Top 10 Pieces Of Advice For A Growing MSP (If I Only Knew Then…)

By Arlin Sorensen, O and Founder of the Heartland Companies which includes HTG Peer Groups

Building a managed services practice is a tedious and never ending process. I first got involved in building a managed service practice at HTS (Heartland Technology Solutions), back in 2005 when the topic became a focus for our HTG group. I sold HTS in 2012, but I still vividly recall the meeting in Madison, Wisconsin, when the group debated the idea of managed services — this concept of providing flat fee services for a monthly rate. 

There were some in the group who proclaimed managed services to be the wave of the future and others who said they would never offer a service at a fixed fee because of the variability of client needs and demands. It was interesting to watch as over the next year or so, almost all the group members jumped on the bandwagon and introduced managed services in some form or other to their clients. In the end, managed services are simply one way to provide service to clients. Done well, it can be a profitable way to meet client needs. 

There were plenty of things I learned along that journey that would have made it a lot less painful had I known earlier. Delivering managed services is not a magic path to recurring revenue, and there are no silver bullets. Still, there are some basics that, put in place, can pave the way and make the journey a lot smoother. 

Here are a few things that you need to have in place if you want to grow your managed service practice profitably:

1. PSA Tool. First of all, there is no “right” tool. But you need a professional services automation (PSA) tool. In our practice, we chose ConnectWise and found it to be a strong performer. Not perfect, but no tool is. The key is to identify the tool that most closely aligns with what you are going to offer and then stick with it. It requires effort to configure any PSA to match what you are delivering. Make that investment and tune it to your needs. Then stick with it and leverage it to manage the process.
2. RMM Tool. Again, there is no “right” remote monitoring and management (RMM) tool.  But just like a PSA, you can’t effectively deliver managed services without a strong RMM tool. In our practice, we chose LabTech after testing a few different options. Much like the PSA, my experience is that none of the RMM tools solve your needs out of the box. It requires time to adapt it to your method of delivering managed services. Someone needs to be assigned to manage the tool and make it useful. Far too many MSP’s invest in tools but only use them at a very surface level and fail to get the true potential value out of their investment. These tools aren’t out of the box ready; you have to work at making them fit your environment. But they are what make you the real money if used well.
3. Strong Internal Processes. Of course, without processes you can’t configure your PSA or RMM tools. Nor can you truly deliver any level of service to your clients. Process makes the service world go round. Many entrepreneurial-led companies have processes in people’s heads, not written down and standardized. That has to be how service gets delivered — closely following a documented process in a standardized way. Anything less will lead to chaos.
4. Regular Rhythm Of Internal Meetings. No one likes meetings, but they are essential to growing a company. There are a few basics that can make them more useful. Always have an agenda. Always have someone in charge. Always have a defined start and stop time. Create a regular schedule of when they will be held and never cancel them. Meetings are core to communication and that is the basic building block of service delivery.
5. Good Customer Communication. Let’s face it, selling managed services is a little squishy because clients are often unsure of what they are buying. The burden is on the MSP to ensure the client sees the value they are receiving on a regular basis. One effective way to do that is through a QBR (quarterly business review) which may need to be more or less regular than quarterly depending on the client size and business needs. However, it is never a report you email to them and allow the client to interpret on their own. QBRs provide an opportunity to have a discussion and tell your value story, as well as to identify other areas where you can add more value in the future.
6. Detailed And Accurate Accounting. Many small businesses don’t have good numbers, and you cannot effectively manage a business without them. Put a good accounting system in place — make sure it will link to your PSA tool — and then use it to not only manage the billing and financial interaction with the client but also to evaluate and analyze the business. At the end of the day you have to make money, and you can’t do that if you are managing in the dark.
7. Solid Service Delivery Team And Plan.  People are the core to making a managed service practice work. It can be a thankless job and without some effort and attention paid to appreciating employees and retaining them, you’ll quickly find you are a revolving door to the marketplace. You need to keep employees engaged, and you can’t always do it based solely on your feelings on how you think things are going. Use a tool, like the engagement index from Judgment Index.  Hiring and employee engagement are critical areas for long term success.
8. Leadership And Management Always Listening To Customer Feedback And Planning The Future. Contrary to popular belief, the client does get to decide some of the services that will be delivered to them. It is important to listen carefully to their requests and to meet the expectations they have if you want to retain them as long term clients. Find ways to create that communication. Roundtables work well, where you bring a handful of clients together to discuss future needs. But the most important thing is to listen!
9. Focus On Value Delivered. People pay for value, not for a cool or slick program or plan. And the first step to the value statement is to identify what that means from the customer’s point of view. Too often we deliver what people need without explaining why they need it. We have to slow down and explain the reasons, and the value it provides. Without that understanding you’ll have a conversation in 6 to 12 months where they ask why they are still paying you. Don’t let that happen. Talk value and your value proposition continually.
10. Deep Relationships With Vendors. As you scale a managed service company, you need deep vendor relationships more and more. Lots of MSP’s think they are independent and have the resources to handle any issues they face. That is prideful and foolish thinking. As you grow, you will find more and more need to be deeply engaged with the key vendors that provide the tools and products you use to deliver service. You can’t build those relationships the day you need them. It takes months and years to go deep. Start well before you need them, and once you get traction, make it a priority to keep those relationships growing. Then expand them more broadly down into your organization and across the vendors’ organizations as well.

Contrary to what some may believe, there are a lot of ways to deliver managed services profitably and well. There isn’t one single way that is “right.” But delivering managed services profitably does require some planning and strategy.  Cloud changes the dynamics a bit but overall the same types of things are necessary to add cloud to your managed service practice. 

I encourage you to view it that way — as a practice with distinct business needs. Managed services can be core to your ability to serve your clients well and drive profit to your bottom line. Done poorly, it can be a constant source of frustration and expense. Do it well.

Author’s note: HTG is committed to helping companies get service delivery right. We are offering, for the first time ever, service executive peer groups that can offer you much support and opportunity to tweak your current practice or build one from the ground up. Contact Dennis at DOConnell@htgpeergroups.com for information on how you can get involved or get access to any of the tools described above. We are privileged to get to work with over 375 of the best MSPs in the industry. Reach out and let us know if there is anything we could do to make a difference for your company. Business can be lonely, but at HTG we make sure no one walks alone.

Arlin Sorensen serves as the CEO and Founder of the Heartland Companies which includes HTG Peer Groups.  When he is not traveling to speak and consult, he is home on his farm in Iowa with his wife Nancy.  He is a proud “Pop” to four precocious grandchildren who serve as daily reminders of why he is intentionally living to leave a strong legacy of faith and integrity.  He loves making a difference in the lives and businesses of small business owners. You can reach him at asorensen@htgpeergroups.com or on Twitter @asorensen.