Anyone in the MSP game knows there are two, three and often four tiers of satisfaction that must be reached to create value for SMB customers and, of course, recurring revenue for IT service providers. But you must know the proper pitch and be aware of the audience you're pitching.
The key component for the IT Service provider is the customer.
For the SMB customer, who will often know very little about technology, the sales and service pitch should be geared toward what will make their business operation better, as in:
- Operational -- What does technology do to increase productivity, track end customer buying habits and customer relationship management aims?
- Infrastructure -- What is needed? One computer connected to a cash register and POS systems or a non-brick and mortar e-commerce operation that requires lots of processing power and datacenters and server farms?
Those are two basic considerations to include in any pitch to existing or potential SMB customers.
The next level, going backwards up the food chain, or forward depending on your perspective is pitching the channel or taking pitches from technology partners that will help you as an IT service company, in turn make better pitches to customers.
Go back and read the customer section once more and come back to this if you need to:
- Scalability -- A channel partner must think about how the hottest new product or service from the big boys, Microsoft, Oracle, IBM, HP, Dell, etc., will translate in scale for a small business. Again, this depends on the end customer's processing environment.
Some may just need a laptop and a WiFi connection, while others may need complex accounting software or mini-ERP (enterprise resource planning) infrastructure or software.
- Geographic expansion (via SaaS) -- A channel partner or potential channel partner must know their limits in order to exceed their limits if that makes any sense. More than ever SaaS technology, web-borne applications and on-demand tech services can help a company in Colorado reach clients in Germany or Mumbai, India.
IT Service firms and channel partners, VARs and MSPs alike must all think globally and act locally and realize that the days of selling software licenses and one-off hardware installations, while still very prevalent, is not long for the newer malleable business processing environments that we will see in the near and distant future.
All of this out-of-the-box thinking should begin with and be included in your pitch to customers, as well as considered, when one of the big technology partners is pitching you on a partnership.
Posted by Jabulani Leffall on October 18, 20100 comments
In early October of 2010,
Coreconnex's Frank Coker and
Service Leadership Inc.'s Paul Dippell turned up at the Tigerpaw User Conference in Dallas and raised some eyebrows with some pretty hefty challenges to MSPs on how to manage their finances from revenue to profit to reinvestment.
Here are two of their most salient points. Accordingly MSPs should do the math.
The Formula: Monthly Billables/Payroll Expenses = good finance.
Take your monthly billable service revenue, divide it by your payroll and if you don't have a multiple of at least 2.5, you need to drum up more business, adjust pricing or streamline service level agreements. According to Paul Dippell, a good number of service providers, if they plugged in this formula are or would be at about a 1.9 or 2.0, which is essentially breaking even because benefits, training, marketing and service management aren't even in this formula.
The Formula: Price - cost = the difference between success and mediocrity.
Billable revenue, should translate to profit after all the bills are paid, especially if, as is the case with most IT Service shops, the cash position or line of credit for continuing operations is nominal or only for emergency use.
This brings us to price, which can be determined by local market for your products and services of course minus the cost determined by vendor materials: Then you take the amount of man hours it would take to deploy the services and subtract the cost of the hourly rate not to the customer, but to you for your manpower. If you're charging the customer a flat fee, say once a month, all of those internal costs should be rolled into what you charge the end customer.
You're not passing along the costs, but you're being realistic based on how many end clients you service.
If you're discouraged by these "word problems," you should remember as a small IT service provider, you're not Infosys and you should only compare your financial performance to competitors who are in the same vertical or have similar business models. At some point though, if you'd like to grow to be an Infosys or similar company, it pays, literally and figuratively, to do the math.
Posted by Jabulani Leffall on October 18, 20100 comments