Why are MSPs struggling with IT sales these days?
We think that one of the biggest reasons for this is the failure to separate different kinds of sales, and trying to use one strategy to sell everything offered.
In the days before cloud-based applications and storage, when clients had to maintain a lot more of their own IT infrastructure, when the inevitable problems arose there was a clear need for the MSP to be there - to use a bit of business-validated tech mumbo-jumbo, and the sales were natural. Because the client had obvious identifiable business pains, the choice of solution was straightforward.
These formerly ready solutions are now fragmented; company infrastructures are much less homogenous, so our model of one-size-fits-all IT service is no longer appropriate. In short, sales have become more complex.
So let's simplify the different IT sales roles and address them.
1. Upgrade T&M clients to MSP
Problem:
We have so much potential on existing T&M clients, but they have not upgraded to the MSP recurring contract yet - we’re leaving money on the table.
Challenge:
In order to import these existing clients we must demonstrate the business value of the MSP contract versus the T&M contract, but C level executives are rarely aware of the subtleties of this distinction and usually don’t put them high on their list of concerns.
Solution:
First of all, you have to identify who could benefit from the MSP contract at all. Companies of 15 or fewer users rarely suffer the complex problems an MSP contract solves. Give them the service of T&M, but don’t wait around hoping to see great potentials arising around them.
Second, you have to produce a business comparison between the T&M and the MSP contract in terms of delivered value, rather than on the features. To that end we developed the Managed Services Platform scoring system, which illustrates the difference in the competitiveness of IT with T&M compared to that with an MSP. This practical measure commonly generates T&M scores of 10-20 out of 100, and 45-55 for operations with managed service provider. This is their introduction to what we call the reframing process.
2. Acquire new clients
Problem:
There’s no getting around it...it’s real work to go through this process effectively.
Challenge:
This is a long process; you have to create leads, qualify them, and invest a lot of time with no guaranteed results. Long hours and multiple meetings go by without us and the client reaching alignment. We know there’s opportunities, but those who would benefit often seem unable to see them.
Solution:
After the first initial meeting, we usually use the IT competitiveness scoring we used in T&M. The role here though is different; it is is to evaluate the business context of their current IT setup. The scores show what they have going on at present. Our role is to assess what score they want to reach.
So if they score a 30, why is that? Do they lack the wherewithal to score higher, or is it a matter of choice? We can then use the different topics within the composite score to introduce possibilities. This shows them a clearly structured way to assess how they can enhance their IT’s impact on being a competitive company. Also, the benchmark score gives them a reference point for them to compare their performance to the industry.
Finally, with this approach, client acquisition could consume less of the upper level personnel's time as the process is standardized and proven in use.
3. UPsell third party productized services
Problem:
For some problems, we are tasked to find the solutions.
Challenge:
There are so many XaaS offering MSPs that could sell (virtualized desktops, BDR, DRP, etc.). Most of them are disrupting one or another current MSP service, so it is quite difficult to fit the portfolio. For example, Office 365 is now disrupting current Hosted Exchange solutions, and BDR solutions are disrupting our existing backup practices, and so on.
Solution:
This is product-based selling, which is very different from traditional service-based selling. Although the product is a service, there is a beginning; an end; and a package with features. These are not the flexible services we usually sell to customers.
That means that there are are certain problems and opportunities that can be dealt with by features you could put on the contract page. For instance, you could have a slide deck, and the problem is solved therein.
However, you have to determine if clients are interested in the features and then sell them, and because we’re talking about product selling, a different IT sales approach is required. Hire IT sales representatives for that and let them do the job...give them the quotas and products, and train them. Then you can sell those items since you’ve defined the problems have been through a minor discovery, and consulting will follow.
4. Complex Solution Selling
Problem:
Complex solutions like MSP services are hard and slow to sell, but are where the big money is. These are the complete cloud adoption and virtualization projects, ERP, CRM, and B2B E-commerce solutions we are always waiting for.
Challenge:
Selling complex solutions is a slow process. It involves third parties, and figuring out the needs of the client and evaluate the available solutions. In this case, it is very unlikely that we are operating without any competitors, and while our services are not always measured, our products are. So even when we’re great, they have their own priorities, and could choose another product.
Solution:
In most cases the party with the better understanding of the client is going to win, so again we highly recommend the IT competitiveness scoring tool, as it will distinguish us from our competitors. We can be more sure and precise about their priorities, problems and hidden opportunities. In this way we‘re able to develop a more appropriate and tailored solution, and highlight this in our presentation. Moreover, showing the business context around the IT solutions is always beneficial. It means we spell out the "why" of the solution, instead of the "what" and "how." The client will understand from their own point of view why they need those in their operation, sales, marketing, etc.
Conclusion
First, understand what you’re selling. Don’t use one method for all different types of sales, sell only one thing at a time, and don’t sell everything at once to a new client - you’ll likely mess up the flow of processes, and leave the client confused.
Second, use a business scoring tool to align your prospects and clients with their business perspectives. It’ll helps you close deals faster and with a better success rate.
The Hard Truth: network assessments can end up as an MSP's worst enemy
Most IT managed services providers are heavily dependent on some form of network assessment practice during their MSP sales process. They gather information on all the prospect’s devices, identify problems and performance-related issues, and then present a comprehensive report, with an action plan that aims to fix those problems.
Although this practice can surely help win over new clients, it also can be the single most important obstacle they face down the road, in terms of further work with them.
The mistake is that the network assessment puts the MSP into the "techy slot". This is a matter of the client's perspective; executives put potential vendors into this slot to make their busy livese easier and simplify their world. There are slots in the executives' minds for many things: roles as consultant, service provider, software company or industry, HR, IT, or accounting.
There are also varying levels of importance to them: high (business-related), medium (operations), low (support), and of accessibility, such as the scarce/premium, easy to access, and commodities. So for IT providers to excel now in the industry, they should seek a business-related consultant slot where there are high levels of scarcity, rather than staying in the IT slot, as a service provider, low-level support or commodity slot.
The untold story is that these first impressions are very difficult to change later on. Once the deal is made with us pegged in the tech slot, it becomes a self-fulfilling prophecy; instead of being judged on our experience and skills, we are sold short by common perception. If they see that our company is professional only on low-tech ground work, then they’ll subscribe to only low-level tech services, and we’ll of course perform those eminently well, securing their perception. A negative outcome of a positive feedback loop - closed. Done. Locked for eternity.
That’s why a different first impression is crucial. (There’s no second chance at a first impression.) If providers cannot manage this first impression, they could be dropped into a slot from which there is no way out. It is the slot we could call "the deadly tech slot." This isn’t what the network assessment is supposed to do - relegating us to the lowest possible category in the mind of our potential clients and a role as a low-tech solution provider.
Ok, I admit I’ve never actually heard any IT service provider complaining that they’re in the tech slot. They proudly purport that they’re in the business / trusted advisor slot. However we all know the difference between how one is seen and how one thinks one is seen. The fact is that there is a high chance that the client's perception is completely different than your company thinks.
Obviously, no one wants to be in the "tech slot" nowadays. It limits potential growth opportunities, control of the client, influence on decisions, profitability, and so on. Everybody wants to be a high-level outsourced IT executive and IT department for their clients. So then why and how it is happening anyway during the network assessment process?
1. Having the wrong conversation
First of all, the network assessment is driving the wrong conversation. It centers around technology-based, device-based, and tech-based ideas...about the flaws and risks and reactionary firefighting solutions.
This is a hot topic for the provider, but C-level decision makers usually don’t much care. They want a conversation about how to go from good to great, but instead are dragged into one about how to go from lame to mediocre.
The cause? The network assessment leads only to the service provider's concerns instead of the client's. There is no business-relevant context; only the "IT benchmarks" of mostly irrelevant artificial metrics that skirt around what the focus should be.
2. Causing the Wrong Client Feeling
Detailing to the clients how badly they’re performing puts them in a defensive position and thus puts the solution provider into an offensive light. The report can show that the clients have little control over their poor decisions, unwise expenditures, and weak ideas in the field, so they can easily feel backed into a corner.
They may even think it irrelevant - they already know they could be doing better, why do they need to sit through this - so they may not carry the conversation any further. Or when they do go through with the "investment" it’s because they’re frightened out of their comfort zones regarding potential risks, etc.
Thus, the decision is not motivated by will and vision, but by pressure, which easily fades away after the tension eases. These emotions are not ideal on which to build a relationship. Moreover, such feelings can misguide the provider about a sudden quick win-- they can sense huge opportunities that actually do not exist.
3. Creating the Wrong Environment:
The wrong environment does not help to carry business conversations and enable positive insights about the company. It does not focus on hope, enthusiasm, optimism, or growth—the typical entrepreneurial values. The environment our clients should be given is one where they can brainstorm... about the company, future projects, improvements, etc.
If we’re not encouraging a creative, "think big" environment, there will be no major projects, improvements, or developments. Only cost will matter; they will invest as little as possible because they don’t see the real value in what we can offer. They focus on problems, (most of them artificial) and how to fix them, rather than on how to invest in the future and create a compelling vision together.
How to fix this process - to change the game by creating the business context first.
Put the network assessment aside for a while, until we have created our image as business partners. It will remain a crucial element of the process, but not define the process itself. We must create the business context around the IT, and then the IT context around all the IT-related activities that the network assessment can measure.
1. Building the business context:
We need to act as IT consultants, using techniques consultants use to acquire clients. We have to be curious about the non-IT-related fields, such as how they grow, their customer challenges, and how their industry is changing. Not in a small-talk way, but with comprehensive, tough, thought-provoking conversations.
This will push us out of our comfort zone a bit, but relax! As a fellow business owner, you have more in common than you might think. Asking questions, actively listening, and not giving any advice up front are all key.
Peel the onion; dig deeper into the why. In this way we’ll create trust and understanding. Believe me, very few companies are doing that, so the client will be delighted to talk with you. You’re going to be a very rare breed; a scarce resource to find.
2. Building the IT execution context:
Once we understand their business context, only then can we drive the conversation toward the technology field: the leadership of IT, the people inside, the users, the company culture...by actually seeing their devices, watching how they use them, discovering their personal goals, etc.
Here, the critical element is to find out why they may have IT challenges, how they are operating, who is responsible for the field, and what other duties or priorities they may have. What is the level of their operation maturity? We have to understand the management issues or problems that can cause mediocre IT performance. We have to assure them that we have a complete view of what they’re facing.
We see the root of the poor decisions they might have made, as well as the problems they face right now, so we’re starting from the very top, from the very core of the business, and most importantly, we’re considering the individual motivations. After clarifying their IT context, we can then do the network assessment to get a clear picture about the specific problems and situation.
The result of the process:
After gathering all the business context discovery experience, and having all the IT execution discovery experience, we’re going to see the results of the network assessment completely differently, and we won’t concentrate on problems and challenges or create fear and bad feelings in the clients.
Instead, we’re going to focus on the big picture and the potential opportunities to make their company more productive: the benefits of our initiatives and a positive picture which will be much more likely to engage them. We can and must use our existing discovery tools, but only after we’ve created the context of our presence. This is what we call the reframing sales process, where we can change the game.
The 3 building blocks of a remarkable MSP sales process
I’ve been talking with a fellow MSP entrepreneur recently about sales. He’s been suffering the inability to find the right someone for MSP contract sales, so he or the other directors are saddled with the sales work.
This is actually the usual situation among IT managed services providers... I see it all the time. The directors, CEOs and company presidents, are doing the sales for MSP services and neglecting their bailiwicks...developing the business.
The problem however is not HR, but the nature of the operation. Usually, when you find yourself unable to hire someone, and the high level staff are stuck doing it, you only see that symptom and not the root cause. In this case, the operational problem is causing the HR problem. The process is so complex that it narrows your field of potential hires. Only those with the most experience can manage it, and those people are most needed in other roles.
So let's see the typical MSP sales process of an MSP 2.0
- Lead generation: by referrals mostly, sometimes through networking.
- Opportunity qualification: no protocols in place for that, so everybody is the target group, from 2-5 people shops to enterprises of 200 and up.
- Client discovery process: technology-based assessments suited to ‘techs’, but the C-level of the MSP can also talk business with the client.
- Problem presentation: only a C-level MSP can properly execute this.
- Proposal: coming from the C-level again, preparing the solution
- Close: handshake between the client and MSP executives
- Follow up, execution, onboarding: this is where process starts to be seen
...and the obvious problems arising from it:
- This is not a scalable process. Each move forward costs the executive's time and jumbles priorities.
- Very hectic sales and operations cycles...so if the sales are brisk, the operation will also be demanding on the C-level, who will have to focus on execution. When the sales slow down, IT companies will be losing opportunities in the funnel as a result.
- The C-level is stuck in account management positions. They have the trust of the client company, so in every future endeavour the client will expect them to show up...and they are relegated to the delivery team.
- If nobody else has authority and accountability on the sales, only the C-level can do it.
- Devalues the role of the C-level of the MSP to the operational level in the eyes of the client.
- Working in the business instead of working on the company.
So currently the expected salesperson is by default a C-level executive, and not a dedicated sales professional, of whom there is no shortage in the workforce. Since we can’t change the facts of the status quo, we’ll change the sales process.
1. Create MSP sales roles:
There are three roles in sales, not one. You can distribute them to your existing people, or of course hire part-time or full-time pros.
Inside sales: creating qualified leads to generate opportunities, communicating by email, phone, and social networks.
Outside sales: visiting prospects, pre-sales, sales, nurturing the account, closing sales, visiting clients regularly, all the time spending company money on fuel, food and CRM software licenses.
Executive: maintaining high level connections, making conversation, meeting with clients when processes are stuck, or whenever executive encouragement is needed.
Account manager: all the up-selling to existing clients, and checking in on a monthly basis to do monthly/quarterly activities and to calculate the required budget for upcoming projects and new products.
If you’re able to separate these different functions, you’ll find you can get the right people from the labour market to work for you and achieve real results.
2. MSP sales process as a system
The sales process can be very long and complex. This isn’t a grocery store where the problem of hunger is solved in every aisle with little or no consultation. Our clients’ problems are layered and technical, often hard to see, and we are the ones who have to put together the solution. We need to actually get to know and understand the client. So for every step along the journey we better find the best practices and separate responsibilities.
Draw a funnel and divide it into three horizontal segments. These are the fundamentals of a remarkable MSP sales process:
The first one we call Top Of The Funnel (TOFU).
This is where prospects are made aware of our existence...they check our website, read our blogs, newsletters, etc. The best approach at this point is to provide valuable content in these mediums. It includes both inbound and outbound marketing...either they’re coming to us, or we’re drawing them.
The former is more likely to be long term and more engaging, while the latter is the traditional (not as fun) cold calling, ad-driven marketing we all know. Both have their merits; it’s just a decision where in the marketing and inbound sales territory you want to invest.
The second is the Middle of the Funnel (MOFU).
This is the evaluation period...we’re talking with the clients, discovering their company, and presenting our expertise. This person to person sales is the most effective method of doing business, with supportive inbound marketing materials like relevant blog posts and articles we’ve published. This helps distinguish our unique value proposition, so it’s critical that you have a system in place. This is the outside sales role, with support from executives, where we have to show who we are, and what we can do.
The third part is the Bottom of the Funnel (BOFU)
This is where the yes/no decisions are made, where we have the proposals, action plans, and company references. The critical item is the product - it needs to demonstrate it fits the needs of the client, so our ability to articulate those issues, the root of the problems, and a viable solution and a professional proposal is what matters.
You need a process to get your sales force in front of the client as soon as possible. This is again the responsibility of outside sales. The executives will come in only if necessary...they shouldn’t be tasked to close deals. If this is happening, then they’re not available for the higher level work only they can do.
After the closing, the growing phase is coming
...where you’re trying to sell more services to your existing clients, and performing the quarterly business reviews, yearly strategic sessions, and monthly phone calls. An annual executive check-in (not during the renewal phase) could further provide valuable feedback for both sides.
3. Automate and standardize
Now that you have the roles and the processes in place, standardization and automation come into play.
For TOFU, you can use marketing automation packages like Hubspot. You can leverage LinkedIn for prospecting, or any other cold calling agency you deem fit. Here’s where your scripts, email templates, and pre-written referral letters come in handy. Don’t over-think though: grab them from your favourite sources and have someone custom-edit to your enterprise.
For MOFU, you can use CRMs like Zoho, Salesforce, or the built-in PSA modules. I am surprised that only 20% of PSA users are using the CRM functionality or CRM integrations at all. A basic fact of MSP sales is that it’s usually time and problem based.. If your timing’s not right, you won’t be able to sell. You should nurture these prospects over time, so when the inevitable troubles come, you have everything covered.. Without CRM functionality, it’s just not going to happen.
For BOFU, you can use a proposal, an action plan, leaflets, agreements, or contract templates. However, usually regardless of all your effort, the client will flip to the last page where the pricing is located. The automation in this regard is more difficult as it involves person-to-person interaction as well.
The problem specifically involves the follow-ups, price recalculations, version revisions, and special clauses. Thus, you have to define follow-up processes, your non-negotiable bottom price for first clients, and the administration process for setting up new accounts. Taking care of these matters in advance will streamline your process so you can strike while the iron is hot.
Conclusion
No, this isn’t rocket surgery. Nonetheless it requires a fair amount of planning and dedicated work to accomplish, but the benefit is that you owners will have more free and creative time. If you’re not able to develop this process, automation, and roles, you will be working too much in the company rather than on the company, and squandering your entrepreneurial spirit on breathing life into your organization.