Running an MSP business and scaling it for sustainability

Many businesses turn to managed service providers (MSPs) for three glaring reasons: They are transitioning from break-fix IT, need predicable costs or require outsourced expertise. The insights from your clients can serve as a sounding board to help shape the trajectory of your services and accelerate your business’s growth. How you run an MSP business will determine its long-term success and ensure that clients receive top-tier services.  

Mastering the basics is fundamental to sustainable growth. The primary pillars for running a competitive MSP include building a holistic MSP business plan, hiring in-demand talent, optimizing your business and adhering to both legal and cyber insurance requirements. 

The ideal business plan must be both profitable and scalable whether an MSP has specialization, caters to all businesses sizes or focuses on a particular vertical market. All MSPs require predictable, recurring revenue to ensure the health of the business and financial flexibility to optimize your services. Success as an MSP is a balancing act that requires multiple components and moving parts. Financial drivers depend on your ability to accurately estimate profit and loss, build a cashflow model, gain insight into cash requirements and identify competitive opportunities. 

Estimating profits and loss is largely impacted by your client segmentation and services. For instance, if most of your client base uses a particular service that has low overhead costs and requires minimal IT attention, while another has few clients and is expensive to manage, it might make sense to discontinue the costly service and instead seek a consolidated, cost-effective solution consolidated, cost-effective solution. By segmenting clients based on their needs and your revenue outcomes, you can swiftly pivot pricing strategies and better prioritize growth areas in the most profitable services. This also helps you identify fixed and variable costs associated with each of your client groups.  

For example, certain vertical markets have increasingly stringent compliance regulations, requiring additional security measures to adhere to. By estimating the costs of additional security measures and cross-examining expenses against your expected revenue, you can more accurately forecast your profits — potentially avoiding losses. Client and service segmentation enables you to make educated and informed business decisions. 

As your MSP business grows, cash flow will be the lifeline of your business. The model aggregates all your income streams, including one-time sales projects and recurring revenue from service contracts and additionally, tracks direct and indirect expenses. Expenses can include overhead costs, technology, labor, marketing and advertising, and business fees. Monitoring your cashflow reveals trends and opportunities for future growth and sheds light on areas needing improvement. These trends can even foreshadow potential downturns in your business. 

Every MSP should gain a deep understanding of the baseline costs required to sustain the business. From operating expenses, investments, infrastructure and reserves, MSP owners should closely know the expenses to minimally run services and the factors influencing these costs.

Your team will be interacting directly with clients and will be an influential part of your services’ outcomes. One way to ensure that professionals have the necessary technical expertise is through certification such as CompTIA A+ certification. The certification provides a standardized foundation, equipping team members with knowledge in IT infrastructure, networking, and security. 

Hiring based on work history versus skills-based hiring has been a longstanding debate in the technology sector. With shrinking IT talent pools, you need confidence that your team can deliver on responsibilities and obligations to clients. Taking a skills-based approach focuses on the IT talent with in-demand skillsets rather than solely considering the years of experience a candidate has. 

MSP technicians have some of the highest turnover rates, and retention is a constant battle for MSP owners. However, there are many activities that MSP leaders can adopt to attract and retain top talent. This includes team appreciation structures, career and professional growth opportunities, and engaging team building experiences. 

Certification programs like Acronis MSP Academy  empower teams to sharpen their skills and advance their careers. Structured learning plans are one of the best ways to propel your team’s career growth forward by helping them develop role-based skills, brush up on soft skills and refresh industry knowledge. You also give your staff the opportunity to share their accomplishments on social media platforms with their network and colleagues. When your team promotes earned certifications with the support of your MSP business, other potential job candidates, recruiters and competitors notice your commitment to providing professional development and educational opportunities.   

The service provider space is fiercely competitive. Optimizing operational efficiency is key to delivering consistent quality of service. Understanding time allocation will help you delegate tasks to the best-fit members on your team. Insights from a time tracking software enables your business with a data-driven backdrop to fine-tune capacity planning and efficiency analysis. You can more accurately plan your team’s responsibilities and eliminate bottlenecks. 

Regularly assessing key performance indicators (KPIs) such as response time, resolution rate, and customer satisfaction, your MSP can identify areas for improvement and implement targeted strategies. And knowing when to outsource time-consuming tasks will not only free up internal resources and allow the team to focus on core competencies, but also save your business from resource-intensive activities. Additionally, conducting market research, analyzing competitors' pricing strategies, and regularly reviewing pricing models can help MSPs strike the right balance between profitability and competitiveness to maintain competitive pricing while factoring in overhead costs is essential.  

As a business owner, seeking legal expertise is essential to handling legal documents and navigating negative feedback from clients. A competent lawyer can help advise and guide you through the complexities of business law to ensure your MSP business satisfies all legal requirements. This legal professional will also be a crucial partner in drafting legal agreements such as service level agreements (SLAs) and help you manage the expectations of your services between your MSP and clients. Data protection, privacy laws and compliance regulations are other concerns that a legal expert will assist you with.  

Additionally, qualifying for cyber insurance is a high-priority concern for your business. Your MSP business must demonstrate active measures to eliminate cyber risk. Insurance underwriters are demanding cutting-edge security tools and processes and greater accountability and transparency from MSPs. For example, in-depth reports generated from security solutions like endpoint protection tools can attest to the actions your MSP took in the event of a breach. 

Cyber insurance qualifiers ultimately want assurance that your MSP has invested in necessary security measures to mitigate risk of attack. In doing so, you can leverage negotiating power to lower premiums. 

Running an MSP and scaling it for sustainability requires a strategic approach and focus on many moving parts. Continuous learning is a lynchpin to success and understanding the reasons why clients turn to your MSP can help accelerate growth. You will need to ensure adaptability by keeping a constant pulse on all planes. Mastering the basics is critical for long-term success.  

Developing a competitive business plan that focuses on profitability and scalability, along with predictable recurring revenue, ensures financial health, stability and flexibility. Accurately estimating profit and loss, building a robust cashflow model, understanding cash requirements and identifying competitive opportunities are essential financial drivers. By addressing these components, your MSP can promote sustainable growth and future proof the quality and delivery of your services to clients. As you build a longstanding reputation as a top-tier service provider, your client base will continue to grow, and you will be enabled to tap into higher profile clients as time goes on.