Well, it’s not like we didn’t know an economic adjustment was coming — we just didn’t think it would happen this way or this fast. For a decade, we’ve had a “money running uphill” bull economy, with everyone overspending and overindulging. Pretty much anyone running a business could make a living (not get rich, mind you, but earn a wage). Now, we’ll see a rapid thinning of the herd.
Personally, this is not the first recession I’ve been through, and I’m sure it won’t be the last. Back in 2009–10, we saw over 20% of our client base disappear. Most folded and got a job. Some sold for pennies and went to work for the company that bought them. Some changed careers entirely, thinking there were greener pastures. (I now wonder how they are faring since IT is one of the industries that has been the least impacted by COVID-19 shutdowns.)
Back then, I was not as prepared as I am today to deal with such a setback. I learned. One of the marks of intelligence is not making the same mistake twice. Sometimes you win, and sometimes you learn.
From my experience, three things will change for IT services businesses in this new economy. If you want to avoid a major loss of clients, income, profits, and personal wealth, then you need to know what these changes are and get ahead of the threats before you’re too far under to stay afloat.
The Buyer: Some of the MSPs I’ve talked to that primarily serve retail, restaurants, and hospitality have been decimated, losing 70%–80% of their income, and there won’t be a quick rebound for most. Others serving the medical or professional services businesses (like CPAs and law firms) have seen an increase in sales. So, the first thing you have to decide is what percentage of your client base is and/or will be no longer viable. If you find yourself on a sinking ship, then it’s better to jump in a dinghy and row to a safer port rather than play music like the band on the Titanic. Second, the power has shifted to the buyer, and they know it. The new buyer will be far less tolerant of sloppy, ordinary services. There will be hungry competitors out there willing to work for beans to steal your clients away, and they will. If you cannot defend your value right now, then you’re headed for trouble. Everyone is watching costs and reconsidering all vendors, asking themselves, “Is this necessary?” and “Where might I get this cheaper?” To be clear, I think it’s foolish to jump to discounting or take any client that can wave a dollar and fog a mirror, but selling to new buyers will require a much higher level of sales skills and knowledge as well as being more thoughtful and strategic about what you sell and to whom.
The Cost Of Client Acquisition: Without a doubt, money will be parked for a while, and fewer opportunities will be available. That’s not to say there won’t be companies spending — there undoubtedly will be. But people will be more hesitant to invest in an upgrade or take on a new project unless they deem it essential. In our organization, we’ve NOT seen a dip in leads — just the opposite. But what we have seen is a dip in people deciding to buy now and/or take the higher-end (more expensive) services we offer, mostly out of fear and uncertainty. To combat this, we’ve tightened the qualifications of our leads and changed our programs to include services that are of interest right now (for example, how to fuel leads with cheap digital marketing and advertising). We’ve also increased the number of follow-up steps, webinars, touches, etc. In doing so, we’ve been able to maintain margins and hit goals, but we’ve had to work a lot harder for it. You will too.
The Need: The famous American bank robber Willie Sutton was once asked why he robbed banks. He replied, “Because that’s where the money is.” You need to think like good ol’ Willie. Where is the money now? Who’s got money, and what will they want to buy? To take another chapter from Willie’s book, the easiest way to close a sale is with a loaded gun in your hand. In IT, your “loaded gun” is compliance. According to Fred Voccola, CEO of Kaseya, approximately 78% of SMBs expect to invest in compliance as a service in 2020 thanks to new regulations such as the Stop Hacks and Improve Electronic Data Security (SHIELD) Act in New York and the California Consumer Privacy Act that went into effect in January of this year. However, less than 10% of MSPs even offer compliance as a service in their mix. Therefore, if you are not selling compliance services and solutions as well as the cybersecurity protections needed to be compliant, then you’re missing out. Further, you need to look at everything you’re selling and ask yourself, “Is this considered essential?” If not, then you better get busy selling something that is. Yes, IT services in general are essential, but if you can add on services, products, and solutions that help businesses make money, save money, retain clients, and provide a competitive edge, then you’ve got a winning mix.
To learn more about trends happening right now, go watch an excerpt from our annual IT Sales and Marketing Boot Camp about what I see as the biggest opportunities right now. Find this at www.MSPSuccessMagazine.com/trends.