful and empathetic to clients.
At the end of the day, your clients are also business owners who understand the struggle and moving target that is profitability, so it’s likely they’ll show you compassion and grace if and when the cost of your services tick up a bit.
Expand your service offerings
While technology is obviously fundamental to an MSP’s business, the range of potential solutions and support options is continually expanding. Introducing additional service offerings or diverse products that meet your clients’ needs or preferences, like those focused on cybersecurity and remote work, for example, offers significant potential for boosting revenue and profits.
What technology and/or services are in high demand right now? What’s a request or area of improvement you consistently hear from customers that you could create an offering around? Simply put – what are your customers saying they want and need, and how can you give it to them?
If you don’t have the resources (time, infrastructure, etc.) to provide this directly to clients yourself, there’s always the option to partner or integrate with your MSP software provider to sell it as a service.
Resolve inefficiencies
By analyzing workflows and processes, you can identify areas where you’re draining valuable time and resources. For instance, streamlining your ticketing system ensures quicker response times and reduces the backlog, allowing your techs to handle issues more efficiently. Implementing automation tools for routine tasks like system monitoring, software updates and patch management can also free up your technicians by a significant margin, which ultimately empowers them to focus on higher-value tasks and more complex client needs.
Resolving inefficiencies is about more than eliminating annoyances throughout you and your techs’ workflows. It’s also about enhancing the quality of client service and increasing capacity, and enabling you to take on more clients without proportionally increasing staff costs.
Take advantage of resources
There are likely existing tools and resources at your disposal, whether through partnerships or software vendors, etc., that you can take advantage of to help boost your bottom line. Utilizing a scripting library, for instance, allows you to create fast, automated solutions with minimal effort, significantly cutting down on the time technicians spend on repetitive tasks.
Additionally, leveraging resources like pre-built integrations reduces the need for extensive development work and lowers expenses, enhancing your service offerings without additional costs.
Streamline your tech stack
Streamlining your tech stack helps you optimize margins by consolidating platforms, eliminating redundant tools and cutting dead weight. By doing so you’re bringing down licensing and maintenance costs, not to mention minimizing the complexity of managing multiple systems. This consolidation allows your team to focus on delivering and expanding client services rather than waste precious time and energy juggling disparate tools.
The result is reduced overhead, increased productivity and better resource allocation, all of which contribute to higher profit margins and sustainable business growth.
Improve your sales process
For sales to be effective, you have to attract and retain the right clients. If you don’t already have a strategy and process for finding and qualifying leads, you have no efficient way of knowing if prospective clients are aligned with your services and values, which can be a dangerous blind spot that leads to churn and high support costs.
Take the time to refine your sales process and tactics, including learning how and when to upsell. This allows you to maximize revenue from existing clients by offering additional services that meet their needs. A streamlined sales process is one that meets customers where they are while giving you the best possible chance of closing deals. Win-win.
Look at MSP benchmarks
The MSP space is a crowded and competitive one. Keeping up with not just industry trends, but what your peers and competitors are doing, and how and why they’re doing it, isn’t a distraction, it’s a necessary evil to stay a profitable MSP. Ask yourself, what are the most successful MSPs right now doing in terms of pricing, service offerings and increasing operational efficiency? Compare your performance against them as well as the broader industry, ID areas for improvement and then make tweaks and optimizations as necessary in your own business.
Choose the best platform
Syncro is built specifically for MSPs and includes all the tools you need, from scripting and AI-driven ticketing to patch management and automated remediation (not to mention 50+ third-party integrations). By leveraging Syncro’s all-in-one PSA, RMM and remote access platform, you can deliver superior client service while maximizing revenue opportunities and profit margins. Start your free trial today.
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