Starting, building, growing and eventually selling an MSP business is tough. The MSP Machine method is a foundation and framework to guide MSP & IT business owners through the core areas of focus to add value to their business.
Once each segment of the machine is implemented and developed, it will act as a flywheel to support the business with purpose, efficiency, and growth.
Build a business that people want to buy, and you want to keep! (until your ready to exit for maximum value)
Follow the Machine Method steps to take your MSP to the next level…
What are the main steps of the MSP Machine Method?
- CLIENT PERSONA
- VALUE PROPOSITION
- TEAM & PARTNERSHIPS
- TECH STACK
What benefits can you achieve by implementing the MSP Machine method?
Having projected, predictable or constant growth is key for any business, not just MSP’s. The Machine Method when fully implemented will create a more efficient business – this will lead to a more productive team and partners, which will ultimately lead to happier customers. This fly wheel of continual improvements, more efficient staff, and happy customers all fuel growth.
Having a business that is ‘transferable’ is one of the key components when valuing a business. If your MSP cannot run without you then you don’t have a business, you have a job. The Machine Method will give you the areas of focus to remove you from working IN the business and move you to working ON the business. This will allow the business to function and grow under new management, and new ownership if the time comes to exit (and allows you to work on the stuff that is fun to you!).
Risks come in many different forms from economic storms, world events, competition, staff retention, the list goes on – having a business that can ride out most of these is a very valuable asset. Implementing the Machine method gives you the tools and processes to build a ‘bullet proof’ business to weather these threats when they arise.
Adds business value
Whether you are looking to grow your MSP as a long-term asset, or plan for an exit its important you maximise the value where you can. Implementing the core areas of the Machine Method will support ‘value add’ through growth and bolster key areas of the business that potential future acquirers will review during the due diligence.
Take these x10 Steps to implement the MSP Machine Method:
STEP 1 – WHY
Most if not all successful business leaders have a WHY. Whether it’s the founders WHY, or a collective WHY from the team – A strong WHY gives teams and the business a purpose, focus and burning drive to success.
You may already know WHY you do what you do, and if so that’s great! You’re in a great position to build the Machine Method on top of this passion and purpose. If you don’t yet have a clear WHY or purpose or want to define it more we recommend you read START WITH WHY by Simon Sinek. Simon has a great process for taking people through their WHY discovery.
“Start with Why shows that the leaders who’ve had the greatest influence in the world all think, act, and communicate the same way—and it’s the opposite of what everyone else does. Sinek calls this powerful idea The Golden Circle, and it provides a framework upon which organizations can be built, movements can be led, and people can be inspired. And it all starts with WHY.”
You can learn more about Simon and his process here: Start with Why – Simon Sinek
STEP 2 – MISSION
A successful business needs a defined mission that the team and partners can rally around to support the journey. The mission will be aligned to helping you achieve your WHY. Missions can come in all shapes and sizes, and often you will need shorter goals and smaller missions to build up to your long-term mission.
Some examples of your MSP’s mission could be:
- Help X number of customers in X sector within the next X years
- Achieve a turnover of X with a GM of X within X years
- Become the most recommended MSP in your sector within the next 12 months
- Get the business ready for an X funding round in X timeframe.
- Get the business ready within X years for an X with a valuation of X.
- Get your MSP to X so that it allows you to focus on supporting X
Every MSP’s WHY and mission will be different and come in all different forms – But the clearer the WHY and mission, the easier you will find it to get buy in from teams, partners and customers to move closer to your goals.
STEP 3 – CUSTOMER PERSONA
Defining your ideal customer persona(s) is critical for all businesses, not just MSP’s.
Many businesses when they build a service offering take it to the masses (any customer, company or industry). The problem with this is:
- You are up against more competition, talking about the same services, using the same messaging – This leads to a race to the bottom for prices.
- You dilute your value proposition – You lose what makes your MSP special – your messaging is lost as you cannot reference similar customers or industries and you have no USP’s.
Having a clearly defined customer persona(s) will allow your messaging to stand our and resonate with the customers you WANT to work with.
Start by giving your ideal customers a made-up name – and document what attributes this customer would have.
A tip to working out who you would like to work with – look at your existing customers – Which ones do you like working with? Which ones are less noisy? Which ones appreciate and want to leverage technology? Which ones want to invest in their IT?
Some attributes for defining your ideal customer persona could be:
- What industries do they work in?
- What is their job title?
- What is their rough age groups?
- What are their interests?
- Where do they hang out online? Peer groups / forums / memberships etc…
- What are their common challenges and pain points? (Can you resolve these issues?)
STEP 4 – NICHE
Similar to defining your ideal customer persona, its important to establish and define a niche or niches that your MSP will focus its attention on in terms of marketing, messaging and looking to become the leading MSP in those spaces.
By not having a niche or a specialism you will be casting your net wide and far – This will increase the amount of competition you come up against, dilute your messaging and again lead to a race to the bottom in terms of pricing.
Having a defined customer persona and defined niche will amplify your messaging, improve your conversation rate and boost growth.
It will lead to a happy team, happier customers, and a healthier business.
Examples of areas you could focus on for a niche:
- Become the leading MSP within an industry
- Become the leading MSP with X regions
- Become the leading MSP with X specialist skillsets or specialist services
You can also combine areas to double down and focus the niche further – For example – ‘Become the leading MSP within X industry offering X specialist services’.
STEP 5 – VALUE PROPOSITION
Once you have defined your ideal customer persona and your ideal niche that you want to focus your efforts on – you need to define and build what VALUE you can bring to these customers.
You need to identify the common challenges, pain points and objectives of your desired customer persona and community within your niche.
You can add value and support these challenges in many ways – it could be a pool of information, training, services, support, managing etc… – What services can your team and MSP offer this pool of customers that is going to value?.
You need a core offer or flagship service that is going to support your customer persona in achieving their objectives – Many MSP’s have their Managed Service agreements where a customer pays a fixed monthly rate, and they receive A, B and C included with all the bells and whistles.
You need to nail this offer down, ensuring you are showing your ideal customers value whilst maintaining strong pricing (having a defined service for a specific customer and niche will allow you to strengthen your messaging and offer, and demand higher rates).
Once you have a defined core offer, product or service – How can you show value to your ideal customers within your defined niche upfront before they enquire or sign up to your core offer?
You need to build out free content, help guides, HOW TO’s, tool kits etc.. and mini service offerings to show up front and to make it easier for them to explore your core offer.
This is called a VALUE Ladder. You can read more about the VALUE LADDER concept here, but below shows how you can start giving value now to your ideal customers and build trust, which will lead to increased lead flow and better conversions for your core offer.
STEP 6 – MRR
MRR or Monthly Recurring revenue needs to be at the top of yours and your teams’ priorities. It should be a key metric that you monitor on a regular basis, and your mission should be to protect and grow it where possible.
Gone of the days of relying just on the ‘break fix’ IT support model where you could not forecast future business, and customers didn’t know what bill to expect at the end of the month.
Delivering Managed IT via a recurring model allows you to show value to your customers on a regular basis, and your customers get the benefits of the latest technology, efficient IT systems and predictable IT costs.
Another reason to focus on MRR is that is a great metric to value an MSP business – its shows commitment from loyal customers, and guaranteed contracted revenue. The amount and length of the MRR contracts is often a contributing factor in the exit value of MSP’s.
Most of your value proposition should be available to be consumed by your customers in a scale up / scale down monthly recurring basis.
Another key aspect of the MRR agreements is the length of the term – We recommend aiming to sign up customers over 12, 24 or 36 agreements and offering your customers more value the longer they commit.
STEP 7 – TEAMS & PARTNERSHIPS
One of the main areas to focus on when building a reputable MSP is the team you hire and the partnerships you make.
Team – The team are the life blood of your MSP. They are the driving force to help you recognise your WHY, move closer to your mission and delight your customers.
Having a strong, skilled and dedicated workforce can amplify your efforts and improve all areas of your business.
Often an MSP is acquired because of the team and skillset it has, so don’t underestimate the value that your team adds to your MSP business.
Partnerships – Leading MSP’s understand the importance of leveraging partnerships. From technical vendors to business associates, partners can support improvement and growth in many areas.
A great example is leveraging the partnerships of your technical vendors and using their manpower that you just don’t have the resource or budget for. Whether that’s technical resource or marketing support, most vendors budget to give you this resource for FREE!
Having a strong partner network, accreditations with key vendors and a team aligned with the technology partners all contribute to a more efficient and healthy running business.
STEP 8 – TECH STACK
The technical stack for your MSP is your ‘tools of your trade’ – MSP’s today cannot be one trick ponies, and need to show value at many levels to their customers.
A tech stack needs to be a suit of technology that allow your teams to offer world class service with efficiency and accuracy, while ensuring the end result is a happy customer.
The list of technology, tools and vendors is endless so its important to define your core tech stack that your MSP will focus on in terms of team training, service delivery and customer outcomes. What technology will your team become the masters of?
You need to ask yourself, what technology does your MSP and team need to deliver your value proposition to your ideal customers?
There is no right or wrong answer with a defined tech stack as it will be unique to your MSP, but common areas of a quality MSP tech stack include:
- PSA (Helpdesk / Management)
- Remote Access / engineer tools
- RMM – Remote Management & Monitoring
- AV – Antivirus
- Backup / Disaster Recovery
- Cloud Environment
- MSSP / Cyber Services
- Security Layer – Firewalls / 2FA / Email Protection etc..
Ensure you choose to work with quality industry leading tech vendors as this will make it easier to hire the correct skills within your team, leverage more resources from the partner and having an industry recognised tech stack and accreditation will support the transferability and value of the business further down the line.
STEP 9 – GROWTH
This is an area where many MSP’s struggle but having a predictable growth engine will multiply the value of your MSP.
Once you nail your messaging, branding, marketing, outreach, and sales process you will have a flywheel of new business that will support growth and bolster your MRR.
The main areas of focus for the GROWTH segment of the MSP Machine are:
- BRAND – A strong and professional brand with messaging that talks to your ideal customer and niche is key
- MARKETING– An area where many MSP’s neglect – MSP’s like any businesses needs to have constant and on brand marketing. ‘Inbound Marketing’ is a very effective type of marketing that attracts your ideal customers by putting valuable content out to your audience to attract and nurture prospects.
- OUTBOUND LEAD GENERATION – As well as consistent marketing and messaging you need an outbound strategy – Whether that is resources, tools or both doing constant outreach to potential customers. A great tool for this to connect, outreach and grow your network is www.linkedin.com
- SALES TEAM – Internal or outsource – Many MSP’s are tech resource heavy, but its important to have a balance of Sales / Account managers resources too. This can be Sales & Account Managers on staff, or a partner – but there needs to be a team constantly working on account management, white spacing and upselling. The easiest types of businesses to sell to, are your existing customers!
- SALES PROCESS – World class MSP’s have a clearly defined Sales & Marketing process documenting all of the above areas, and how the MSP will grow new business to support the long-term objectives and mission of the business.
The gold is in the PIPELINE – With a strong brand, the right marketing message, and a solid sales process this will all contribute to growing the pipeline (potential future business of prospects). Its important to have a healthy pipeline to support forecasting your MSP’s growth. Another bonus to having a healthy and strong pipeline within a CRM system, is that its shows potential future acquires that there are strong growth opportunities – This all contributes to removing risk, making the systems easily transferable and adding value.
STEP 10 – DOCUMENTATION
One of the key areas to a valuable business but often overlooked; documentation & processes are key to creating a business asset that is truly ‘transferable’.
When we say documentation, what do we mean? They come in many forms, but some common ones within an MSP are:
- Run books
- Project Management processes
- Process checklists
- Customer Information
- CRM Data
Quality documentation and processes allow your teams to follow defined steps, perform tasks to high standards and provide a record of all activities.
ISO standards are great as they show external parties that your business has documented processes and procedures that are externally verified.
Once you have your documentation and processes in a great place, the next step is to implement a quality IT document management system – This will securely store and give your team quick, easy and secure access to key documentation and data like customer records.
Having a central and secure IT document management system not only makes your team more efficient, but the fact the documentation is centrally managed means it can be easily integrated or moved into another business and creates great transferability – All factors that contribute to the value of your MSP.
Congratulations on implementing all x10 steps of the MSP Machine Method – You’re on track to build a strong profitable MSP business that will become a valuable asset.
The journey doesn’t stop here – Each segment of the method can be continually improved and built on to create further results and value.
We recommend you checkout the other articles here on all things MSP M&A, exits and growth.
If you have any questions, need help / advise around the ‘MSP Machine method’ or have feedback on your results, the MSP.blog team would love to hear from you. Please contact the team here or email firstname.lastname@example.org