From Break/Fix to MSP: 5 Steps to Build Your Retainer Business
The fast-paced world of technology is constantly changing, and how you provide technical services to your clients is no exception. The shift from traditional break/fix consulting projects to a managed services model has some companies scrambling to keep up.
Making that transition may be easier than you might think. These five steps will get you there.
1. Move from project-based consulting to recurring revenue
Imagine a predictable, recurring amount of monthly revenue for your services.
It’s not impossible. Traditionally, companies had one of two focuses: selling big, long-term projects or packaging buckets of hours. Both involve a near constant sales hustle and risks for sales and delivery. Creating a service backlog means you are always selling while identifying your client’s needs. A project-based approach means that you risk constantly balancing scope creep with customer satisfaction. And defining scope may take a considerable amount of non-billable time.
Moving to a recurring services model provides predictable operations for the client and recurring revenue for you. It’s a win-win scenario. It means executing work that you both agree on within a service-level agreement (SLA). The risk is that you often discount your services while finding a way to differentiate those services from your competitors.
Strong recurring services means maintaining your client relationships and executing strong SLAs. SLAs benefit both you and the client, as they guide scope of work and pricing. Getting this right will set you up to move into a values-based service—or a true Managed Service Provider (MSP) model.
But what about those big, long-term projects that your clients still need? Don’t worry, we’ll address that in Step 4.
2. Recurring revenue means moving from a capital expense to an operating expense for your client.
Many products and services are delivered on a subscription model today. You experience it in your personal life with music, movies, TV, and food delivery. Corporate budgeting cycles are no different. In the past, organizations created a yearly capital budget for their technical needs and spent out of it over the course of 12 months. Today, with a boom in managed services and subscriptions, many companies have moved to using an operating budget instead, closely managing subscription services month-to-month.
Many organizations no longer have easy access to the lump sums of money that large IT projects require. The predictable pricing for managed services just makes sense for them. When you’re selling services to your clients, it’s important to understand how their budgeting cycles work and where your service model can fit. You may be surprised at how many of your clients would be more comfortable with moving your services to an operating expense.
3. Price your services as a commodity
A good MSP bundles both services and software together, thus commoditizing their offerings. This will set up your pricing model to transition to a value-based commodity in the final step of evolution to an MSP. By pricing your services as a commodity, you can focus your internal efforts on people, processes, and technology—essentially using fewer of your people to deliver more work.
Determine the best unit of measure for your core services and create a base price for it. Base the price on the effort to maintain a single unit. Once you have these prices, you can determine your service levels and craft beneficial SLAs.
- Your team can monitor and maintain units at scale and the pricing should reflect this.
- Charge appropriately for escalated SLAs for emergencies or requested additional work.
4. Craft client success
To begin your relationship with a new client, consider providing a complimentary assessment or health check. This initial assessment captures baselines to work from, generates roadmaps for the scope of work, and identifies the KPIs to monitor for each client. With the scope of work determined, put an SLA in place that is beneficial to both you and the client.
Your client may still require a major project. Leverage the roadmap to present non-maintenance projects as your relationship with the client grows.
It is essential to report back to your client regularly. With a break/fix business model, clients received a bill and report when something went wrong. In an MSP model, out of sight means out of mind. Some clients may not see the continued value you’re providing without regular communication. Regular reporting reminds your clients of the benefit they receive from their partnership with you.
5. Build your bench
Continue to build your portfolio of products and services as your organization grows. Consider offering add-on services such as consulting hours, project planning, and hardware/software analysis to provide additional value to your clients. Keep training up-to-date, develop best practices, and strive to put the long-term success of your clients first.
SentryOne provides more than just a best-in-class product to help you effectively monitor your clients’ environments. We also place a team of experts in your corner to provide training and support.
An effective MSP model is often a win-win for both you and your clients. Clients receive peace of mind and predictable monthly expenses; you experience happy clients and predictable monthly revenue.
In need of a best-in-class SQL Server monitoring tool to add to your MSP toolbox? Learn more about the SentryOne MSP Partner Program.
Nick (@nicharsh) is the Senior Vice President of Strategic Alliances and Channels for SentryOne and is responsible for leading the SentryOne Global Partner Network. Prior to joining SentryOne, Nick was Vice President of National & Strategic Accounts for Dictaphone - Healthcare Division. Previous experience includes sales management positions with Computer Associates, NEC Computer USA, Tegra Varityper, and Heath/Zenith Computer Systems. Nick holds a BA degree in Economics from University of Dayton in Dayton, OH.