The Managed Service Provider business model is a complex one and comes loaded with all sorts of challenges. One of the biggest issues is being able to drive predictable growth for the company and to build an operational maturity that can manage that growth at the same time. You’re beset from both sides: MSPs will suffer from their growth being slow and all effort will go into desperate tactical marketing and sales efforts. They’ll also struggle if growth is too fast and all efforts are spent on a tactical fix of their service delivery.
Progressive MSPs have deserved a strategic answer to move from the reactive firefighting mode to a proactive business building model. Let’s review how to solve this problem once and for all.
A fellow Hungarian psychologist Mihaly Csikszentmihalyi recognized and named the psychological concept of flow, a highly focused mental state conducive to productivity. He wrote an amazing book on the subject called “Flow: The Psychology of Happiness”. His studies revealed that what makes an experience genuinely satisfying is 'flow' - a state of concentration so focused that it amounts to complete absorption in an activity and results in the achievement of a perfect state of happiness. Flow has become the classic work on happiness and a major contribution to contemporary psychology.
The foundational idea is that if you personally face a challenge too big for your skills you feel anxiety as you are overwhelmed by the task in your hands. However, if your skills are developing and you are not facing challenges you feel boredom and lack of motivation. What he pointed out was that the challenge and skills have to be in balance to be able to be happy and grow as an individual.
We’re sure you can see how this idea can translate to growing an MSP…
If you make the analogy apply to growing your managed services you can envision a strategy.
MSP’s Flow state is needed to grow your MSP in a sustainable way. Imagine how it would feel to:
Your MSP’s Flow state is when Operational Maturity Development is balanced with Growth. This is the state where your growth is sustainable, people are motivated, issues are minor, it’s fun to go to work and an exciting journey to run the company. The owner can make enough money to set aside profit for personal reasons but invest back to the company as well. There is a satisfying sense of balance between working “in” the company and working “on” the company.
On the horizontal axis, you see your MSP skills as Operation Maturity which means more professional people, organization, leadership, processes, and automation. This usually leads to higher expenses, salaries, and overall cost increases. If sales aren’t sustainable to match, growth leads to cash-flow issues as expenses overtake revenues.
On the vertical axis, you see the growth challenges your MSP is facing which means releasing new services, selling more projects or landing more new clients. This usually leads to service delivery issues such as new client onboarding issues, piling up projects or dropping the ball on day-to-day operations.
This is the state when the MSP is too small to be able to work enough IN the business to generate quality delivery and too small to be able to work enough ON the business to be able to overcome issues and grow. This is not where an MSP should start, but it’s where MANY MSPs find themselves after a successful start, by servicing too many not ideal clients, generating too many services, growing without any structure and entering unprofitable agreements This becomes a constant battle to make ends meet, and a struggle to escape the vicious cycle. This is not what bankrupts and MSP, but is where they get stuck for a long period of time without realizing it.
The reason for being in any of the yellow - not ideal states is the lack of balance between Customer Development (Win New Businesses and Expand Existing Client Base) and Internal Development (Operation Development and Service Development).
The operational pains (like service delivery issues) force the leadership to focus on fixing problems and pay less attention to winning new businesses or expanding the current client base. They hire new people and buy new tools to let people work on internal projects (which reduces the billable hours overall) which leads to cash-flow issues.
The cash-flow issues force the leadership to shift focus and start generating demand, go after existing clients, do QBRs and close more projects. As the pressure is high they likely close deals with less ideal clients or promise services the team cannot deliver in a sustainable way. They close more projects with clients who need more development, consuming disproportionate resources and so on. The operational pains start to arise again.
This vicious cycle pushes the company from one yellow state to another without staying in the middle for any valuable period of time.
On the contrary, proactive business building is when the organization stays in the “flow state” most of the time. They might take on a new client who is not ideal, they release a new service half baked or simply not paying attention to high-value clients for a while. These are natural imbalances but none of them alone pushes the organization out of balance to force the leadership to shift gears rapidly. Internal Development and the Customer Development is balanced which results in less turmoil, issues, problems and needed damage control.
This might lead to an obvious question: how to actually grow in a proactive way? What is the solution for that? What are the blueprints? Can I follow a 10 step formula?
The bad news: there is no solution…. you have to figure it out by yourself...
The good news: there is no solution… your competition has to figure it out themselves too.
The bottom line… if you excel in this, you can leave your competition behind and wondering how you do it!
I do not want to leave you hanging without giving you a chance to start solving the problem. This is the first article of many we produced on Proactive Business Building. Let’s take a sneak peek of the model we are going to introduce to give you a competitive edge over your competition. The model is not going to solve your problems but will give you a reliable process for you to see negative trends, causes and potential fixes to get this done quickly.
Your growth potential depends on the four different elements we have covered before:
Internal Development:
Customer Development:
As you see we can put those elements into an easy thinking framework and call it Growth Potential. This helps you to wrap your head around the concept of Development-type activities for new services and new clients and Operation-type activities for Operation Maturity and Client Engagement.
It might be obvious that these quadrants are highly interdependent. You cannot be great in one without being great with the other three.
There are key activities you can execute better to unlock your growth potential. Here are the 20% activities which will lead you to the 80% result.
New Service Development
Win New Businesses
Operation Development
Expand Existing Client Base
To unlock the key activities we have been building an assessment and action plan tool to be able to quickly assess your growth potential. The result is a score over the 4 building blocks to review the health of your growth over the various categories.
The assessment gives you an idea where your company stands and what actions need to be taken to get back to a “Flow State”
Stay tuned as these items are going to be published over further blog posts and downloadable PDFs!