The other day, we had a brand-new member cancel his membership, threatening, “I’ll take you to court” if we didn’t let him out of his agreement. Want to know one of the big reasons he was so angry? He was HIGHLY annoyed that we had MFA turned on for his Dashboard login. His exact words: “I don’t know what that is. It’s just annoying, so turn it off.” Folks, you can’t make this stuff up. P.S. – Only good MSPs will understand why that is such an incredibly moronic statement. If you don’t understand it, ask a friend. But that’s not my point…
No matter what type or size of business you’re in right now, I know one thing for sure: you are either currently dealing with, or in the not-so-distant future WILL deal with, annoying to outright dangerously stupid clients like the doofus above. No one is immune – and if you’re not proactively filtering these people OUT, they’ll accumulate under your roof and multiply like cockroaches. This is one of the key things more successful MSPs do that failing MSPs don’t – they routinely shed and replace BAD clients.
A stern reminder to ALL of you: set up your business to attract and retain ONLY those clients who meet your strict criteria for HVCs, or high-value clients, firing and repelling EVERYONE else.
This is very simple to understand intellectually, but, from an emotional standpoint, extremely difficult for people to implement. But if you actually pay attention to this advice and act on it, you will profit from this in multiple ways, including but certainly not limited to financial reward.
That’s because a high-value client is not just someone who pays you a lot of money – although that certainly IS one of the characteristics. They also represent a significant amount of profit, follow your advice, are easy to service (because they follow your advice), don’t complain about everything, are very reasonable in their expectations, pay on time and APPRECIATE what you do. Many will also be deep wells for referrals. And ultimately, they should give you energy and inspiration, not suck the ever-living soul out of you.
Way too many MSPs make the mistake of clinging to low-money, unprofitable, wrong-fit clients and pay the price in multiple ways. There are several factors driving this, with the biggest one being they don’t have a sufficient marketing plan and sales team in place to create a steady flow of fresh new clients and opportunities to REPLACE the problem children they have. They’re stagnant. Other reasons MSPs stay burdened with a bunch of low-profit, wrong-fit clients are:
- An obsession with growth and gross over quality and profits. If you’re not too picky about who you take as a client, it’s relatively easy to get growth but it can cost you in profits, retention and equity valuation, not to mention having to deal with a high level of churn, staff burnout and a bad reputation that will come from these crap-heads posting negative reviews about you online.
- An extremely flawed sales process that doesn’t set the proper expectations for new clients about what is expected of THEM and how they should behave, so you’re essentially set up to FAIL before you even get started. (Shameless plug: this is one of the many reasons you should attend my upcoming MSP Sales Blueprint 2-day event, in Newark, NJ.)
- ZERO thought, strategy or definition of what a GREAT client is, so they have no target to aim at, no criteria to filter through. They just take ’em all and sort the mess out later. Emotional baggage over raising prices and insisting on certain standards for clients. This can show up as fear that you can’t replace the money they represent, or a fear of simply confronting their bad behavior. Or guilt for making demands. Or insecurities about your authority to “make demands” and set standards.
A theory I’ve long believed to be true but cannot provide statistical evidence to back up my gut feeling on is this: the LEAST desirable customers are the easiest and cheapest to get but the hardest to monetize and retain, and the MOST desirable customers are the most expensive and difficult to get initially but VERY easy to retain and monetize.
This means, of course, getting the RIGHT customers is going to be an expensive, difficult path to walk, requiring investment, solid strategy, consistent execution, careful thought, and playing the long game. Given most MSPs simply won’t give up their addiction to “easy buttons” in marketing, they are going to suffer with trying to support a growing scrap heap of low-money, pain-in the-a$$ customers.
To do this right requires you to first dig into your customer records to find commonalities of source, demographics and psychographics, as well as investing time into defining what a great customer is and figuring out the size of market (haystack) you’ll have to start sorting through to find the select few golden needles. It will also require a much more targeted marketing message and media approach to ensure you’re not aiming too broad, which may require marketing media such as direct mail, telemarketing and sponsored trade shows and events (not cheap), as well as strategic partnerships and referral partners, which can be relatively difficult to establish.
Few are ever willing to make this shift in mindset and approach, much less do the work involved. They choose to run faster and harder, eyes shut. The key word here is CHOICE. You do choose your customers, whether strategically or sloppily, thoughtfully or thoughtlessly.
Right now, we’re already more than halfway through the year, and I hope it’s a profitable one. According to Paul Cissel, Service Leadership Coach and Expert in Residence here at TMT, sales and profits are up across the board by 15% for all MSPs industry-wide, far more if you’re a bigger MSP growing through acquisition and not organic growth. If you’re not up 15% in revenue, you ARE FALLING BEHIND. A 10% increase is not a 10% increase but a 5% loss. Harsh, yes, but I love you too much to not tell you the truth. That doesn’t mean YOU are a failure, but you are failing to execute. That’s very fixable. Now, let’s get to it.