Elon Musk was quoted as saying, “It’s okay to have all your eggs in one basket…as long as you control what happens to that basket.”
His philosophy is evident in all the companies he runs. For Tesla, he niched the company to only selling electric vehicles (specialization principle) and then invested heavily into building his own battery-manufacturing capabilities, including the Gigafactory, to gain control over production costs. He’s taken steps to secure his own lithium supply, forming strong partnerships with miners and building his own lithium refinery.
All of this has enabled him to lead the industry in electric vehicles, allowing Tesla to charge more than other manufacturers selling their own EVs and outselling them over all other automakers – and because he holds the “power” of being able to deliver a unique and superior EV, he then can charge higher prices and generate more profit and appeal to HIS target market, which is upper-middle-class empty nesters with a household income of $150K+.
Many MSPs have no such “power” to charge premium fees or to even raise prices right now without the fear of high churn and therefore are suffering horrendously with low profitability. Is it the economy? Competition? Yes, to some degree…but the bigger reason for it is that they are delivering commodity services to commodity buyers who don’t value what they do and/or aren’t discerning when it comes to who they trust with their IT.
Read that last sentence again, because it’s a whopper.
As many of you already know, MSP growth declined sharply last year and continues to be flat. Election years are notoriously bad for the economy, but this year seems to have a persistent election-year “hangover” that is lingering.
That’s why in THIS economy, with THESE conditions, it’s more important than ever to shift your approach to the attraction, development and retention of high-value 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 flat economy, with labor costs stubbornly high and the rapid surge of inflation over the last couple of years, it’s more critical than ever.
Over here at TMT, we’ve seen a big surge of new MSPs starting up over the last couple of years. Tons of small solo guys just getting going who have no clients and, unfortunately, no money. While we appreciate their ambition and root for them to win, they are TERRIBLE customers for us. Most are extremely needy, have unrealistic expectations for results AND have credit cards that decline on a regular basis. Not bad people, but definitely not “high-value” clients for us.
For that reason, we are shifting a lot of our marketing investments to places we know have more “high-value” clients – or what I call HVCs – and are far more meticulous in list cleaning and qualification so that we don’t waste marketing dollars targeting someone who can’t be a great client for us long-term. YOU SHOULD TOO.
Far too many MSPs don’t give sufficient thought to this when marketing, 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 HVCs, 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 cyberprotections 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 so you can find the commonalities and replicate them. 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, target “recession proof” industries, such as CPAs, lawyers, HVAC, schools, etc., with companies that are not startups; and definitely NOT restaurants, hair salons, entertainment venues and other “non-essential” services.
Finally, 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, leeches 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 to know how to RESEARCH and find a lucrative target market? Then click here to get registered IMMEDIATELY for our annual IT Sales And Marketing Boot Camp, where MSPs from around the world will join together in Dallas, Texas, to discover the most impactful and effective marketing, sales and business development strategies in the MSP channel.
