During the 2008 recession, mass layoffs and high unemployment led to a large portion of the working economy being performed on a gig/freelance basis. This was great alternative for businesses as it allowed them to contract the amount of work they needed at any given time and more importantly it got people innovating and starting new businesses at a time when it seemed impossible to do so.
I have a sense recently that there may be a new wave of newly un-employed IT talent hitting the open market and many are using this opportunity to freelance for businesses or start their own MSP. If this sounds like your situation, buckle your seat belt, you are in for quite a ride. Here are a few things that are important to learn if you want to have success in the industry.
Your Value Is Entirely Subjective
One of the biggest challenges you will face early on in your business is figuring out what to charge for your services. If you are starting from nothing and are somewhat desperate for income, it can be difficult to avoid taking anything you can get just to get the money flowing in. This is okay to an extent, but it is important to always protect your time in the process. Every customer will value you, your experience, and your time differently. You ultimately need to find a way to make the effort that you put out as valuable as possible to your customer. This starts with what problems you can solve and what that may be worth to your customer and their business.
Bad Contracts Can Hinder Growth
The first few contracts that an MSP takes on can have a way of haunting the business for years to come. If you are going to take less than industry standard pricing in your service area, it is important to shorten the contract length so that you are not obligated to offer services that may end up being at a loss later on. Retention from contract-to-contract is generally high in Managed Services. This is why you should not be worried about signing long term contracts early on in your venture. Instead, focus on execution and leave yourself with as much flexibility as possible moving forward. Your business will change dramatically over time. Your agreements should have the ability to keep pace.
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Set Clear Customer Expectations
As I said before, customer retention in this industry is generally high. The relationships that you establish with your customers are long term, which is why it is important to set clear expectations early on. If you do not charge customers properly for services, or allow them to monopolize your time, this expectation can lead to a toxic relationship that will negatively effect your business for years. This is why you should always try to under-promise and over-deliver instead of the other way around. It is better to say you will resolve an issue in 60 minutes and then complete it in 10 minutes than say you will resolve it in 5 minutes and then complete it in 10 minutes. In the first case, you far exceeded expectations, whereas in the second case you missed the mark completely. The time to resolution may be the same, but your customer will not always see it that way.
Not Every Customer Is A Good Fit
When you are first starting out, you tend to over-value opportunities that come your way. This is entirely understandable because at this point, you never know when the next one will come. What you will eventually learn is that some customers are better off not having on your books and the sooner you can identify them, the better off you will be. We used a system that we call the “5 R’s” to evaluate our customers. This was a way to grade our customers based on different factors that were important to us: rates, requirements, relationships, referrals, and receivables. Not only will this type of evaluation help you determine who your worst customers are, it will also help you determine the type of customers you want to go after based on common trends in size, industry, and territory.
Hire/Outsource Your Weaknesses
By now you are probably wearing every hat imaginable. As you bring on more opportunity, you will be faced with the decision to hire internally or outsource work to fill in the gaps. The first few hires are of critical importance. At this stage you likely cannot afford to constantly turn over employees, even on a part time or freelance basis. When trying to figure out what responsibilities to offload, focus on your weaknesses. Consider soft skills, technical skills, and even motivational factors into this decision. You may be tempted to offer equity in lieu of short term salary. Don’t do it. At least until you have worked with this person for 6-12 months and know who they are and what they are capable of.
Competitors Can Be Referral Partners
The Managed Service industry is competitive. It won’t take long for you to figure out who your competitors are and what market share of your service area they likely have. The sooner you get on their radar the better. “Hiding” from your competitors is short term thinking. These companies are already hundreds (if not thousands) of steps ahead of you. There is a lot you can learn from them if you are willing to swallow your pride and put yourself out there. One thing that you might find is that there are prospects or customers that they don’t want and would gladly pass over to you should you be interested.
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Vendor Relationships Are Important
When it comes to the IT Channel, the vendors hold all the cards. This is where new venture capital flows in, which gets converted into products and services that you sell, only to push that money back to your vendors (thus returned to their investors). It is important to know how this financial system works and what role you play in it. Your vendors have the ability to open up new doors for you that you simply cannot on your own. Maintaining a healthy relationship with your vendors will increase your chances at scoring market development funds or new leads which can accelerate your growth.
Be A Part of The Community
It is a lot different now than when I was an MSP. Industry Veterans are leveraging information (in the form of content) to gain your attention and are asking for little in return. Take advantage of this, but take it at face value. The more information you can harvest, the better you will be at making your decisions. There are also private and public communities where you can interact with your peers. Give as much as you take in these scenarios and you will find that they will be incredibly important for the maturity of your business (and you as the Owner).
Failure Is All Part of The Process
The most important thing to learn is that you will fail often. Each mistake is a step forward toward building a business that will change your life entirely. The sooner you get these failures out of the way, the better off you will be, which is why constant experimentation is an important part of growth. While being an “MSP” is a bit of a turnkey business model, you should never be afraid to break the mold. What works for some people in the industry does not work for everyone, so it is important to always trust your instincts and act accordingly. This industry is what we all make it. The more people there are willing to defy the status quo, the further we can take it.