What type of MSP software buyer are you?

That helps you plan more effectively. There are a million software tools and widgets marketing to MSPs every day, and it’s important to sort through the noise and find what matters most for your organization right now. But to do so, you'll need self-awareness on where your MSP currently is, and where you see it two, five, or ten years down the line. Here are the stages of progress in the growth trajectory of a Managed Service Provider.

Stage 1 – Break fix

Break fix shops are usually small outfits.  Sometimes even 1- or 2-man shops.  They have a handful of clients and generally less than 500 endpoints under management.  Revenue for these shops is less than 1 million USD per year.

Break fix shops usually service micro and small businesses that have 5 or less employees, but find success through sheer numbers by working with a large number of clients. They don’t have super sophisticated tools for ticketing or fancy reporting.  Most of their revenue is typically from billable support hours.

The revenue for these smaller shops is somewhat less predictable as it is usually tied directly to the hours worked. This unpredictable cash flow sometimes keeps these smaller shops from investing in tools and technology infrastructure.

To get ahead, these companies need to work on developing their service delivery process to maximize efficiency and drive profit.  They then need to be ready to reinvest in their own tools and marketing to take their business to the next level.

Stage 2 – Early managed services

This stage represents organizations that are growing and slowly transitioning from break fix solutions to managed services. They're growing steadily and usually have an employee headcount of 5-10 members on board. They have slowly started putting processes in place and have picked up more clients. They're adding more processes as necessities arise, and keep learning as they grow.

Revenue has grown to somewhere from 1-4 million in revenue. The number of clients and support seats under management is higher as well. They typically have 500-2500 endpoints under management.

These companies have been working on transitioning their clients from hourly support to a flat rate monthly price for IT. They’ve started to define roles and processes within the support organization and have implemented some basic tools like a ticket system.

This is also the time when Managed Service Providers start to build a brand and identity. They focus in on services that they excel at, or perhaps a vertical niche they know well. This aids them narrow down their marketing efforts further and fuels continued growth.

Stage 3 – Advanced Managed Services

As your MSP continues to grow, you will reach the advanced managed services stage.  At this point all your clients have been transitioned to a monthly contract instead of break fix billing. The organization has grown as well, both in size and in terms of market visibility.

This size of MSP will typically have 4-17 million per year in revenue. This revenue comes from a large client base, and the number of endpoints they support can vary from 2000 to 18000 endpoints.

As they grow in size and maturity, they now have robust internal processes in place, with clearly defined and structured roles

While the business has been maturing so have their processes internally.  They now have much more structured roles.  The help desk is typically divided into tiers with subject matter specialists.  There is also more administration as well.  Account management departments have grown along with accounting and leadership on the service desk.

Automation has started gaining prominence in their everyday operations, to reduce redundant manual tasks and drive efficiency. It's a good time for them to invest in hiring scripting specialists to drive this initiative.

Their offerings are clearly differentiated from the competition in the marketplace, and they have specialties in IT security and other areas that help drive new business. They have marketing and sales staff in place that work towards client acquisition and improving monthly recurring revenue. They're at a stage of growth where they can start thinking about acquisitions or opening additional offices in other parts of the world.

Step 4 – Fully mature master MSP

As you keep growing, you reach the last step in the MSP growth ladder—the master MSP. A Master MSP is an established player in the market and generates 18 million USD or more in yearly revenue. They are a fully staffed robust service organization with specialists in every area of IT. This enables them to provide a wide set of IT services and expert support to large, enterprise clients.

Master MSPs have a large clientele, primarily catering to mid-market and enterprise clients.  They start to take on larger, more complex projects with long-term contracts that contribute significantly to the company's revenue. Master MSPs are either the market's go-to favourites for large deals, or solid competitors for the spot.

Own where you’re at – a plan for growth

Once you’ve determined where your MSP is, it can help you determine your priorities for software and other purchases that will help your MSP grow.  If you’re still doing break fix, you might not need a large PSA system. However, it's always good to think ahead. Equipping yourself with the right tools can expedite your company's growth and propel you to the next step.

Invest in tools and software that will help you be the Managed Service Provider that you want to be 12 months from now. That will ensure that you're prepared to handle incremental growth, and that your toolset is ready to match your company's maturity in the future.

Try to find the balance between buying for the future without overextending yourself.  We know that as you own where you’re at, and make plans for where you’re going, you’ll find the success you’re looking for.