How To Build A Recession-Proof MSP Practice
By Chris Lietz, Data-Tech
With economic uncertainty continuing and a potential recession looming, MSPs should take the opportunity to tighten bonds with existing customers—while strategically preparing to rapidly adapt to whatever business environment the future holds. To be recession-proof is to be in touch with your practice. But because customers are navigating the same economic struggles, it also pays to be in touch with their business needs as well.
Here are four specific practices for recession-proofing your MSP:
Build A Recurring Revenue Model (RRM) With Flexible À La Carte Options, While Requiring Essential Services
A recession-proof practice starts with adopting a recurring revenue model (RRM) backed by an effective technology stack. Offer a flexible à la carte model that empowers businesses to select tools at price points they’re comfortable with. At the same time, be the expert and guide customers to adopt tools most crucial to their specific needs and industries—especially in functions like business continuity, security, and compliance.
As a recession unfolds, customers will feel a budget crunch. MSPs with rigid pricing options and poor rapport will immediately come off as non-receptive to customer needs, leaving the customer to assume their only option is to switch to a cheaper competitor. In contrast, à la carte flexibility and strong communication, and tailored advice will establish the MSP as a business’s essential ally in challenging times. Under the MSP’s expert guidance, a cash-strapped customer can remove or throttle down tooling costs in certain areas while still maintaining the most necessary services.
Customers in certain industries have intensive compliance obligations and need expert assistance in meeting the letter of the law when it comes to encryption, device security, and other essentially non-negotiable requirements. For example, we use BeachheadSecure for MSPs to provide data encryption, remote access control capable of deleting data from lost or stolen devices, and automated sentinel capabilities that take protective action in response to pre-determined risk conditions. This affordable, compliance-grade option works as a good starting point for customer conversations. At the same time, our à la carte menu also includes high-ticket solutions like Acronis for full disaster recovery and business continuity. We also offer a range of options within these functions: a customer might begin with simple local backup functionality, but then opt for off-site backup with hurricane season looming.
Hinging on my Florida-specific reference (where our MSP is based), it’s worth mentioning that cloud-managed solutions let MSPs reach more customers regardless of location, adding another layer of economic resilience. And the right tooling also can bolster MSPs’ customers with competitive differentiators in a recession, allowing them to, in turn, advertise capabilities that others can’t.
Proactively Right-Size Your Customers’ Technology
If you want a customer for life, say you’re going to save them money without taking anything away.
To achieve this, perform an account review to proactively right-size your customer’s services when the relationship hits the six-month mark, and then periodically after. Customers usually lack the savvy to know if their solutions are appropriate or overkill, and even MSPs never know exactly what a new customer is going to need on day one. Customer requirements often increase as they realize they have more devices than they thought, or as they adjust to encompass more of their business. Letting those costs go and shaving off a few dollars where possible earns goodwill and should particularly help MSPs retain customers during a recession. MSPs also can reward low-burden customers with discounts wherever appropriate. As an MSP, pick smart profit centers within your flexible stack and design your finances so you can afford to make customers feel good in ways that won’t hurt you financially.
Build Open Communication
During a recession, retaining customers will likely be easier than sourcing new ones. To keep the folks you’re already working with as sticky as possible, double down on reinforcing existing relationships such that neither you nor your customers will shy away from an honest recession conversation. Proactive rightsizing helps build that rapport. In reality, MSP customers are often afraid to say when they’re unhappy because the MSP has so much control over their technology. Customers with this fear mindset look for a replacement MSP instead of talking out issues.
Customers must be comfortable asking for price breaks or dropping products as they see fit. With a strong relationship, customers know their MSP cares about them and will be willing to work on a recession budget plan together. Honest and open conversation is your friend, now more than ever.
Address Burdensome Clients, And Set Customers Up For Success
Part of those open and honest customer conversations should address potential savings related to reducing their burden on your resources. From a help desk perspective, say your pricing is based on the expectation that customers call with issues twice a week. Customers that come in under that expectation are easy to award discounts. However, a customer responsible for multiple calls every day is a huge burden and affects your ability to service low-burden clients. Even a few such customers can put you in the poor house fast. This is why MSPs must know their business and their precise pricing cutoffs: giving too much away means losing money.
In our case, we provide access to free training and tools that reduce handholding and specifically train internal experts at customer businesses. This reduces our load while giving customers the comfort of a go-to expert on hand. For those customers that don’t effectively reduce their burden even with this assistance, increased prices are an appropriate incentive.
Turn A Recession Into An Advantage
MSPs that implement flexible technology stacks with accurate pricing and forge resilient customer relationships can know this: most of their competitors won’t. Therefore, MSPs can turn recession pressures to their advantage, keeping customers and gaining ground in the market even amid difficult conditions.
About The Author
Chris Lietz is the President and CEO at Data-Tech, a Florida-based provider of customized IT solutions.