Managed IT Services To Grow 10.8% By 2021: How To Capture Opportunities

Here’s the good news: the managed IT services market is expected to grow from $145.33 billion in 2016 to $242.45 billion by 2021, with a 10.8% compounded annual growth rate. Industry growth like this can create an enormous opportunity for MSPs to grow their businesses.

The challenge is that growth requires you to constantly build your recurring revenue. In fact, to grow, you must retain 85% to 90% of your recurring revenue. Anything less and your business is either stagnating or shrinking.

To capture opportunities that will allow you to grow into the future may seem daunting, but if you can drive sales, build the right relationships with your current and future clients, grow your monthly recurring revenue (MRR) and provide value, it is achievable.

Retain Current Clients

While driving sales is an important part of any growth plan, it’s unrealistic to assume that you’ll be able to grow simply by taking on a higher volume of clients.

You also need to ensure that you can retain current clients, which you can do by building relationships with business leadership and continually providing value. Your clients will see the managed IT services your MSP provides as an investment in their future and want to reinvest. With the right retention practices, you may be able to achieve 5% to 8% growth before you add a single new client.

Embrace Good Churn

While having high churn rates is bad for your MSP, a little bit of managed churn can be a good thing. Some clients may be a drain on your bandwidth and aren’t interested in reinvesting with your MSP. Often these are older clients who started with you before you could offer a unique value proposition. If they distract you from your growth strategy and aren’t likely to grow their MRR, there’s nothing wrong with letting them go.

Grow Your Monthly Recurring Revenue (MRR)

To grow your revenue with your current customer base, you need to continually evolve your levels of service. To do this, you need to show your clients that you can provide them with genuine value for their level of reinvestment.

Let’s assume that you sign on a new client at $3,000 a month. As you evolve your managed IT services, don’t offer clients individual services incrementally. You’re likely to only increase your MRR by $50 with each offering. Even if you could provide a new offering every month for a full year, you’d only gain a $600 increase in MRR.

Instead, when it’s time to re-up with a client, come to them with multiple services that are part of a larger value package. Show them how newer clients of a similar size who have signed on for $4,000 a month are putting the new value package to work. When you position your value in this way, they are more likely to reinvest with you at the higher level.

Even if you wait a year or two before coming back to them with a new value package, the boost in revenue is worth it.

To learn how to command higher monthly fees and increase your MRR through the proper packaging and pricing techinques, view this free webinar.

Discover how to package and price your IT services

TOPICS: IT servicemanaged service provider
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