When the news starts forecasting down times ahead, small businesses take good hard looks in the mirror to see what a recession might mean for them. For managed service providers (MSPs) this means three things:
- Does this increase the risk of churn for any of my existing clients?
- Am I going to be able to find new clients?
- How can I manage to scale and grow my business?
In working with hundreds of MSP companies every day, we have seen lots of best practices - not just to protect their businesses but to thrive in tough times.
Churn
We should definitely not make it sound like it is all sunshine and rainbows. They are called down times for a reason! That is why it is critical to track your customers’ health. MSPs should always monitor customer health metrics such as:
- Sentiment
- CSAT
- Technology attitude/buy-in
- Stack adoption
These help to identify clients who could be raving fans and drive referrals. It is also the thermometer to determine when the relationship is at risk.
(For more on how to establish your company’s customer health metrics, check out my book: Literally: The Book on Customer Success for MSPs)
When Covid first began, the Lifecycle Insights team was on a community call with 20 MSPs discussing another trait of customer health. The conversation was around how to identify customers whose businesses might not survive the pandemic - that would almost guarantee they would churn. We collaborated to develop this short assessment to help narrow in on a Customer Health Index:
- The customer's response to 'How are you holding up?' is positive and shows composure because they have a plan.
- This customer is deeply invested in and values the benefits that technology brings to running their business.
- This customer's vertical or individual business is largely protected from financial risk in today's market conditions.
- This customer pays on time in full and I don't spend time chasing them for payments.
- This customer is overwhelmingly happy with our service offering (consider term, adoption, CSAT/Satisfaction).
- This company is consuming a large portion of my product stack and is therefore sticky to my MSP as a customer.
- The customer's business habits and operational maturity sets them up for success during this crisis and beyond.
Hearing news about recessions brings these questions to light again. If you knew the answers to these questions for each of your clients, you would have insights into their potential churn. You would also begin to highlight some areas of opportunity.
New sales
Look up a couple of paragraphs. ^^^ Remember that tracking customer health is not just good for identifying potential churn but also for finding those referrals from raving fans. Once you find your happiest and healthiest clients, you should do two things:
- Ask for a referral - if you are delivering value to them, ask if they know other business owners in the area that might also get the same kind of value
- Analyze your raving fans and look for patterns - is there a particular vertical or size company that you should target for marketing?
Scale and grow
At a recent industry event, we were able to connect with many of our partners. Two of them told very similar stories about how they had more than tripled their MRR that year while intentionally letting some of their existing customers go. We heard this consistently during the pandemic. These MSPs did this by expanding and upselling into their existing customer base in a few ways:
- Outreach: Imagine being a business owner concerned about their own business health and the next thing they get is a proactive phone call from their technical provider to see if they wanted to talk about ways to help. If you don’t make this call, you set yourself up for blindsided churn (a terrible business practice). Instead, by making that call, you are further advancing your partnership with them. When you are at the table helping them prioritize their business technology expenses aligned to their business goals, you become the trusted partner - not a line item to be singled out.
- Saving time: Many times that conversation leads to ways technology can help save money by eliminating labor costs with productivity tools. Just reviewing their contracts often brings saving opportunities to light.
Customer Success is always the way to grow a business. MSP coaches say this is even more true in tough economic times. Doing regular business reviews with your clients keeps a healthy and happy relationship - helping both the MSP and their clients grow! Ensure you are tracking customer health metrics and with all data - if you are collecting it, make sure you have a plan to do something about it. Create a communication plan for existing customers and marketing plans for prospects and upsell opportunities.
“So I think the winners in recession are the people who produce new technology that does things better, which people really want.” James Dyson
MSPs are the ones introducing and selling those technologies to small businesses. It is not a question that it will take focus, but with the right data at hand, you have the insights to take action! Schedule regular business reviews (QBRs) with your clients and drive conversations around helping them not just survive but thrive in a down economy.
About the author
Marnie Stockman, Ed.D. started her career in Customer Success with the toughest customers of all - high school math students. Her passion for education and using data and humor to help others grow and succeed took her from the classroom to Sr. Director of Customer Success of a leading Ed Tech company - and now to co-founder and CEO of Lifecycle Insights - a vCIO/Customer Success platform for MSPs. With her default setting locked on "Smiles," she aims to create raving fans for Lifecycle Insights and help MSPs do the same for their customers.
She strongly believes your clients’ success becomes your success. She wrote Literally: The Book on Customer Success for MSPs (which can be found on Amazon). When she isn't Lifecycling, she can be found playing volleyball with her husband and two 20-something kids in Greensboro, MD.
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