MSP business owners gathered in Dallas, Texas, this week to learn key strategies that the fastest growing MSPs—the top 1%—are using to grow 50-100% year after year.
Hosted by MSP Success, MSP Growth Day featured industry experts and thought leaders who revealed their insider knowledge on M&A, marketing, and increasing an MSP’s value.
How To Grow By M&A
Will Nobles (pictured right), founder and CEO of Vector Choice, spoke on how he grew his company to $18 million with M&A. He shared some mistakes he made along the way—and provided advice on how other MSPs can avoid doing the same. Here are just a few recommendations any MSP looking to buy should consider:
- Ask the seller how many managed services clients and active clients they have, how much MRR they get, the contract end dates, and what kind of services they currently provide. This information is critical to give you a full picture of what you’re buying into.
- Beware of handshake agreements, long-term (longer than 3-year) contracts, and broker-negotiated agreements. Hidden agreements like these can take a big chunk out your new investment. Make sure you’re aware of them going in.
- Verify all licenses are valid and current. Black market licenses can cost you hundreds of thousands of dollars if your new acquisition wasn’t following best practices and you don’t catch it, because your auditor will.
A final key piece of advice from Nobles was to find a way to compensate your employees after an acquisition. Because their workload increased exponentially each time he acquired a new MSP, Nobles noticed his employees were becoming dissatisfied—some enough to leave the company. He recommends finding a way to reward them for their efforts, whether that’s a bonus or additional PTO.
For more M&A mistakes to avoid, check out this list of reasons why M&A deals fall apart.
Mastering the Sell Side of M&A
Frank DeBenedetto (pictured above), founding partner & CEO of audIT, a Kaseya company, and president & chief technology advisor to his previous MSP, Two River Technology Group, traced his journey through the founding, growth, and sale of his MSP. He shared with attendees why every decision you make in your MSP today will affect the money you make when you sell, using his own experience as an example.
Use MDF To Drive Explosive Growth
Tonya Gentry, chief sales officer of Big Red Media, discussed how Marketing Development Funds (MDF) can launch explosive growth for MSPs. By working with vendors, your MSP can get free money to put towards marketing efforts. That can mean a huge return if you sign even one client as a result. However, Gentry stressed that MSPs must have realistic expectations—vendors aren’t going to just give you thousands of dollars. “The typical amount you’re going to get for MDF is $500–$2,500,” she said.
Additionally, you’ll need to have a clear plan in place for what you’ll do with the money—events like Lunch & Learns or digital marketing efforts are good options. Afterwards, be sure to report back to your sponsors and let them know the results. This increases the likelihood that they’ll be willing to invest in you again in the future.
Rank Your Customers—No, Really
Robb Patterson, GM of Technology Marketing Toolkit‘s top tier, Mastermind, walked attendees through how to get the most value out of existing clients. First, he advised, calculate current spend and margins per customer, then rank them from A to D, with A being a client with healthy margins. “An A customer is over 65% margin, B is between 50 and 65%, C is between 35 and 50%, and D is 35% and under,” Patterson explained. He recommends meeting with A and B customers regularly to keep them happy, get them on your most comprehensive, current offerings, and determine what’s preventing you from getting better margins. He warned that C customers are usually on their way to becoming D customers, and D clients need to have their rates increased.
“You don’t want to take on a new customer and be so desperate to win them that you bring them in as a D customer. It’s way easier if you bring them in that A level and do proper accounting and keep them there,” Patterson said.
Organic Growth Strategies Of The Fastest Growing MSPs
Aaron Leicht, VP of client coaching at TMT, shared some of his best organic growth strategies for MSPs—and touched on how to secure those high-value clients who are happy to pay what you’re worth.
Strategy #1: Raise Your Prices. Many MSPs could benefit from raising their prices, Leicht said. Increasing your prices in order to improve your margins allows you to increase your value in your customers’ eyes and ensure they stay protected. And don’t worry about losing clients over increased prices—you can often make equal or greater revenue without low-value clients eating up hours of manpower.
Strategy #2: Get The Most Value Out Of Every Client. One of the key ways Leicht recommends doing this is by scheduling QBRs with every client. “You reduce risk, increase stability, lower the number of tickets, improve productivity, and help with growth,” Leicht said. This is one of the best opportunities to upsell and build value with your customers. You can also ask them if they could refer anyone specific, such as their CPA, who could benefit from your services.
Strategy #3: Don’t Make Marketing An Afterthought. “Nobody knows how good you are before the sale,” Leicht said. “They only know how good your marketing is.” While referrals are great, they’re not as reliable as other methods. Leicht advised establishing drip marketing campaigns and marketing oil wells to create a steady stream of incoming leads.
Marketing oil wells are process-driven marketing campaigns that you can repeat and use to generate the same results, within an acceptable range of variance. These can include digital marketing, direct mail campaigns, etc. Whatever method you use, make sure you have a system in place to track your progress, and follow up!
Get Out Of Your Own Damn Way
In his closing presentation, Nobles focused on finding the motivation within yourself to make growth happen. “You have to decide for yourself, are you all in?” he stressed. “I find so many MSPs as I coach that sometimes are better off just staying as techs. Sometimes they really want to do it, but they’re stuck in their own way. You’ve got to get out of your damn way. How bad do you want it?”
For Nobles, that’s what it comes down to. You can find the time, you can make the budget work, and you can learn the new skill if you’re all in and ready to do the work. MSPs need to get good at marketing—regardless of whether their end goal is to grow, or to sell and get the most possible money out of their MSP.
Nobles wrapped up with a word of encouragement for MSP owners: “Take this journey, but go get results. Don’t stop when you start putting in effort and you’re not seeing immediate satisfaction; that’s where you’re going to have the biggest transformation personally, in your business, and for your future.
If you want to turbocharge your growth by learning the strategies of the top-performing MSPs, there are four more MSP Growth Days coming to a city near you. Next up is Newark, New Jersey, on June 11. Find out more on the MSP Growth Day page.
