During TMT’s Annual IT Sales And Marketing Boot Camp opening-night event, “Indiana Robin Robins” strode in waving an American flag to deliver a deep dive into the industry’s top trends. She was hot, the industry is hot and revenue growth is hot. But trends like skyrocketing client acquisition costs, chronic underpricing, and competitive compliance and security offerings put MSPs at risk of becoming irrelevant if they can’t adapt and turn challenges into opportunities.
Snapshot Of The Top 5 Industry Trends You Can’t Afford To Ignore
1. Growth is being driven by putting more competitive offerings on the table.
MSPs are undoubtedly growing. From 2021 to 2022, top-line revenue increased from 19% to 23% and monthly recurring revenue (MRR) rose from 23% to 30%. But best-in-class MSPs, like our Better Your Best finalists, experienced incredible 35% top-line revenue growth and 67% MRR growth. So, what’s driving the extreme growth for these MSPs?
Basic managed services are considered a commodity by best-in-class MSPs because of rising customer acquisition costs (which we’ll touch on later). So, they drive growth by differentiating themselves through competitive offerings that today’s businesses need, including compliance, advanced cyber security solutions and co-managed IT.
How to tap into greater growth: You need to start looking at compliance and advanced security packages if you aren’t already. Another route is offering co-managed IT when an incumbent MSP can’t deliver security services; come in as the MSSP and sell it as a stand-alone service.
2. Many MSPs are pricing packages the old way, and it’s hurting them.
Many managed services packages include only labor, RMM and AV. Everything else is either an upcharge to your clients (which they read as nickel-and-diming) or it’s included – i.e., you’re not making money. The other trend we’re seeing is that per-seat prices are too low. Our MSP Success poll showed an average per-seat price of $107.87, but Robin and our resident experts recommend prices between $150 and $175.
If you’re not somewhere around that range (keeping gross margin and profitability in mind, so your price might be lower or higher, depending on your situation), you’re probably underpriced based on the cost of labor and tools today.
Here’s how to improve your pricing model: One of the BEST changes you can make to your sales process that will make clients happier and increase your profits is to set a 12-month budget (seat/server AND all upcoming projects) and a road map from DAY 1.
3. Customer acquisition costs (CAC) are way, way up.
The average best-in-class told us they spent $29,000 to acquire a new client. That’s all-in sales, marketing and commission combined. Some of this is being driven by skyrocketing digital marketing costs across every channel. Today, it costs $3,500 per month for a paid search on Google alone, and that doesn’t even cover the cost of managing it.
How to combat rising CAC/NCA: You don’t necessarily need to spend $29,000 on New Client Acquisition (NCA). There are many effective ways to generate leads and close clients without raising prices.
- Canvass for referrals with JV partners, like your client’s insurance professional or accountant.
- Follow lead generation marketing and campaign best practices like using lead generation offers on your website, retargeting digital marketing and leveraging local search.
- Post videos because it’s where the highest-converting, lowest-cost leads are coming from.
- Use our IT Services Recession Survival Money Map to tighten up your inbound lead capture to close process.
- Use Prospect Hopper to improve the consistency of your drip marketing system.
- Upsell and cross-sell during your Quarterly Business Reviews (QBRs) and set expectations of additional spending during onboarding.
4. What everyone else is doing isn’t working.
Revenues are up, but there are still challenges: 79% of MSPs/IT services companies are under $1 million in top-line revenue. Here’s what you can take from that statistic: if you want to be successful, you cannot behave and make decisions like the bottom 80%. What do most MSPs do for marketing? Nothing. How do most MSPs price? Too low. What do most MSPs do when it comes to hiring a salesperson or a marketing team? They don’t do it. If you want to get to $5 million, $10 million, $50 million in revenue – don’t do what everyone else does.
Do what the titans are doing: The titans of our industry consistently rise to the top because they are doing what no one else is. Like a titan, differentiate yourself by focusing on:
- Recruiting quality talent and building a solid work culture
- Increasing efficiency using automation and vendor consolidation
- Aggressively building out security and compliance services
- Scaling up through acquisition, mergers and building equity
5. Opportunity is out there. Now is the time to double down.
No matter what goes on with the economy – recession or no recession – the MSP industry WILL remain strong because of compliance and security. But if we do hit a recession, winners will win and losers will lose. The #1 question is, what do you want?
How to be a winner: Last year, MSPs grew their top-line revenue from 19% to 23%. It’s not because they became marketing whizzes overnight. It’s because opportunity is everywhere. If you want to be a winner, you must take advantage of these opportunities. Yes, it’s going to be hard. But that’s why we have peer groups to hold you accountable and endless resources to help you buckle down on marketing. These trends may look like challenges, but if you’re willing to learn and step things up a notch, these trends may be your greatest business opportunity yet.
These tips just scratch the surface of Robin’s industry-trends gold mine. Follow live reports of everything that’s going on at Boot Camp on our Facebook.
