Starting your Managed Service Provider
Starting your Managed Service Provider Business
You’re techy with a broad skill set, years of experience, and you know the difference between a server and a NAS, and IMAP and MAPI.
You know you can provide a better service than the company you work for, so it is time to go it alone. The good news is that every business is your potential customer as a managed service provider (MSP), and not many sectors can say that. The bad news is that all these companies already have IT Support or an MSP, so you must outshine your competition.
Starting an MSP is a challenging task that demands careful planning, but nothing you can’t handle.
While it might be tempting to jump in and start your new MSP, don’t forget that success in anything is the sum of its parts, and you need to get these sorted before you start. In this whitepaper, we provide valuable tips for launching an MSP business. We’ll cover everything from business setup and pricing strategies to finding your first client.
1. Choosing Your Company Name
Nut and bolts, and the legal bits.
These are the basics that you will probably already know. There are two different types of
business structures in the UK (Ltd and PLC), and you can find companies that will create your company on your behalf for under £100.
Your legal name doesn’t have to be the same as your trading name, and many businesses use a trading name instead of a legal one. For example, our legal name is SCDC Limited, but we trade as BOBcloud.net.
Don’t go anywhere near other legal names; get advice if needed. If you sail close to another registered name, you must change it. Get it right now, and don’t risk it for LOLs and clicks, as you will have to rebrand later. To see how strictly companies police their IP, check how many retailers or cloud providers have ‘Amazon’ in their domain name and are still trading!
Domains are just as simple. Keep your domain name short and pair it with your legal or trading name. Think of the world’s most popular company names: Apple. Tesla, Coca-Cola (everyone uses Coke), HP, Netflix… all one word and simple, you get the idea.
Make sure the name is easy to spell and pronounce to avoid misunderstandings, especially when giving out your email address over the phone.
“Your brand is the single most important investment you can make in your business.” – Steve Forbes
Finding a single-word domain name that makes sense will be impossible, so you will need to think around this. There are online tools that can help you with suggestions. If you are lucky to find a unique domain name that works well, consider registering other suffixes if you can afford it (i.e., .com .net, .uk).
One last suggestion is to avoid names that restrict your growth later. Choose a name that can grow with your company and won’t limit your future expansion. Having words that date, such as niche industry descriptions, your local town, or your name might restrict you when you want to grow later. You can change the name later, but you might as well get it right now.
2. Creating Your Online Presence
Now you have a company name and domain name, you can create a logo, website and social media channels.
There are tons of free logo creators and website name suggestions online, so make use of those. Can a free AI tool make a better logo than a human? You bet they can. A human will take longer and charge you; they might use AI anyway.
It would be great if you could get the social media names the same as your company’s. If not, don’t panic. Look at some of the most popular celebrities, and you’ll see many don’t or couldn’t use their real names and instead use a play on words.
You will be very busy at this time and might not have time to post on social media yet, but it is worthwhile spending a few hours setting it up now.
3. Staying Legal
Hire professionals like an Accountant, open a Business Bank account, and use a Lawyer if necessary.
From day one, you will need the help of an Accountant. You might also need a bookkeeper if you don’t want to get bogged down with the day-to-day accounting. Most start-ups do this themselves in the early days, so it’s not a priority now. Either way, you will need an accountant to advise you on the dos and don’ts and to make you look legal and honest to HMRC and Companies House at the end of the year. Shabby accounts can often invite an inspection from HMRC, and you don’t want that.
You will need a bank account, and your Accountant will tell you never to mix your personal and business accounts. Shop around; there are loads of banking deals for new businesses.
Lawyer? Maybe for your MSP contracts, but then you can buy these off the shelf for now.
4. Deciding where you will work from
Will your business start in an office or at your home? Maybe a hybrid with remote staff? What about phones and CRM?
Almost all startups start from home, and this is especially true with service-based businesses like an MSP. When you start employing staff, you can consider an office. If you do, the flexibility of leasing, readiness, and scalability of serviced offices will outweigh having your own building.
Overheads can strangle you in your early days, so cut them right down.
“Efficiency is doing things right; effectiveness is doing the right things. Reducing overhead is both.” – Peter Drucker
5. Building your Service Portfolio
- Which skills do you have?
- What services do your potential customers require?
- Delivery model, and pricing.
Which skills do you have?
Your potential customer won’t care much about how technical you are and that you can code in java or lever Powershell with one hand.
What services do your potential customers require?
Your customers will probably have mixed skills themselves and might be managing some of their IT Systems in-house or outsourcing. This isn’t an issue and gives you the opportunity to add value where they need it.
Delivery model, and pricing
Defining the services you will offer and how you sell them is crucial. Think simplicity because your prospective customers must be able to easily visualise your service offering and distinguish it from their existing MSP.
They will likely already be using an MSP, so you must convince them to replace them with you!
You will already have a broad range of technical skills, or you won’t be here. You are unlikely to have all the skills required, and you might need to recruit staff that can link in these skills or outsource a service to another company. The more apparent services you can outsource will be online backup, edge protection, anti-virus and software distribution.
A common mistake when starting is to bring these solutions in-house and build them yourself. Your job as a business owner is to spend 100% of your time driving new sales; EVERYTHING else is a distraction and doesn’t drive your business forward.
Do you know which services your potential customers will need most? Security and disaster recovery planning are good places to start. You should sell services that automatically renew and provide a continual income requiring minimal input. Don’t get drawn into services starting from zero monthly revenue, such as PC repairs or selling hardware.
If hardware and maintenance contracts are part of your business model, consider leasing them. That way, you’ll earn money each month.
Try not to have more than 10% of your total revenue coming from one customer.
Have a look at what your local competitors are doing. They have fine-tuned their services over the years and know what works best in your sector and region.
6. Building your MSP toolkit
Even if you decide to clean windows for a living, you will need tools such as a van, cleaning equipment, water system, customer outreach, and billing. These five tools (respectfully) are required to be a window cleaner.
You are no different. You will already know which tools you need and where to get them. The difference is that your tools will mainly be software-based.
You must be frugal here because you will pay for all expenses from YOUR company profits. There are loads of free SaaS and standalone software applications, such as helpdesk, CRM, remote control, remote monitoring, inventory management, etc. Even many licensed SaaS provide cutdown-free versions of their software, which they are happy to give away to entice you into a purchase later.
A common mistake MSPs make when they purchase SaaS is that they go for a suite of applications from one provider rather than the best provider for each. Doing so is an easy option and often a lazy one. Why do I say this? Look at any customer’s desktop (or your own). They use Windows and Office from Microsoft but won’t buy their hardware from Microsoft (Microsoft doesn’t make servers and PCs); they will often use Chrome for browsing, antivirus from anyone but Microsoft, their website will run on Linux, etc.
If you get all your MSP software from one provider, you risk getting a suite of ‘second team players’ when you want the ‘A Team’.
What does your customer want? Spoiler!! They won’t care what systems you use (no matter how much you try to impress them). They only care about their data being safe, and all their systems work 24×7. If they don’t, then they want you to fix them 24×7. Forget everything else; your customer already has.
In our experience, these are the software tools your new MSP needs on day one.
- Helpdesk and ticketing system, useful for CRM in the early days: Don’t try to run your business on email. You will lose track of what your colleagues have done for your customers and what they have said to you; you might not get their emails, and you will lose control. Plenty of free options will give you at least three user accounts for you and your staff.
- Enterprise edge security and antivirus protection: Before you can manage any network of any size anywhere, you must first protect it from malicious intent from inside and outside the network.
- First, you need an immutable antivirus on all the servers and desktops.
- Secondly, assuming that all internet activity is constantly under threat, scanning is imperative. This can be achieved through desktop security software, hardware devices, or a cloud-based service. The latter is beneficial as it’s regularly updated by the vendor, eliminating the need for manual patching. It also can block access to undesirable sites, such as streaming platforms, adult content, and web-based email systems that could inadvertently download malware.
- Remote Monitoring and Management Software: These systems notify you in real-time about what is happening on endpoints, such as low disk space, disabled antivirus software, and unpatched hardware and software. Most servers and some desktops have embedded hardware monitoring; however, there is no alternative to a licensed service that will deep-scan all of a customer’s endpoints.
- Cloud backup: If security breaks down and ransomware gets into your customer’s network, staff will be locked out of all their files. It won’t happen to you?
- If it does, you can always pay a ransom or tell the cybercriminal where to go and restore your data. A secure cloud backup puts you in charge and gives you options for recovering from a ransom attack.
- Other MSP Tools you will probably need: Remote control, inventory management, password management, documentation system, forum and knowledgebase, and contract software.
7. Your MSP Pricing Strategy
You must make it easy for your customer to buy from you
Any sales guy will tell you that you must make it easy for your customers to buy from you. If you offer complicated pricing models, they will glaze over and move on.
Pricing models such as Gold, Silver and Bronze can work logically. For instance, Gold represents 24×7 support, Silver is for seven days (9-5), and Bronze is for business hours only. These models are designed to be straightforward, providing a sense of reassurance. This is about as clever as you want to be. Once you start trying to be radical and adding bolt-ons and different packages, you can run into expected difficulties because you are overcomplicating things.
This model works equally well for customers who want their servers or desktops supported. It’s not unusual for more than one MSP to manage different parts of a business.
You must insist on recurring monthly fees when possible. This model will allow you to forecast your profits and help you obtain funding later. Banks love businesses with predictable revenue.
The only exception is customers who want a PAYG model. If they are stuck on this idea, make sure you charge extra for the unknown. For example, you won’t know the condition of their devices, so if a hard disk fails, it might take you a day to restore the system to its previous state. If you had monitored the disk’s pre-emptive failure alerts on a maintenance contract, you could have preempted the failure and downtime.
Have a look at what your local competitors are doing. They have fine-tuned their services over the years and know what works best in your sector and region.
Offer Free, not discounts
Never offer a discount on any of your services. No one believes you unless you are Apple or Rolex.
Your prospective customers know nothing about your pricing or service offering, so your discount has no value. It isn’t unheard of for a service provider to inflate their prices before offering a discount. When your customers are ready to strike a deal, they will probably negotiate a price reduction and feel good about it.
If you offer a free, no-strings option, potential customers know they have nothing to lose, and free is free the world over.
Why not provide three months of free support without a termination period? If you overdeliver and they need your service, they will buy from you.
We do this slightly differently by offering a £250 credit on our services to new customers coming from another provider and sometimes stretching this to £500 when we need to reach our targets. These are both time-limited and work for small and large resellers.
We also provide some free-for-life services that can convert into paid services later. ‘Free‘ isn’t new, but i still effective and is how the likes of Google and Dropbox built up a massive customer base.
8. Marketing and finding your first customer
Once you have completed all the preparation work to start your MSP business, you’re finally ready to find your first clients. Fortunately, finding MSP clients is not as complicated as you might think. Remember I said that you should be thinking about marketing in the beginning? Hopefully, you have some ideas that will make the process more manageable.
I won’t cover PPC on Google, social media, or SEO (maybe a little later) because these topics require in-depth understanding, and there are data centres full of blogs on them. These advertising methods will burn through your budget and require more thought before jumping in.
You can employ a variety of actionable strategies. I have left off organic marketing because it is a more extended task and often outside your control. However, the following methods are entirely within your control and will vary depending on you.
- Ask your existing network if anyone needs IT Support, then ask for a referral outside your network.
- Get busy on YouTube and other social media.
- Build strategic relationships with your suppliers.
- Trade shows.
- Outreach cold calls. Always send a postal or email campaign so you have a reason to call.
Now you have your first customer, try asking for a referral.