Kicking Off The Year Right: An MSP's Guide for Success In 2024
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A Fresh Start:
Imagine this: a brand-new year, a fresh start, and boundless possibilities.
As we kickstart a new year, Managed Service Providers (MSP’s) have the opportunity to set their business up for a year filled with growth and success. However, this journey isn’t a stroll in the park; it requires a well-thought-out plan and a strategic approach to ensure that your MSP business thrives in the upcoming 12 months.
Whether the year brought outstanding achievements or a mix of highs and lows, you’re likely working hard to end the year on a good note. Given this, you may not have had the opportunity to focus on the next year.
Here, we offer some guidance to kickstart the new year and set your business on the right path.
Section 1: Mastering the Message
The Communication Conundrum
One of the common yet critical mistakes that MSP’s often make is neglecting communication within their business. Busy schedules, the pressure to hit short-term targets, and a lack of strategic planning can lead to a vicious cycle.
Reminder – You need to be working ON the business and not IN the business.
Imagine running an MSP without the right stats and figures, no business plan for the next 12 months, and no time to sit down and strategize; It’s actually more common than you might think.
In the high-paced world of managed services, it’s not uncommon for MSP owners to become immersed in the day-to-day operational aspects. The urgent demands of providing IT support, resolving client issues, and meeting immediate needs often overshadow the importance of clear and consistent communication. Without this, your team, your clients, and your growth goals can suffer.
Get your communication strategy right, and your team will be in sync, understanding their roles and the bigger picture. Think of it as the vital tool that lets your team share ideas, feedback, and information, helping them make well-informed decisions. Neglect it, and you’ll watch invisible barriers creep up within your organization, leading to confusion, inefficiency, and missed opportunities.
The Impacts of Late Planning: Breaking the Vicious Cycle
Late planning can be disastrous for MSP’s, creating a vicious cycle that’s hard to break free from.
Picture this scenario:
- An MSP owner, overwhelmed by the day-to-day demands of their business
- Lacks the right stats and figures to assess their current situation
- As a result, they don’t have a comprehensive business plan for the next 12 months
- And they certainly don’t have time in the hectic fourth quarter to sit down and strategize for the year ahead.
This perpetual cycle of firefighting to meet short-term targets can be relentless. To escape this, MSPs need a mindset shift and a commitment to strategic planning.
Late planning often results in reactive decision-making, addressing issues as they arise instead of proactively shaping business strategies. This reactive approach can lead to chaos, with constant firefighting becoming the norm. This not only burdens the team but can also lead to burnout and decreased morale.
Not only are you making decisions reactively, but you may find yourself only reaching decisions partway into Q1, forcing you to adjust targets. This adjustment might impact the year’s overall success.
Section 2: Navigating Strategic Growth
Rule of 78 Cells: The Value of Early Planning
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Enter the “Rule of 78 Cells.” This principle illustrates the implications of falling behind on your yearly Monthly Recurring Revenues (MRR) targets – a core determinant of MSP’s success. The numbers can be daunting and serve as a stark reminder of the value of early planning, especially in comparison to project and ad hoc work.
If you begin planning in this scenario, you’re essentially six, MRRs behind your yearly target, meaning your team’s goal must be adjusted upwards.
Instead of dividing 210 by 78, it’s essential to find a new divisor since you’re starting in Q1. To illustrate, deducting 6 from 78 equals 72, so dividing 210 by this new factor raises your monthly target to 2900.
You can also download our free template here for your own customization.
The Rule of 78 Cells serves as a stark reminder of the value of early planning. When you prioritize MRR, you take control of your trajectory. You have the time to gather data, analyze trends, and make informed decisions. This approach leads to setting realistic goals, allocating resources efficiently, and positioning your MSP for growth.
Late planning, on the other hand, forces you into a reactive mode, where you’re constantly playing catch-up, leading to suboptimal outcomes.
Reflect and Strategize: Assessing Your MSP’s Past and Future
Before looking ahead, it’s essential to evaluate your current situation. You need to have a clear understanding of where your MSP stands right now. This includes analyzing key performance indicators, assessing your team’s performance, and reviewing financial data.
Essentially, you’re taking a snapshot of the present.
Next, consider your long-term vision for your MSP. What are your ultimate goals and where do you envision your business in the next several years? This long-term vision serves as your guiding star, and your past year’s performance should be aligned with it.
Once you’ve looked at where you are and where you want to go, it’s time to outline your growth targets. These targets could involve increasing your Monthly Recurring Revenues (MRRs), completing projects, acquiring new customers, or expanding your services. For instance, if your long-term vision involves doubling your client base, this is the time to strategize how to achieve that.
Navigating The Product Life Cycle
Additionally, it’s crucial to evaluate your research and development needs and whether you need to invest in new technologies, tools, or skills. Technology evolves rapidly, so it’s important to stay ahead of the curve.
For this, we like to use the ‘Product Life Cycle’, which plays a vital role for MSPs:
You can download our ‘Free Roadmap Template’ here
It helps MSP’s understand the journey of their services, from introduction to eventual retirement.
- For instance, when you first introduce a new service, it enters the “Introduction” phase, where you’re building awareness and gaining initial clients.
- As it gains traction and becomes a core offering, it enters the “Growth” phase, where customer numbers and revenue expand. Afterward, you might reach a point where the service matures, signaling the “Maturity” phase. Here, you’ll focus on customer retention and perhaps enhancements.
- Eventually, there comes a time for “Decline,” where the service may become outdated or replaced by newer offerings. Recognizing where your services stand in this cycle can inform your strategic decisions, from marketing efforts in the Introduction phase to deciding whether to phase out older services in the Decline phase.
Identifying your research and development needs enables effective resource and budget allocation. However, it’s vital to determine when investing more resources into a service in its “declining” phase, as it might not be the optimal move.
This strategic approach ensures that your efforts align with service lifecycle dynamics, directing resources where they have the most significant impact for sustained growth.
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Section 3: Building a Profitable Foundation
Setting Goals and Objectives
When you’re setting goals and objectives, it’s essential to consider both business and personal development goals.
Business-wise, you may aim for objectives like increasing revenue, enhancing client retention, and expanding your services. However, a strategic approach involves looking at your existing client base.
Instead of focusing solely on acquiring new clients, explore the potential to offer additional services to your current clients, thus embracing cross-selling opportunities. This not only deepens your engagement with them but also leads to more significant revenues.
The Role of the Organizational Chart: Streamlining Success
Now, as you embark on your journey to increase revenue and clients, you need to consider the structural implications for your business.
In 2024, it’s a good idea to revisit your organizational chart and introduce a “roll chart”.
The organizational chart outlines the roles within your company and the individuals filling them. Consider the financial impact of changes in staff, roles, or resource allocation on costs of goods sold (COGS), which can influence your gross margin/profit plan for 2024.
This alignment ensures everyone in your organization understands their responsibilities and contributions to your growth objectives.
In other words, it’s about making sure your business structure aligns seamlessly with your goals for the year ahead.
Team Collaboration: Beyond Sales
If you’re an MSP owner who also handles sales, it’s crucial to recognize that your business’s success relies on the entire team, not just the sales department.
Emphasizing the importance of involving every team member in your business plan is key. Building a thriving and sustainable business goes beyond individual roles; it’s about creating substantial value that persists even in your absence.
If you do have a sales team, align them with your business plan and emphasize the significance of a well-structured commission plan. This not only motivates your sales team but also ensures the right behaviors and attention, leading to the achievement of your business targets.
Remember, if you’re the sole driver of sales in your business, it’s time to shift your perspective. Your team, including marketing and finance, should fully grasp the business plan and contribute to its success. Build a business that holds value even when you’re not directly involved.
Section 4: Financial Planning and Continuous Assessment
The Money Map: Financial Planning
Do you have a well-structured financial plan in place? If not, it’s time to explore what we refer to as the “value creation plan.”
This plan is your roadmap for the next 12 months, broken down into a detailed monthly financial forecast. What makes it invaluable is its ability to anticipate your resource requirements accurately.
- Picture your IT support team, operating at peak efficiency, serving 240 endpoints per engineer. Now, let’s say your value creation plan indicates a significant growth trajectory, with plans to onboard an additional 300 endpoints.
- In this scenario, the value creation plan serves as an early warning system, signalling the need for an extra engineer to handle the increased workload. While this proactive approach signals the need for an extra engineer to maintain service quality, make sure to recognize that adding resources also impacts the gross margin outcome against the plan, introducing additional costs.
But it’s not just about resource allocation; it’s also about effective communication.
The ultimate goal of this process is to host an all-hands meeting where you clearly articulate the direction, reasons, and benefits of your growth strategy to the entire team.
Creating a Sales Pipeline: The Power of Team Collaboration
When establishing sales targets for MSP’s, remember that it’s not just about setting an overall figure. To maximize success, you should break down these figures to individual team members, including pre-sales professionals.
The reason is simple – your team needs to know what good looks like, what’s in it for them and how to achieve those targets.
Collaborative synergy within your team is the key – If one piece isn’t working in harmony, it can impact the entire process, and the overall goals may fall short.
Aligning Your MSP’s Mission and Values: Client-Centric Approach
Maintaining alignment between your mission, values, client base, and team is vital.
- Start by examining your client base, ensuring it’s profitable and sustainable.
- Then, review your mission statement and values, making sure they resonate with your current business objectives and client needs.
- Lastly, keep an eye on your team’s dynamics, ensuring they share the same vision as your MSP’s mission.
Regularly revisiting and aligning these elements ensures your MSP stays agile and client-focused, enabling you to make informed decisions on hiring and firing team members.
Continuous Assessment: A Year-round Practice
Good practice throughout the year: Avoid the common mistake of waiting until the last quarter to evaluate your financial results. Instead, make it a habit to monitor your financial performance regularly and make adjustments as needed.
Tracking key performance indicators and regularly assessing your performance will enable you to adapt and optimize your strategies in real time. Then you can create a basis of what needs to happen for next year.
Launching Your MSP’s Year on the Right Foot
Beginning the year right for MSP’s is all about communication, strategic planning, and a dedication to achieving growth and excellence. We’ve covered a wide array of strategies and insights in this guide. Now, it’s time to put these ideas into action and start your journey toward a successful year.
Remember that this isn’t just a one-time effort; it’s about maintaining momentum throughout the year.
Starting strong is only the beginning – the rest is up to you.
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