Year-end focus of best-in-class MSPs: A blueprint for success
The end of the year is a crucial time for managed service providers (MSPs) to review their businesses and lay the groundwork for success in the coming year. The top performing MSPs, known as best-in-class providers, focus on five key areas during this time: reviewing and updating their value creation strategy, target customer profile, solution portfolio, and technology stack, as well as building their budget for the following year.
By optimizing these areas, they can deliver better quality for their customers and faster growth with higher profitability. In this blog, we’ll explore the five key focus areas for best-in-class MSPs and how you can leverage them for your own business.
1. Develop a five-year value creation strategy
The most successful MSPs know what they want their business to be worth in five years. Once they establish their five-year goals, they then work backwards to develop a detailed plan for how they will achieve these goals throughout the next five years. This plan includes things revenue growth, profitability goals, and beyond.
Once this plan is in place, each year these MSPs review and refine their value creation strategy based on their current year’s achievement of budget, changes in the market, and perhaps a different valuation goal. With a clear vision and roadmap in place, they are then able to make strategic and tactical decisions that will help ensure they achieve their desired valuation.
2. Focus on a narrow target customer profile
Top-performing MSPs exercise strong discipline in defining the ideal target customer profile (TCP) for their business model. Focusing on a narrow customer profile lets them standardize their solutions and services, operate more efficiently, deliver higher quality results to their customers, and allows them to charge higher prices.
The most important part of choosing a narrow enough target customer profile is the number of users at a customer’s site, and it can also include vertical, location, and other factors. What matters most is your ability to service all customers in that customer profile with the same tech—both yours and the tech stack deployed to your customers—processes, service level agreement (SLA), and employees at the MSP.
At the end of each year, best-in-class MSPs evaluate if they were successful selling to their desired customer profile or if they need to become more disciplined in the upcoming year. They’ll also decide if they need any adjustments to be made to their TCP to ensure the best fit with their offerings.
By having a well-defined TCP, they can tailor all aspects of their business to meet the unique needs of their ideal customers and target their sales and marketing efforts to finding only those prospects that fit the bill.
3. Sell a full, standardized solution offering
In addition, the best-in-class MSPs aim to have as many customers as possible using their most complete managed service offering. This “full meal deal” approach allows them to maximize revenue from each customer while minimizing the complexity of their operations. Because their solution portfolio is highly standardized, they can deliver consistent quality and efficiency.
Each year, they review the latest solutions on the market to determine if any changes need to be made to their managed service offerings to keep up with innovations and evolving customer demands.
4. Adhere to a standardized technology stack
Top MSPs also rely on a standardized technology stack, selecting a single solution for each part of their managed service offerings for each of their clients. This minimizes the number of technologies they must support, allowing them to achieve maximum efficiency and expertise with these technologies.
At the end of each year, these MSPs evaluate new solutions to determine if any should replace part of their existing tech stack to gain a competitive advantage or better meet customer needs. With consistency across their customer base, these MSPs can achieve the highest levels of quality, expertise, and efficiency.
5. Develop detailed annual budgets
Finally, best-in-class MSPs create comprehensive budgets each year to plan next year’s revenue, expenses, and, ultimately, profit. This plan, once adopted, is then used to adjust incentive compensation targets so staff and managers can ensure win-win targets.
While the discipline of budgeting can be challenging, it provides the visibility MSPs need to define key targets, track progress, and make data-driven business decisions. Before the new fiscal year starts, top-performing MSPs review how they executed against the previous year’s budget and use this to help build a new “aggressive but attainable” budget designed to maximize growth and profitability. With clear budgets in place, they have a roadmap for success in the coming year.
In summary, the top quartile MSPs focus on these five key areas at the end of each year to build a foundation for excellence and growth in the next year. By optimizing these areas of their business, they can achieve sustainable success and market leadership. Other MSPs can follow their lead by implementing these best practices and realizing the benefits of increased growth and higher profitability, leading to a long-term, thriving business.