All successful MSP business models are built on recurring revenue streams. When starting out, most MSPs typically have a large number of break-fix customers. This means they only make money when their client has an IT problem and something needs fixing.
As your business and product-service delivery model matures, the need for predictable income streams increase. To transition from “break-fix” invoicing to a recurring revenue stream model, you need to convince your “break-fix” customers to sign you up as a managed service provider.
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Making the Business Case For Managed Services
However, making the business case for this can be quite difficult.
Customers, understandably, resist the transition to managed services for various reasons and the burden lies on you to assuage their fears and show them the benefits of signing a managed service contract.
Here are some steps you can take to get your break-fix customers to switch to a managed service model.
Define Your Core Service Offerings
First off, you should reevaluate your core services to ensure that the value you are providing as a managed service provider solves the pain points of your break-fix customers. Identify common problems between your break-fix accounts and create an effective solution.
One of the reasons why customers resist making the switch to managed services is that they see no reason to make periodic payments for a service that delivers little or no value. Creating a packaged suite of service that appeals to their needs can help convince your break-fix customers to transition to managed services.
Further reading MSP’s Bundling Guide: How to Build Your Offer
Define Your Proposition
Demonstrating the limitations of a break-fix model and how it can hurt business operations or lead to downtime can get your break-fix customers to switch. MSPs are held accountable by their service level agreements (SLA) — a contract that guarantees a certain level of service delivery. This means that issues and problems are resolved within an agreed-upon timeline — something that break-fix customers typically don’t get to enjoy.
By signing a managed service contract, clients are reassured that there will always be someone readily available to resolve issues and attend to their every need. When drafting an SLA or MSA, always seek the advice of an attorney to ensure that the terms of your managed service contract are enforceable. Such attorneys should have extensive experience in the IT space and be knowledgeable about the rapidly evolving cybersecurity landscape.
There are numerous reasons why a managed service model is better than break-fix and educating customers on these benefits is a great way to get them to switch. You can share stories of some of your most successful clients and build a business case by leveraging industry research and data. Show them how managed services help organizations streamline their IT operations to deliver better products and services to their customers.
Further reading MSP’s Guide to Sales Funnel and Sales Operations
Most customers like to bring up the cost of managed services. They feel that paying you to resolve issues as they come up is cheaper than paying periodically for a service that they may or may not use.
Create a chart that compares over time the costs of a managed service model vs. the amount clients currently spend on emergency repair and maintenance services. There is a good chance that clients will see the value of a managed service model, especially when they factor the upfront costs of the technician’s hourly fee, purchase and installation cost of new hardware and other associated costs.
While these are convincing reasons why break-fix clients should transition to managed services, don’t expect them to get on board right away. Usually, there are reasons why your clients are skeptical of signing a managed service contract. At this point list our common arguments against managed services and prepare savvy responses that break down the resistance of break-fix customers and get them to make the switch.
The managed service model is valuable to both clients and MSPs. It provides you with a predictable source of revenue and makes more financial sense for your business. Simultaneously, clients have round-the-clock access to IT expertise, resulting in improved workflow efficiency and better data security due to a proactive (rather than reactive) approach to IT operations.
Following through with the above strategies will help you better engage with break-fix customers and get them to sign a managed services contract. Not only do your clients get better levels of service and cost savings but they also derive better satisfaction and improved productivity from your services — key factors that contribute significantly to the long-term profitability of your MSP business.