“If you’ve got the power to raise prices without losing business to competitors, you’ve got a VERY good business.”
Warren Buffett made the above comment over a decade ago in a meeting where he was asked about how businesses will succeed in times of high inflation and a stagnant economy, such as the one we’re in today. What’s key to his statement is “the power to.”
Many MSPs have no such ability or “power” to raise prices without fear because they are delivering commodity services to a group of customers who don’t value what they do and/or aren’t discerning when it comes to who they trust with IT. Read that last sentence again, because it’s a whopper.
As many of you already know, MSP sales are in a slump. Since we’re in an election year, deals are taking longer to close and many businesses are holding with what they have vs. funding upgrades or even changing IT providers as they wait to see who’s going to take office in 2025.
Inbound leads are slightly down as well, with digital ad costs climbing, thanks to the influx of political campaign funds for online marketing and ongoing competition from ALL advertisers, not just other MSPs. We’re also hearing that MSPs are experiencing more price sensitivity due to an influx of brand-new start-up MSPs flooding the market (according to a report from Datto, the ratio of new MSPs starting to those being acquired or merged is 3 to 1). Many of these start-ups are the typical “techs with helpers” who offer to do IT support cheap since they’re simply trying to replace their paycheck, not scale a multimillion-dollar MSP business.
In THIS economy, with THESE conditions, it’s more important than ever to shift your approach to the attraction, development and retention of right-fit clients, not just “more” leads and “more” clients. For years I’ve urged my members to aim up and have more rigorous standards for WHO they target and attract to become a client, but now, in the current economy, with labor costs stubbornly high and the rapid surge of inflation over the last couple of years, it’s more critical than ever.
Far too many MSPs don’t give sufficient thought to this decision, despite the fact that every decision you make in business should START with the “who,” not the “what.” WHO do we want to attract? WHO has an unmet need they will cheerfully pay to solve? WHO has a flexible wallet? WHO will be a great LONG-TERM client for us to develop?
That choice should be done with careful consideration. You can choose to attract, develop and retain what I call HVCs, or “high-value clients,” who are more discerning, financially stronger and more sophisticated than those who make their decisions based mostly on price, or you can take a shotgun approach to marketing and take whoever shows up.
Obviously, if your business is full of mediocre clients who are very sensitive to price, who do NOT follow your advice, who fight you over every recommendation, refuse to fund critical cyber-protections and upgrades, complain about everything and are “noisy,” you do NOT have a very strong business and your fortune is fragile – your vulnerability to poor economic conditions and competitors is high. So, what are we to do about this?
For starters, I would urge you to at least identify who the HVCs are in your client base. Given the Pareto Principle, it’s very likely that only 20% or fewer of your clients fall into this category. Keep in mind that they might not be those who represent the most revenue. Often, they’re not. They are the clients who represent the highest margins, in addition to being those you enjoy working with and who allow you to do your best work. You should also note that the person you consider an HVC might not be the same for everyone else, because it should be based on your chosen business model, your service offering and your culture and values.
Second, you need to have a strategy for DEVELOPING more HVCs from the 80%. They won’t all move up, but many will, and THIS is the secret most businesses never understand. HVCs must be cultivated, not just found. In our programs, we have to teach our members how to be successful entrepreneurs and break bad belief systems and negative behaviors BEFORE we can teach them how to be great at marketing and sales. They must be developed into better leaders, with greater capabilities, emotional strength and knowledge of how business works, not just given a better website and some campaign to run. If we fail to develop them, they will fail to execute properly and get the results they want.
And finally, you need a more sophisticated approach to marketing and selling, so you fish in better ponds where HVCs are more likely to be found vs. fishing in whatever pond is closest, cheapest and most convenient but is also full of mosquitoes and alligators. As Qubein taught me, who your customer is today is a piece of data. Who your customer SHOULD BE is a piece of STRATEGY.
Do you want a blueprint for attracting, developing and cultivating more HVCs for your MSP? Then click here to get registered IMMEDIATELY for the annual MSP Marketing Roadshow where we’ll take a deep dive into how you can replace your unprofitable, unappreciative clients with higher-paying, more respectful and more appreciative MSP clients.