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Every great MSP client has four things in common: they adopt your technology stack, they follow your direction on technology matters, they are on a fully managed support plan, and they are consistently profitable. Usually, you can tell during the sales process whether those four conditions are likely to be fulfilled by a particular prospect.

So which clients have prizewinner pumpkin potential for an MSP? Well, some of that depends on your company’s unique strengths, vertical penetration, and core values. Only you can define exactly what your giant pumpkin should look like. But every truly great MSP client has certain foundational qualities.

Prizewinning pumpkins adopt your technology stack.

The healthier an MSP’s pumpkin patch gets, the more their clients will start to look similar when it comes to technology. As MSPs progress to operational maturity, the amount of random “stuff” they support goes down to almost nothing. But if they aren’t overtly intentional about making it so, it will never happen. We’ve said it before and we’ll say it again: MSPs need repeatable processes. And they can’t build them around things that aren’t repeated.

MSPs should decide on their preferred suite of hardware and software products, and they should push hard for those products to be THE standard for their clients. Your stack should be the right fit for your best clients. Then you can use that stack to weed out which other clients don’t belong in your pumpkin patch—the ones who won’t accept it.

New clients should get most of your stack when they sign on. They get your security tools. They get your back-end technologies (email system, firewall, WAPs, switches, access points, phone system, etc.). They get your backup system.

The more that MSPs allow customization to their stack, the more difficult and expensive the “exception clients” will be to support. This leads to the need to employ more high-level engineers. On average, a Level 2 resource costs 30% less than a Level 3 resource, and a Level 1 resource costs 30% less than a Level 2 resource. The most profitable MSPs are “bottom-heavy.” A disproportionate amount of their work can be done by lower-level resources. This is primarily due to mature processes and a standardized client technology stack. 

Lack of technology standardization also leads to clients who are less happy, because their systems break more and it takes longer to fix them. Some items may take a refresh cycle to get into place, but that should be within sight and discussed with the client before they are taken on.

Prizewinning pumpkins follow your direction on technology matters.

MSPs work with clients to identify their business needs, and then they prescribe a technology strategy, which it is their job to execute. Can you imagine someone hiring a top-notch lawyer and then deciding to represent themselves in a high-stakes trial? There’s a saying in the legal world: “The man who represents himself has a fool for a client.”

And how can a technology environment ever match your standard if the client is the one making the calls?

Some clients consider themselves to be the technology experts, and they just want to hire somebody to clean up when they make a mess. These clients will most likely need to be weeded out of the pumpkin patch over time. Their hopes for ever making the A List are dim.

Prizewinning pumpkins are on a fully managed support plan.

Flat-fee, all-in managed support plans are not just the bread and butter of MSPs, they are the water and oxygen too. They serve as the stabilizing foundation for the overwhelming majority of healthy MSPs. These packages are what allow you to pile up monthly recurring revenue (MRR) and load up that piggy bank of business value that you will hopefully break open one day.

These days, most MSPs include some technology-platform elements with their support bundles, whether they realize it or not. If part of what you are selling with your standard package is security tools, then you are including some of their platform, even if that fact never dawned on you. And that is great, as long as your offering is priced correctly! It enables you to get your stack in place more easily and more consistently, and it allows you to charge more because you are providing more.

These clients aren’t just getting a help desk with escalation engineers. They are getting a carefully curated security stack, with experts who know it inside out and are able to set it up and support it. They’re not just paying you to come running when things go wrong; they are paying extra money to ensure things go wrong much less often.

MSPs must recognize that they are in control when it comes to what and how they sell. An MSP will never have fully managed clients unless that is the service they sell them. If all they have is a bunch of break/fix, swapping time for money, “We’ll call you when we need you” clients, it’s no coincidence. It just so happens that is the service they sold those clients.

The great news is that MSPs can stop doing that—like, today. If most sales to date have been some form of swapping time for money, all they need to do to end that trend is to come to the table with different service offerings when they get opportunities. Ultimately, MSPs should strive to get to the point where the only support offering they sell is all-in managed services with some platform bundled in.

Prizewinning pumpkins are consistently profitable for you.

A lot of this comes down to not over-compromising on technology standardization, selling the right package of inclusive support services and platform, and pricing that package correctly. High-revenue, low-profit clients will hamstring an MSP for as long as they exist (see our previous blog on Killer Whales).

Do you know what being hamstrung actually means? Back in the day, after defeating an opposing army, the victorious forces would sever one leg tendon on every horse the opposing army had. They did this to ensure that the enemy army would literally be crippled indefinitely and never pose them a threat again. It was a brutal practice.

That’s what happens when MSPs allow unprofitable clients into their pumpkin patch. Profit gives MSPs flexibility to hire, get the right tools in place, and  outsource key company functions. Without healthy profits, MSP owners will continually struggle to get off the hamster wheel.

Many of us (yes, us—not just you) have fallen into the trap of thinking, But it’s just so much revenue. That revenue may look mighty sexy at your top line of the P&L, but if not much of it is making it to the bottom line, that’s not good for your business. Lots of unprofitable revenue can indicate that a lot of time and energy is being invested in a pumpkin that is a waste of time.

Many MSPs base their pricing on what their local competitors charge. This is a common mistake. MSPs should price their offerings according to what makes them a healthy profit. Period. And that means they must know their costs. It’s the simplest business calculation out there: Revenue minus costs equals profit. Every business on the planet of any type should be using that formula, yet many MSPs don’t because calculating costs takes a little work in a service business. Some owners would rather fudge around with some interesting technical matter…even as they are losing their house.

“But we’ll lose deals if we price that way!” Yes…you might. Usually, you’ll lose the ones you should lose. Winning deals you will lose money on is, well, pretty dumb. Actually, you didn’t even ‘win’ that deal. You sold some business, but you are going to lose on that deal. It’s better to win fewer deals and have all the ones that you win be profitable relationships with two-way trust involved. Leave bottom-feeder clients to bottom-feeder competitors.

Right now, you may be thinking, I think I might BE that bottom-feeder competitor. Not anymore. Time for a mindset shift. You’re learning how to grow a giant pumpkin, and you absolutely can do it.

The Sales Litmus Test

One of the most important things to note about the four traits above is that they can usually be identified in the sales stage. So whether it’s the owner doing the sales for the MSP or someone else, these questions must be answered correctly before clients are taken on.

As MSPs mature and their pumpkin starts to get fat and hefty, they should really want to go four-for-four on these questions every time. If not, with rare exception, it’s time to move along. MSPs can’t focus on great clients if their collective time and energy is focused on mediocre-to-crappy ones.

Adapted from Chapter 5 of The Pumpkin Plan for Managed Service Providers by Dave Cava and Shawn P. Walsh. Read a chapter for free here: https://encorestrategic.io/#form