MSP Guide To Vertical Market Success: Specializing In Vertical Markets

For managed service providers (MSPs), it’s more difficult than ever to differentiate services and build a viable business. Declining prices, increasing commoditization, and intensifying competition are all contributing to this new reality. For some MSPs, building a sustainable business in the face of these trends means taking on any new client whether or not they understand their business or have the skill set to deliver the services they need. This horizontal approach can quickly backfire. Without a deep understanding of a client’s business environment, it can be difficult to add unique value, which leads to service commoditization.

One remedy is to specialize in vertical markets. This approach helps you distinguish your business by becoming subject-matter experts. You get insight into the common needs and applications of customers in that industry, making it faster and more efficient to identify and solve problems. It also enables you to offer a more relevant mix of products and services that provide a complete solution, and create greater customer value. This leads to a more focused and relevant offering, stronger customer relationships, and ultimately to increased revenue and a more successful managed services business.

In this guide to vertical market success, we’ll look at:

• The advantages of specializing in vertical markets
• How focusing on specific vertical markets can fuel word of mouth advertising
• How to choose the right vertical market(s)

The Advantages of Focusing on Vertical Markets
In many businesses, specialization equals differentiation which equals competitive advantage. The IT services business is no different. By specializing in one or a select number of verticals, MSPs become experts and specialists rather than generalists. Generalists must sell either one-sizefits- all services – so no differentiation – or create new service packages for every customer, which isn’t scalable.

With deep industry knowledge, you begin to acquire valuable knowledge and expertise specific to the about the systems and processes of a type of business. This will help you create services that not only solve your customers’ technical issues, but that add value to your clients’ core business – making you difficult to displace. Your services also become repeatable, which lowers the cost of your sale, increases sales velocity, and improves your margins.

In fact, research conducted by ChannelE2E revealed interesting trends among their top 100 MSPs who have adopted a vertical market focus:

• Honorees generated a combined $277.3 million in vertical market annual recurring revenue (ARR) for 2017, up from $247.6 million in 2016.
• Honorees are managing a combined 574 million users.
• The most successful vertical market MSPs are zeroing in on healthcare and financial services, while manufacturing and legal sector activities are accelerating. [Source: Thrive]

Focusing on specific vertical markets also fuels word of mouth advertising. This is one of the most powerful ways to set your business apart from the competition. When you satisfy your customers’ needs, they will happily refer you to others in their business network. Word about your expertise will grow.

Word of mouth advertising is not only inexpensive, but one of the most effective ways to acquire new customers. You may even consider providing special offers to existing customers to encourage referrals. For example, you may offer a discount or a special rate for a service you know they need in return for a direct referral.

How to Choose the Right Vertical Market
Many Avast Business partners often choose to specialize in a select few vertical markets. They diversify not by appealing to several verticals, but through the number of IT services that are offered to a growing client base. This enables them to take advantage of deeper industry knowledge that meets the needs of specific types of customers, to offer a more relevant mix of products and services that provide a more complete solution, and create greater customer value.

This approach leads to a more focused and relevant offering, stronger customer relationships, and ultimately to increased revenue, and a more successful managed services business. However, when choosing a vertical to enter, you will want to consider certain factors:

1. How big is the vertical?
Is there an abundance of businesses in your area to make this worth your while?

2. Which verticals offer greater profit margins?
Some verticals are more lucrative than others simply because IT is essential to how they do business.

3. How competitive is the vertical?
Moving into any vertical means facing established competitors. You will need to refine your sales and marketing materials, track the effectiveness of sales activities, and monitor customer satisfaction levels as closely as possible.

4. What type of businesses are you really interested in or passionate about?
Targeting a vertical means understanding the specific challenges, type of customers, problems, suppliers, workflows, and processes of a specific type of business. How can IT help enable not just efficiency and productivity, but profitability?

5. Are you already servicing clients in a vertical?
You may already have a foothold in a vertical. Existing customers are typically the first place to start when deciding on a vertical and focusing on a niche where you can shine.

6. What specialized skills and expertise are required to be successful in the vertical?
Expertise and specialized skills are what enable you to confidently consult with decision makers and become a trusted advisor; the goal of all MSPs and IT service providers. Who on your staff has this expertise? Do you need to hire or train before you can go after a vertical?

Conclusion
While there are many verticals to consider, Avast Business partners have found great success targeting healthcare, education, and professional services, which includes legal, finance, and accounting. Businesses in these verticals are always evolving and changing and have ongoing IT requirements that you can address with a suite of Avast Business solutions.

Customers in vertical markets face similar problems and have similar needs. Taking a verticalized approach to your practice allows you to become a subject-matter expert, which creates credibility and trust and allows you to diagnose issues faster and more accurately. It also helps you streamline processes, offer a more relevant mix of products and services that provide a complete solution, and create greater customer value. There are numerous markets available to you, including education, automotive, finance, healthcare, construction, legal, and many others. The key is determining the one(s) that work best for your business, experience, and areas of interest.

About Avast Business
Avast Business provides easy-to-manage, enterprise-grade security and network management solutions for SMBs and IT service providers. Backed by the largest, most globally dispersed threat detection network, the Avast Business security portfolio makes securing, managing, and monitoring complex, ever-changing IT environments easy and affordable. Our unique combination of security and remote monitoring and management expertise means we can deliver integrated solutions that are faster, smarter, and more powerful. The result is superior protection that businesses can count on.