I want to spend some time talking about vertical markets, and how you, as an MSP, can venture into them — so what are the pros and cons of shifting to vertical markets? Let’s review (I know some of you in the forums have been asking questions about this topic).
How Can I Dive Into Vertical Markets?
There are two primary ways to pursue an industry vertical. The first is through effective marketing tactics. Every vertical market has its own associations and events you can become part of (you just need to do the research ahead of time). For instance, there are publications you can advertise in; there are also influencers you can connect with. You can target content and events to the needs of the vertical markets you’re in. As you build your customer base within a vertical, your references become more meaningful.
The second reason to consider a vertical is the potential value. You may be able to add additional value by the following: understanding the business, the technology impact and the core applications. Your clients will absolutely pay a premium for this knowledge.
What Are The Risks?
As with anything, there are risks. First, you have to decide what percentage of your revenue you want to commit to a vertical. Then ask if that particular vertical is susceptible to economic or industry setback. For example, specifically, I’m thinking of an MSP that focused on mortgage companies and financial markets before the 2008 crash.
We have seen the same thing with oil and gas, dotcoms and building related verticals. Be sure you have an historical perspective of the cycle in the market you are looking at. We are in the midst of a historically unprecedented economic expansion, so be sure not to be shortsighted. Medical, legal and some other professional services verticals have weathered economic cycles fairly well (to be honest). What this means for you ultimately: In other words, ask yourself: “What’s the worst thing that could happen?”
Can You Bring Any Value?
Assess the value-add you can bring and what expertise, partnerships and technology you need to have in place to offer a compelling reason to do business with you. Factor these costs into your cost per seat. Will there be an impact on support? Will these clients create more tickets or more complex tickets based on the nature of their businesses?
For example, we work with several MSPs that have a legal vertical. They tend to have higher noise levels, and it’s costlier to bring new support folks up to speed because they need to learn some vertical apps and technology. This means our seat price must be higher. Diving into vertical markets can be a valuable part of your business strategy. Choose wisely, and limit your risk. At my first MSP, I considered several business practices horizontally. It turned out to be a nice balance that helped us grow profitably.
Finding the right vertical market for your business could change things for the better. Pursue vertical markets carefully, and don’t forget to explore the potential value. Consider the risks, examine your value and leverage it when dealing with customers.