By The Business Solutions Network
After years of suffering through high-stress, break-fix sales, a VAR transitions into managed services and is now projecting double-digit revenue growth this year.
Former break-fix VAR Quinn Denny, founder and CEO of High Plains Computer Services, says, “Constant customer emergencies and employee burnout were two big motivators for migrating to the managed services business model.”
Photo By K.C. Keefer
Do you want to grow?” This question may sound like a no-brainer to many business owners, but it is a very real and scary consideration for breakfix VARs who know that with more customers comes more stress and other problems. Instead of striving for more, a good number of VARs decide how many customers/ projects are needed to finance their lifestyles, and they try to maintain that status.
Quinn Denny found himself in this dilemma a few years ago. After starting High Plains Computer Services (HPCS) as a breakfix IT solutions provider in 2008, he quickly amassed 100 clients from a variety of industries. Denny comes from a family of IT professionals and was raised on the idea that, “You make money when your customers have emergencies.” Being a small business owner selling IT services, Denny saw this principle at work nearly every day, with customer problems ranging from annoying computer freeze-ups to disastrous server crashes. “There was a high level of recurring stress as a result of unexpected emergencies and the demands those emergencies placed on my time,” quips Denny. After several years of putting out IT fires, however, it was getting harder to keep a good sense of humor about his work. He knew he needed to make some big changes to his business, but the day-to-day demands of work made it nearly impossible. Following the departure of a key team member from stress-related causes, Denny knew that making a change was now a top priority.
Part Ways With Profit-Draining Customers
In his quest for change, one of the first big steps entailed reviewing his customer base and assessing the profitability — and likability — of each customer. Denny then determined that he was no longer going to work with customers that were below a certain threshold. “Although I did look at what each customer had spent with us during the previous 12 months, the bigger factor I took into consideration was the relationship we had developed with each company,” he says. “One of the major reasons we chose to stop working with some companies was that they only viewed IT [i.e., HPCS] as a necessary evil. We kept our prompt payers, those who valued and invested in their IT infrastructure at reasonable intervals.” he says. “At the end of the assessment, I decided to part ways with 60 percent of my customers. A few business associates told me I was crazy to turn away all that potential revenue. But I’ve learned that short-term financial gains aren’t worth it if you’re constantly stressed out and unhappy in your work.”
Denny contacted customers HPCS decided to stop working with and explained that his company business model was changing, which included downsizing. He offered to help each customer look for a replacement IT provider. Several customers took him up on the offer, and much of 2014 and early 2015 were spent helping these clients transition to new IT providers by providing the new providers with customers’ network credentials and other documentation. Even though this period wasn’t marked by growth for HPCS, Denny says he was able to maintain his revenue levels by working more closely with customers who valued his company’s expertise. Equally important, he was able to free up time each week and investigate managed services.
Selecting And Selling Managed Services
Denny spent much of his extra time investigating the managed services business model. “I read anything managed services related I came across and asked questions of other managed services vendors to learn about their experiences,” he says. “I eventually selected Autotask as my PSA [professional services automation] provider, Carbonite for BDR [backup and disaster recovery], AVG Managed Workplace for RMM [remote monitoring and management], and AVG Cloudcare for antivirus and Web security. One of the key factors behind my selection decisions was that I wanted to use cloud-based tools to eliminate the need to manage applications in-house. Additionally, our PSA needed to integrate well with our RMM, which Autotask and AVG Managed Workplace do.” (Check out the sidebar below to learn more about why HPCS uses Carbonite.)
One thing MSPs quickly discover with selling managed services is that it is not a Field of Dreams sales opportunity (i.e., “If you build it, they will come.”) Just the opposite, it requires sales skills to convince customers that previously only paid when there was an IT problem to now pay every month. To acquire this skill, Denny says he put himself in his customers’ position and asked himself which kinds of managed services could help them the most. “Since 80 percent of my revenue comes from the dental market, I focused on these customers’ needs first,” he says. “Even small dental practices rely heavily on computers and servers to run their businesses, and they have a very low tolerance for downtime. For example, dentists store X-ray images and patient notes in databases that are accessed by practice management and imaging applications. Dental practices need to access this information to schedule patients, to make decisions about medical procedures, and to do their billing. When these applications become unavailable, appointments have to be cancelled, billing is delayed, and practices incur thousands of dollars an hour in lost revenue. Additionally, dental practices have to comply with HIPAA and PCI regulations, so data security is another top priority. The value of managed services to these customers is that they can pay a company like ours to minimize downtime and keep their data secure.”
With the above scenario in mind, HPCS put together a services offering that addressed three key areas for dental practices: business continuity, data protection, and security. “Our bundled offering includes remote monitoring and management of computers and servers, patch management, automated local and cloud backup, plus multiple layers of security,” says Denny.
“At the end of the assessment, I decided to part ways with 60 percent of my customers.”
Quinn Denny, founder and CEO, High Plains Computer Services
Denny says the key to winning over customers to this new business model is focusing on the business benefits to the client rather than talking about the specific technologies at play. For example, a key component of HPCS’ sales presentation entails walking clients through various downtime scenarios and contrasting the time it takes to get back up and running in a break-fix situation (days) versus a managed services program (hours/minutes). “We let our prospect know we are the most economic ‘IT employee’ a customer will ever hire,” he says. “For us, managed services is more than monitoring, patching, and recommending remediation to problems before they are critical in nature. It’s about providing an entire service experience to the customer, one that reduces ours and the customer’s stress while boosting productivity. It’s the difference between reacting and responding.” To make the decision even easier for his customers, Denny implemented several additional incentives, including:
- Reduced labor fees. In addition to paying a $100 sameday service fee, HPCS’ break-fix customers pay $120 per-hour labor rate and must prepay for 20 hours of labor before earning a price break. Managed services customers, on the other hand, pay no same-day service fee, plus they pay $100 per hour for HPCS labor that falls outside their managed services contract, such as setting up a new computer or phone system. Additionally, managed services customers can reduce their labor costs to $90 per hour by pre-purchasing a minimum block of 10 hours.
- Extended service hours. HPCS is available for breakfix customers between the hours of 8 a.m. and 5 p.m. Managed services customer help desk support is available 7 a.m. to 10 p.m. seven days a week, plus 24/7/365 monitoring.
- Business consulting. Included with HPCS’ managed services package is complimentary quarterly business consulting, which the MSP uses to discuss clients’ business needs and to make IT recommendations.
- Quicker response times. If HPCS has multiple customers requesting immediate support simultaneously, managed services customers always take precedence over break-fix customers and receive a call back within 15 minutes of contacting the MSP and service within two hours or sooner.
Find New Ways To Add Value To Your Managed Services
Within six months of formally rolling out his managed services program, Denny says 10 percent of his customers have made the switch, and he anticipates another 20 to 30 percent signing up before the end of the year. “The combination of industry regulations and increased cyber attacks is making IT security a top need for many businesses,” says Denny. “In fact, dental practices now find themselves in the crosshairs of HIPAA, PCI, cyber security threats, and the Affordable Care Act. In the next couple of months, we’re going to announce a new security scanning service, which will become part of our managed services program. I envision performing security audits and HIPAA compliance audits for our customers quarterly and not only helping them implement the latest security solutions, but also assisting them with the development of security policies and procedures.”
As Denny looks back on his company’s business transition over the past couple of years, he admits it’s been a difficult journey, but he’s finally starting to see the fruit of his labors this year. “It took a while to get our customer base situated and to develop a foundation for selling managed services, but it’s getting exciting now that we have these key pieces in place,” he says. “Our revenue is starting to increase, which is encouraging, and now we’re in a position to grow without placing a heavy burden on our staff.”