Carrie Simpson is the founder and CEO of Managed Sales Pros. She has over 20 years of cold calling experience, and supports a team of 30 lead generators. Her team makes over 40,000 outbound MSP prospecting calls monthly.
One of the biggest challenges for MSPs is preserving and growing revenue coming from current clients. When your MSP is adding new clients, that’s a reason to celebrate. However, if your revenue is stagnant as you add new business, there’s something wrong. This must be addressed if you want to increase your revenue.
According to MSPCFO, a business intelligence platform for MSPs, the largest driver of growth in monthly recurring revenue (MRR) isn’t new customers. Instead, it’s the growth of existing customers. 60 percent of your growth should be coming from your base while about 40 percent should be coming from new opportunities.
Your client base shouldn’t be churning so quickly that new business is replacing lost business. If you aren’t keeping up with your clients as you add new business, your top line will remain flat and your bottom line will shrink. If you’re experiencing the flat revenue line that comes with a revolving door, focus on service before you make any further investments in sales and marketing.
The best way to explain this is with a story about my 17-year-old daughter. Every summer, I preload my daughter’s bank account with money for whatever she needs. (This has eliminated us arguing about what she wants to buy – Starbucks, makeup, whatever. If the money runs out, you’re broke for the rest of the summer, don’t ask for more.)
Last summer, she wanted to go on a class trip to Berlin in the fall, and her father and I agreed she would have to pay for it herself by getting a part-time job. She got a job, but she didn’t stop going to Starbucks twice a day while she was working. At the end of the summer, when she deposited her paycheck, she was no further ahead than she had been in July. So, she did all the work, she did it well, she focused on new revenue, but she didn’t focus on preserving the revenue she already had. When she deposited her $1,600.00 paycheck at the end of the summer, she had $1,600.00. That’s a lot of work to not move the needle.
Most of your business-building expenses are centered around acquisition, not maintenance.
The cost of acquiring a new client is high. In fact, most of the expenses that will move your bottom line are centered around finding, nurturing, and winning new business. Your client-retention costs are minimal compared to your client-acquisition costs.
Consider the expenses associated with finding new business. Lead generation, sales development, marketing, proposal development, and presentation. These are costly from a “things we have to purchase” standpoint and an “opportunity cost” standpoint. Think about what you could you do with the time you’re spending cold calling, emailing, attending trade shows, planning, and so on?
The better and faster you can onboard clients, the more likely it is that you’ll keep them. Clients who aren’t onboarded well are easy to poach. If you don’t deliver on what you promise, you’ve created a client that is riding out their contract. You know who benefits from all the hard work you did? The next MSP they hire.
You must remain vigilant to retain clients. Your competitors are contacting your clients every day. They want them as badly as you do. The 100 phone calls you want to make to new prospects today? Earmark some of those to check in on your current clients. Are they happy? How can you make their experience with you even better?
Once your clients are successfully on-boarded, happy, and satisfied you can start up-selling them. Is every client on your roster buying everything you sell or are you going in conservatively with lower-end package deals, afraid to ask them for larger commitments? Have you successfully developed your service offerings so you can show your clients the value that comes along with a larger investment? Are you leaving the wedge sale as an open door for a competitor, or are you asking for the business yourself?
New business is essential. If 60 percent of your growth is coming from current clients, that still leaves 40 percent of your growth to new business. The places you’re potentially failing clients? Some of your competitors are falling down there as well. Make yourself a list of areas to improve. Assign a team to ensure you’re fixing everything on it. Then go out and hit your competitors’ client lists with a line card of reasons they may want to consider changing providers. Using well-thought out and well-timed questions about their on-boarding experiences and their levels of satisfaction with their current providers will go a long way towards you adding new business to your roster. Fix the hole in your bucket, and pretty soon you’ll need another bucket.
Read Carrie's previous blogs, 5 Benefits of the Wedge Sell, How MSPs Can Generate Outstanding Customer Referrals, How MSPs Can Measure Sales Success, and How MSPs Can Successfully Handle Outbound Prospecting.