Choosing the Right Lever
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Most businesses eventually hit a wall where they've tapped out their opportunity well across personal networks and existing clients. MSPs are no different.
When looking at the business and considering new growth options, always keep four levers in mind; price increase, cost reduction, marketing and advertising, and new offerings. Considering these levers in your forecast models is a powerful tool for predicting revenue and profit growth.
We had previously covered cost reduction in other articles (here and here), so let's focus on the other levers.
Lever 1: Price Increase
This one is the most obvious, but should be approached with the most caution. While it's easy for clients to accept a reduction of their fees, most aren't exactly thrilled with increases; especially if they don't understand the additional value associated with the new price. When considering a model for pulling on this lever, keep in mind that clients may reject the price increase or decide to change providers altogether, which ends up costing existing revenue.
Lever 2: Marketing and Advertising
Don't just cruise past this option if you've "been there, done that." Many MSPs, ours included, have tried all sorts of advertising on a one-shot pilot only to be left disappointed. The reality of marketing and advertising is that it requires consistency and persistence. Your brand's feel, style, and the content of your message needs to be consistent or they won't know how to relate to you. When you've nailed the consistency, remember that it takes 7-12 touches on average to make a sale. The same logic applies with trying to "sell" someone on even talking to you – commit to a 6-month minimum timeline of persistent marketing before making a judgment on its validity.
One other thing to consider with this lever is that a referral campaign counts as marketing. Who better to recommend you than the people that love you? Almost everyone is generally interested in some personal reward for doing so. There are no limitations on this, either; it doesn't need to be a $50 gift certificate or a tablet. If you want it to get attention, be creative. Choose a prize that warrants an average new contract (ask us about the motorcycle campaign).
Lever 3: New Offerings
This one can have an immediate impact on your business, but be sure to remember that new offerings typically require more planning and come with a considerable cost of implementation. Some cost factors with this lever are the vendor selection process, market validation on interest, the resale price point considerations, and the go-to-market strategy.
Now that we've considered the levers available, remember one thing when modeling how it might all play out. Always take a conservative approach. It rarely happens that every client will accept a price increase or that new offerings fly off the shelf, so err on the side of caution when evaluating the impact any of these levers might have on your business. If you have historical data on how other increases, campaigns, or new offerings have performed for your business, and the timeline it took to accomplish, be sure to leverage that knowledge to determine what might happen this time.
It's fun to dream and imagine the best-case scenario, but you'll serve yourself better by being realistic.