One of the things that smaller MSPs who are struggling screw up in their business is they don’t think in terms of building financial strength and financial leverage. These task-oriented people are thinking in terms of what needs to be done. They might be thinking, “How do we get more clients? How do we generate more MRR?” But they’re not thinking long term and they’re certainly not thinking about equity.
Here I’m going to answer the questions, “How do you build financial strength and how do you build financial leverage?”
You know, one of the things I find in smaller MSPs that are struggling, that aren’t growing, is that they’re not thinking about strength in their business. They’re primarily focused on tasks and what needs to be done to maintain the day-to-day. They’re not being very strategic about what types of clients they want to target. They should be thinking, “How do I build leverage and strength in my MSP?” Instead they’re just thinking, “How do I get more customers in the door?”
Because, you know, getting more customers in the door is a good thing, but you want to be strategic, and you want to think about how do you build real financial strength in your business so you don’t have something like COVID that hits and puts you out of business or wipes you out. Or you lose one or two of your biggest customers, no fault of your own and you’re wiped out or you’re struggling to make payroll.
And that happens a lot. And I actually think it’s going to happen more because mergers and acquisitions are really hot right now. Across the board, there’s a lot of money that’s pent up because of COVID that wasn’t invested. And so, there’s a lot of private equity money out there just burning a hole in somebody’s pocket. So I think over these next couple years, you’re going to see a lot more mergers and acquisitions.
And what that means is your best clients, the ones that are growing and are profitable, that are probably spending the most money with you, are going to get bought. And they’re the ones that you could lose due to no fault of your own just because they get bought and then the company that buys them is going to take over the IT.
So one of the things you want to think about for financial strength, is you never want more than 10 percent of your revenue tied up in any one client or one project or one thing.
Because if you lose that client or you lose that opportunity, you’re screwed and you’re going to be scrambling to get it back. And I know there are some MSPs out there where their top one or two clients represent 50-60% of their revenue. And again, it’s not uncommon to lose that person in an instant to a merger and acquisition. Or they grow.
I just had a client the other day say they finally grew to a point, and they said, “Hey, we’re going to bring this in-house.” So they’re losing their single biggest client. These are the kind of things you want to think about when you’re building financial strength in your MSP.
Another thing you want to think about is that you want to have enough recurring revenue coming in at the first of every month to cover your nut. Meaning whatever your cost and expenses for running the business, your software, your salary, your rent, your utilities, etc. That’s another way to build financial strength. Now, there are other ways in building financial strength, and I haven’t even touched on financial leverage.
So if you want to learn to grow a business that can withstand a bad economy and the loss of a major client, or so that you actually have money in the bank and you’re building strength and leverage so you can invest in your business and get a return on it, then you’ll want to join me at one of the upcoming five roadshows that we’re doing.
It’s 7 steps to 7-figures: a 7-figure earning MSP. It’s a two-day event. On day one, I’m going to be showing you the 7 strategies to build your MSP and net at least a million dollars or more. And believe me, once you get there, once you’re netting a million dollars, everything gets easier because you can reinvest money.
You’re going to be able to pay off debt, and you’re going to be able to grow your business. You’re going to be able to have a better lifestyle. All those things happen. You’re going to be able to pay people more. So you’re going to be able to find better people. Everything gets easier.
You can click the button below to join us. That’s just going to be day one. Day two, we’re covering the 5 most important digital marketing strategies you need in your MSP. And believe me, the digital marketing world will make you nuts with all the new tools and gadgets and websites.
I mean, you can’t just say social media. I mean, every single platform has different ways to market, different strategies, and it changes all the time. It’s a full-time job. You can’t even keep up with it. So we’re going to simplify that and give you 5 digital marketing strategies we’ve been seeing consistently work. They deliver high ROI and quality leads to the thousands of MSPs that we work with on a daily basis.