Is Your MSP Business Proactively Committed to Raising Your Managed Services Margins?
You May Feel You’re Running in Place, But You’re Not
An MSP business often feels that once they’ve hit a certain point, it’s time to relax. Many who own such operations will set themselves a monthly income goal, and suppose once they’ve achieved that goal, they can just “cruise.” Perhaps that goal’s a certain amount of income or a certain number of clients. Owners feel they’ve been running long enough, and once they reach their goals, they’re just running in place.
Say your goal for a small company were $15k a month. Now say you hit that goal. Are you making any more money? The strange truth is that the more you make, the more your operational costs expand. So, your actual increased profit is minimal. Say you were at $10k a month before. Well, to hit $15k, you had to hire another employee. That means they’re now drawing some of the profit. So instead of having an extra $5k to put in your pocket, after payroll, payroll taxes, benefits, and opportunity expenses, it turns out you actually only put an extra $1k in your pocket. $500 of that has to go to additional outreach in order to make the $15k. When you excise the dross from the silver, you’ve only profited 10% with 33% more income.
If, instead of a monetary amount, you were banking on a certain number of clients, you’ve got the same problem. Some clients pay more than others. If you expanded from 20 clients to 50, you may feel you’ve reached your “cruising altitude.” In reality, your MSP business has a handful of clients that represent the primary revenue of your organization. Five clients make up a half of your income, while the other 45 make up the other half. What if one of those five were wooed away by another MSP? There goes 10% of your monthly revenue. Your choice at this point is to either dismiss some employees, or acquire additional clients to make up for the loss.
Keep Your Business Swimming
A business is a lot like a great white shark. Should the shark quit swimming, because of the way its respiratory system works, that shark would die. Your business is that shark. It must keep expanding or it will stagnate, implode, and eventually dissolve.
But you’ll get tired if you keep running in a way that seems to go nowhere. Certainly, you’re gaining musculature, but how do you keep your energy? There are several ways:
• Diversify your business “exercise”
• Continuously acquire new clients
• Cut the fat
• Continuously pursue new technology solutions
Sometimes you want to get off the treadmill and hit the elliptical. Sometimes you’ve got to quit concentrating on installation, and instead concentrate on upgrades, or cloud computing.
You need to continuously acquire new clients in order to preserve your bottom line, and you should always be curtailing unnecessary expenses and chasing new innovations to diversify you MSP business’ ability to support clients.
About the Author
Mike Bloomfield currently serves as President Geek at Tekie Geek, a company providing computer repair to Staten Island small and medium-sized businesses. Since 2012, Tekie Geek has been offering services like IT Support in Staten Island, Brooklyn, Queens, Bronx, Long Island, and New Jersey areas. Other IT support services Tekie Geek offers in NYC ranges from providing technical helpdesk support, computer support, and Data Recovery in Staten Island. They have been awarded a CompTIA Managed Services Trustmark, which is a respected industry credential that signifies the company’s adherence to best practices for technology service delivery and customer interaction.
Mike started with technology at a very young age and hasn’t slowed down since. He has served in the IT industry as an IT director, Engineer Manager, and a Director of IT/Research and Development. In 2012, he started Tekie Geek with the hope of being a one stop shop for all IT consulting in Staten Island. When not working, Mike is a true geek and will be watching one of his favorite shows or movies, which include Game of Thrones, Star Wars, Gotham, and much more.