MSPs: New Client Acquisition By The Numbers (Part 2)

Robin Robins MSP Business Development Leave a Comment

Most of the marketing “gurus” out there give only the exciting, often inflated, end result numbers of the home runs.

The marketing gurus out there fail to really dig into the metrics and backwards planning that went into getting that number. Often, if you DO look under the hood, you’ll see far more work and effort, possibly months or years of laying a foundation, building a list and preparation to get the results they’re showing. When I tell you we generated $2.2 million in ARR from this year’s Boot Camp, you should also know that I’ve been at it for 15 years, working at “stocking the pond” to ensure I can secure that type of financial windfall. That doesn’t take away from the success, but should give some context.

Marketers got on a bandwagon of bragging about “million-dollar launches” until it was revealed that most of them never kept a penny of the money, often losing more than they generated after paying for all the ads, credit card and processing fees, product fulfillment costs and their affiliates’ commissions, and issuing refunds. They also wouldn’t reveal they often secured that on teeny, tiny percentages of response rates, utilizing massive e-mail lists they and their affiliates built over years and years of cost and effort, hammering the list to a pulp to get the response, sometimes creating more damage than it was worth.

If you didn’t know the real “math” behind a “million-dollar” launch, you’d be frustrated with yourself for not being able to reproduce with your “big” list of a couple of hundred clients or prospects. Candidly, understanding this type of math is not fun or easy, so it doesn’t sell (which is why most marketing “gurus” don’t talk about it). Further, what MOST marketers don’t tell you is that they strike out and hit a hell of a lot more singles than home runs to win a ball game.

Before you dive into the math, if you missed MSPs: New Client Acquisition By The Numbers (Part 1) – CLICK HERE

But know this: NO great marketing strategy, “secret” campaign, offer or tactic can fix bad marketing math.

If you need a 20% response rate to a campaign to make it “work” for you, and you’re sending it to a cold list of prospects – be it direct mail, PPC, etc. – I already know you’re set up to fail. Because you need an 80% open rate, or a 50% click-through, or a telemarketer who *must* get 10 quality appointments booked from your direct mail letter to a Farm List, you’re already hosed. If you need a 100% show rate for your seminar to work or your webinar to pay, you’re in trouble. Is it possible to get higher response rates than this? Yes, of course. But they would most likely be in unique circumstances or highly relevant offers made to clients or precisely targeted prospects.

MOST business-to-business marketers only get a 0.5% response rate to their prospecting efforts.

Even then, most B2B sales are made from slow-maturing buyers who are cultivated over a long period of time (which is why follow-up and drip marketing are so critical). Further, when selling IT services, you’re playing a “contact sport” where you have to take out (replace) an incumbent to win a deal. Further, there are high consequences to picking the “wrong” IT company, so people aren’t quick to change unless they are in dire need and being grossly abused by their current IT company/team. Most who are being underserved don’t even know it.

This is part of the reason why most MSPs don’t generate more than one, possibly two leads a month and close fewer than 10 new customers a year. There’s just not that much “new” business floating around ready for the taking. It’s also why you cannot rely on referrals alone to secure consistent YOY growth. Market share must be MADE. This is also why expecting more than a 1% response rate on GREAT lead generation marketing is a setup for failure. Yes, you can get a better response, and it depends on the situation, the list, the offer, etc.

Overall, you will get ignored, blocked and told “NO” far more than you will yes.

If you are unprepared for this because you have unreasonable expectations of getting 2%, 5% or higher response rates to cold prospecting and new client acquisition and you’ve worked your “math” (costs) in such a way that you MUST get that response or you’ll go broke, you’ve lost before you’ve started.

Below are the marketing and sales funnel averages for Technology Marketing Toolkit’s Producers Club members over the last year. We are going to retest again soon, so they may change a bit given the economic volatility we’re in, the soaring inflation and the threat of a recession coming. Note that these are MEAN averages.

  • 58% of all RAW leads are MQLs (marketing qualified leads).
    (NOTE: This is an average when adding ALL leads generated. FAR more will be qualified using a “controlled” prospecting campaign like a direct mail piece where you prebuild the list.)
  • 64% of qualified leads (MQLs) turn into a first-time appointment (FTA), also classified as an SQL or sales qualified lead.
  • 34% of those FTAs become a paying client (closed).
  • The average MRR was $1,749 per month (NOT including projects).

Once you know these metrics for your business, you can perform backwards planning to determine the activities you need to conduct to reach your new client acquisition goals.

Obviously, YOUR numbers are what matter, and you should plan based on YOUR new client acquisition goals, YOUR close rate, YOUR marketing funnel metrics. But if your numbers matched these mean averages, then this is what a “backwards plan” would look like to get two new clients per month:

  • If the goal was to get two new MRR clients a month, that would be 24 total for the year
  • You would need 71 FTAs (if 34% of FTAs close to become a paying client)
  • You would need 111 MQLs (if 64% of MQLs turn into FTAs)
  • You would need 191 RAW leads (if 58% of ALL leads generated are qualified), or 16 raw leads per month (191 ÷ 12 months)
  • If your appointment setter/marketing generates a 2% response, you need to prospect 8,000 businesses per year (universe)
  • That’s 667 companies per month (roughly 167 per week) that you’ll have to prospect to get 2 new MRR clients per month

IMPORTANT: Generally speaking, the 2% response is on the HIGH side – but if you’re following our methods, it’s certainly attainable as an average. Further, not all marketing will produce a 2% response rate. Some will produce less, some more. A referral campaign might bring you a 10% response or 20%, depending on the relationship you have with your clients, the manner in which you ask, your timing and the reward you’re offering. Your Facebook ad may generate a higher response percentage, but only 10% will be qualified. Ultimately, response rates aren’t what you’re going for anyway – an ROI is. But you need some response metric for planning purposes and determining the size of the market you need to target in order to hit the goals you’ve set (see the backwards planning earlier in this article).

Also keep in mind that these numbers will always be moving up and down due to the countless variables that can and will impact them both positively and negatively. Your marketing strategy, and the numbers they are producing, need a watchful eye, along with constant care and feeding, not set-it-and-forget-it. A mandate if you are going to grow is a weekly marketing and sales metrics review with goals, milestones and leading indicators to know if you’re on or off track, with swift actions put into play if you’re slipping behind.

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