How To Set-Up Your IT Business For Sustainable Growth
Failure is a key ingredient in every success story, not only in the IT industry, but in business in general. As you are trying to stay afloat within the “current” of the day-to-day operations, you will make mistakes. This is a natural occurrence and should not be looked at with a pessimistic point-of-view.
Our Managed Services company went through similar growing pains and there were time when we couldn’t seem to get out of our own way. Whenever we thought that we had found a clear path for growth, there was something waiting around the corner to derail our progress and strip away our profits. After awhile we decided that it was time to take control of the situation. From that point forward we put out an intense amount of proactive effort to correct our mistakes and set our company up for success.
Here are a few of the most important areas that we needed to drastically improve on, that you may need to address as well:
Refresh Your Branding
Let’s face it, IT companies are not known for their epic branding. Most company names appear to be some play on the words “tech” or “IT” with a clever pun mixed in between. We were guilty of this as well and in my opinion it is part of the “charm” of small IT providers.
Regardless of the name, one thing that is important to address before growth is your logo and branding assets. If all goes well, your brand will be well-saturated and become a well-known mark within the industry. For maximum effect, your brand must be consistent across all off these impressions that you receive. This requires that you have an updated logo with the appropriate file types, color schemes, fonts and images readily available whenever you need them.
If you do not wish to update your logo entirely, simply contract a designer to have it redrawn in vector and high resolution formats and provide you with a style guide. Having this on-hand will allow you to use various freelancers, designers, or agencies for different parts of your marketing all while maintaining a consistent image.
The Ultimate Guide To Cash Flow For Managed Services
Sponsored by Alternative Payments & Zest
Refine Your Bookkeeping
There is a Maya Angelou quote that reads, “you can’t know where you are going until you know where you have been.” I don’t believe Maya was referring to financial reports, but it remains true nonetheless. Keeping accurate records is imperative to execute on your growth strategy.
Unfortunately for some, having great technical skills in the IT industry and being able to read a Balance Sheet are two entirely different skill sets. This can become an issue as your business grows and you need to make decisions, but can’t trust your numbers with complete confidence. Our firm faced a similar problem and the solution was not a simple fix.
After several weeks and countless of hours of reorganizing our ledger to make better sense of our financial state, we were finally able to get a better understanding of where we stood. From there we hired a Bookkeeper to classify our expenses on and ongoing basis and make sure all future transactions lined up just the way we wanted. Once we could trust our numbers, we were able to design new reports that we ran on a monthly and quarterly basis to detail where we stood and what growth we could expect in the future.
Package Your Services
Selling “Managed Services” is all about packaging various solutions together to provide a valuable technology offering to businesses. As time passes, the needs of these businesses will change and your packaging must change with it. Think about this in the context of your home television and internet package. Rarely is this a static offering as channel lineups frequently change as well as new apps and faster speeds being introduced. As a customer, if you do not feel like your provider is keeping up with your needs, you will inevitably switch services.
When it comes to growth, your service packaging must be well thought out and flexible enough to be adapted to the future needs of the customers you intend to acquire. The last thing you want to do is bring on a herd of new customers with service packages that contain either the wrong solutions or the right solutions at the wrong price.
Instead, take time to meet with new vendors, seeing what is available within the channel, and put together a well constructed offering that you are confident will hold its value. Branding your package with a unique name will not only help to draw interest from your prospects but it will also differentiate the offering for existing customers that may need an upgrade.
The Ultimate Guide To Cash Flow For Managed Services
Sponsored by Alternative Payments & Zest
Understand Your Costs
Circling back to the topic of bookkeeping, there is often a discrepancy between what an MSP believes their costs are for a specific product or service and what they actually are after the transaction takes place. When you provide a labor-intensive service such as Help Desk as part of your offering, your costs will vary greatly from customer to customer which makes it difficult to price your services at a consistent profit.
In addition to service costs, fluctuations in the cost of network appliances and hardware can create an even bigger nuisance. Most small-medium MSPs do not keep inventory and order parts and equipment as it is needed. With the lapse of time between when a quote is created and when it is signed being unknown, there are many occasions when the price of the products will increase by the time the MSP goes to purchase them. This can cut into their profit significantly and in my opinion is one of the more frustrating parts of the business.
The solution to this is to maintain a constant awareness of what your costs are and put standards in place to control them. For example, explore vendor options that offer consistent pricing that will not fluctuate in an “e-commerce” model. Also be tedious about tracking the cost of your workforce (including any and all overhead expenses) and keep these figures up-to-date in your PSA. This allows you to pull reports that detail labor costs on any contract and gives you more data to work off of when packaging your service
Establish Customer Fit
When your business is young, you tend to jump at opportunities that may end up being more trouble than they are worth. This is very common and having these experiences is what allows MSPs to learn what their best customer fit should be moving forward.
As your business grows these incoming opportunities will increase in frequency and you need to prepare yourself and your team to handle them appropriately. This means being able to spot a bad opportunity in advance and being selective about the prospects that make it all the way through your funnel to be quoted.
The best way to do this is to evaluate your existing customer base (we use a system called “the 5Rs“) and look for good and bad trends in your relationships. You may find that specific characteristics such as company size, industry, or territory can act as indicators into the quality of a customer. Once you have an understanding of who your best customers are, then it becomes as simple as narrowing your targeting to match your findings, thus bringing on more customers with beneficial qualities.
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Standardize Technology Offerings
As our Managed Services company grew, we noticed that our longest tenured customers were often the most difficult to support. The largest reason for this was that their infrastructure was developed before we implemented a standard offering. This meant that whoever was working on a project to update or repair their infrastructure had complete autonomy in what was being offered and why.
There are many issues that occur as a result of this. Not only is it difficult to maintain a steady margin, but without the proper documentation it can be arduous for your Help Desk to support. When you standardize and partner with specific hardware and software vendors, you will have the resources available to train your sales and support teams, setting the customer up for long-term success.
Before you attempt to grow your business, document your technology standards and create a training regimen to ensure that all new and existing employees are well-educated on the products and services that you offer. Also establish relationships with the vendors and seek out exclusive discounts or market development funds that may help to fuel your growth.
Streamline Procurement
When a prospect or existing customer approves your quote it should fire off a chain of events within your company. One important part of that chain is the procurement of items required to complete the project. If your company does not keep inventory then this can require some logistical computation. Not only do you need to source the products but you must also get them all to arrive at your location or the job site in the appropriate amount of time.
One of our firm’s most significant challenges was figuring out how to always have what we needed, when we needed it. Before addressing this issues, we often would just “wing-it” as orders came in and hoped that everything worked out in the end. More often than not this process would fail and we failed to meet customer expectations as a result.
Eventually, we had to develop a documented system and appoint an individual to each part of the process. This meant that when a quote was approved there was an obvious next step and clear point of accountability to ensure that everything was ordered and received in the time required.
Create An On-boarding Template
If you are successfully marketing your business and closing new contracts then at some point these prospects will have to be on-boarded as customers. If your company has grown organically before this point, you likely do not have the capacity or processes in place to handle multiple on-boardings at once.
Before you begin executing on your growth strategy, be sure to have a plan on what to do if you are successful. We often put so much emphasis on the marketing and sales side of growth that we sometimes forget that we need to deliver services immediately after this process concludes. The last thing you want to do is get off on the wrong foot in a new customer relationship due to a mismanaged or sloppy on-boarding.
Have a transition plan documented and a template (or checklist) created so that you can easily manage this process internally. Appoint a member of your team responsible for seeing this process through so that there is no lapse in attention between your sales and services teams.
Devise Flexible Staffing Options
Before your Managed Services company crosses into seven figure revenue, you will often have issues with being over or understaffed. For example, you may have enough ticket volume on your service desk to warrant four employees but they are often overworked and the ticket queues keep growing. Hiring a fifth employee would help to reduce this stress, however this salary eats away at most of the profit of your contracts.
This balance is one that is difficult to manage until you grow to a certain size where the impact is not as great. The way that we decided to manage this issue was through developing a partnership with an outsourced Help Desk. This partner handled our ticket overflow as well as all low-level tickets for a specific group of customers that had very well-documented environments.
By doing this, we could manage our overflow effectively without worrying about constantly addressing our internal staffing volumes. As ticket volumes increased, we could outsource them on a ticket-by-ticket basis and did not have to rush to bring on new employees as there was a fluctuation. This worked extremely well and allowed us to make the right internal hires at the right time instead of hiring out of desperation.
Design Compensation Plans
Growth is exciting, but the rapid change that it requires is a lot to put your team through and can cause high levels of stress that impact morale. One way to offset this is through compensation plans for your employees, not just on your sales and marketing team, but on your service and administrative teams as well.
By the time that our company was acquired, every single employee was on some kind of compensation plan. This was not easy to implement, since various roles come with different responsibilities that sometimes do not have a clear overlap with the business’s revenue generation.
The best thing you can do is come up with a plan, implement it, and find out if it works. If you promise your employees an “eventual incentive” and then do not make it a priority to design the plan, they will inevitably be more frustrated than if you never offered it to begin with. On top of this, if you do implement a plan, be sure to honor it as often as promised regardless of the short term financial impact it may have.