MSP sales, business plan key to 2021 success

MSP sales strategy and business planning will be particularly important entering 2021, with the coming year offering the potential for expansion along with lingering economic hazards.

Speaker at this week's IT Nation Connect conference, a digital event hosted by ConnectWise, encouraged service providers to take extra care in preparing for the year ahead. Gary Pica, president at TruMethods, an MSP training and software organization, suggested that the 11-year period of unprecedented economic expansion preceding the pandemic was more forgiving of miscalculations than the current business environment.

"Our total addressable market [had] been growing so significantly that you [could] make a lot of mistakes and still have success," Pica said, noting that a rising tide floats all ships.

But with the market entering a lower tide, MSPs might need to make some adjustments to their plans for 2021, he added.

"Your sales and business plan for 2021 will be the most important one you probably had to do in your company career, because there is more risk and there's more opportunity," Pica said. "So many things have changed in such a short period of time. That is when planning is more important."

New opportunities that came about or were accelerated because of the pandemic should inspire MSPs to grow their business with current customers and add new logos. But before planning to expand, MSPs should assess their situations from a business and MSP sales standpoint. Specifically, MSPs should consider their cash and credit position, accounts payable and accounts receivable, and the net profit they currently generate.

Gross margin plays a critical role in having the funds to invest in bringing new services to market, noted Paul Dippell, CEO at Service Leadership Inc., a consulting firm based in Plano, Texas, that provides a solution provider financial performance benchmark. He called gross margin the "oxygen" that sustains the life of a company.

He said MSPs need to generate services revenue 2.5 times greater than their service wages -- payroll times the number of service-providing employees. A multiple of service wages of 2.5 should put a company in a position to generate gross margin, and, after subtracting sales, general and administrative (SG&A) expenses, net profit sufficient to reinvest in the organization.

Chris Peterson, principal at Vector Firm, a sales training and consulting company, provided a few ideas for how MSPs might invest in 2021 business development. He suggested creating a simple package of services or technologies to spark discussions with customers. The packages should be repeatable, while allowing room to tailor the offerings to the customer's needs.

Peterson, speaking on business development at IT Nation Connect, also recommended updating top customers on new offerings and services. He said many customers might not know, or have forgotten, about the latest services added to the portfolio. If a service provider hasn't added any new services recently, the company should still reminds its top-tier customers about what it offers.

In addition, he said businesses should enter 2021 with an aggressive, short-term promotion. The idea is to get business flowing at the beginning of a year in which organizations hope to return to growth. "People are really excited to move into 2021," Peterson said.