By Derek Marin, Simple Selling
The company's founder usually handles the initial setup of an MSP. The founder is out there finding new customers and making everything happen. No one understands the SMB’s IT pains better, and besides, there’s not usually a lot of extra money to put into marketing.
Eventually, everything starts to come together, and an incredible thing happens: the MSP goes from surviving to thriving! The entrepreneur evolves into the President of a company, the MSP has a team of talented people, the company has a real client base, and maybe the “office” isn’t just a room at home anymore.
This is when some Presidents start to think differently about their role; it’s a mindset shift that sparks the MSP toward a path they’ve never been down before.
The purpose of this MSP Sales Journey Series is to help MSP Presidents effectively navigate their new path and mindset. Before embarking on your new journey, there are several issues and questions that may not have been thought about before and that can help the MSP have greater odds with proactive sales.
Our Journey Begins With A Simple But Often Overlooked First Step: Setting Sales Goals
Why Starting With Sales Goals Is Important
We’ll start with an example that parallels the sales growth journey you are about to embark on.
Sales Planning For An MSP Is Not So Different From Marathon Planning For A Serious Runner
A well-executed marathon depends on how the runner defines “well-executed.” Similarly, a well-executed sales plan depends on how the MSP defines “well-executed.”
For example, let’s consider my wife – the marathoner of our family.
Her main goal is to run a marathon in each of the 50 U.S. states. Meanwhile, her secondary goal is to run each at a comfortable and respectable pace of 3:40 or less.
Since her goals are clear, she knows that she must run 45-60 miles every week year-round. Some of those miles faster than others, and sometimes she cross-trains on a spinning bike instead. In her experience, that level of weekly training enables her to be successful.
For me? My goal was completely different from hers.
I wanted to run just one half-marathon and a “good race” meant running faster than my wife’s marathon pace! Therefore, to hit my goals, I had to train differently than she did. For one, I had to run fewer miles than her each week. Since I didn’t desire or have the time to run every day, my only option was to increase the intensity of my training runs.
Sharing our goals ahead of time forced us to be accountable, which resulted in more discipline and good results. Recently, in the Hilo Half-Marathon in Hawaii, I finished in 10th place overall at an average 7:30 mile pace, which was different from my wife’s 8:21 mile pace. She came in 3rd overall for women in the full marathon and under her 3:40 target!
The bottom line is that having clear goals is not just a tool for empowerment, it’s an accountability and discipline tool. It also forces us to break our goals into smaller chunks that we can focus on and track.
The Process Of Setting Sales Goals
Far too many MSPs jump into marriage with an outsourcing lead generation firm or a new hire without a clear understanding of what the MSP expects in terms of outcomes.
Here are some questions to ask yourself to help decide on your ultimate goals:
1. How much annual revenue growth do you want for the next 3 years?
The bottom line is how much you see your company ultimately making. Your goals are completely your own, and you can play with these figures. However, consider how growth could impact everything in business and life.
Think about how much you want to grow within the next 3 years. For example, is it possible to grow your MRR by $1 million or maybe even $2 million?
Your next step is to reverse engineer your revenue into metrics that lead generation professionals can target.
2. How much of your sales growth should come from new vs existing clients?
How much of your growth is possible with your current clients? Once you figure that out, you can get a good idea of how important new clients are to your overall goals.
For example, if your growth goal is $1 million in 3 years, and you can grow by $250K with your current clients, then you know that you need to make up 75% or $750K with new clients.
After you determine this, you’ll need to figure out how many more clients you might need to reach your growth goals.
3. How many new clients are necessary to reach your sales goal?
How many new clients do you need to make up the difference between the growth your current clients can provide and your growth goal?
As an example, if your new clients will provide an additional $750,000, you will need to divide by the average annual revenue per new client. Let’s assume that a new client brings in $30,000 in annual revenue.
$750,000 ÷ $30,000 = 25 new clients that you will need to achieve your goal in 3 years.
4. How many opportunities do you need to reach your goal?
Determining how many opportunities you need is essential to reaching your sales growth goals.
What’s an Opportunity? Typically, they’re sales-qualified leads who you’re able to talk to in person, over the phone, or by video call. Being sales-qualified means they would make a good potential client based on their industry, size, and location.
Determining how many Opportunities you will need may require thinking back to the process of getting your first clients.
Your goal is to build a sales funnel for your three-year sales goal.
First, you need to estimate the average closed-won ratio. Your closed-won ratio is the percentage of opportunities that convert into a new customer.
Most people assume that closing a warm referral is the same as closing Opportunities regardless of their source.
It’s not the same! A referral is a HOT Opportunity. It’s so much easier to close them because HOT Opportunities are already feeling acute IT pain, and someone they trust referred you.
Matching close rates for referrals and close rates for leads sourced from marketing is not the same, so don’t make that mistake! Instead, assume that the close rate for sourced leads will be lower than hot opportunities from referrals.
For example, if you’re thinking that the closed-won ratio for warm referrals is 25% then maybe assume a closed-won of 15% for leads that didn’t come from someone you know.
Therefore, here’s how you can use that 15% conversion to arrive at how many Opportunities you need.
25 new clients ÷ 15% close rate = Number of sales-qualified leads you would need!
This works out to 166.66, or let’s just keep this simple to put it at 167 over the next three years.
What Are The Next Steps Of The Journey?
When you have clear overall goals, you can reverse engineer them into smaller, more manageable goals that you can aim for and track throughout the year. When your goals align with reality, they can turn your hopes and dreams into a tangible reality.
Now that you have clearly-defined goals, it’s important to think more deeply about the next step. How do you plan to progress cold SMB prospects from the “Opportunity” stage to the final buying stage where they’ve become a steady client? Thinking about the decision-making process from the prospective client’s point of view can allow you to uncover different ways your MSP could increase your closed-won conversion rate.
About The Author
Derek Marin is the founder of Simple Selling, a sales and marketing agency for MSPs.