Cloud-based technology and software have become increasingly popular among customers, largely because they provide greater flexibility and scalability. They also often cost less up front and facilitate collaboration. From the MSP’s perspective, they not only have the potential to bring increased recurring revenue, but often serve to improve client service and relationships.
Before you jump in and start adding new cloud solutions, though, it’s important to evaluate these new tools and technologies. Ask yourself, “Will these provide value to my clients?” If not, now probably isn’t the time to invest in new cloud technology. While cloud software is often profitable for businesses and valuable for customers, this isn’t the case for every MSP.
Common Mistakes MSPs Make When Offering Cloud Solutions
Offering cloud solutions is a great way to improve client service and increase revenue for your business. Too often, however, MSPs don’t understand the impact that cloud features have on their business model.
Some mistakes come from pricing errors, such as adding features that lower your gross margins. Another pricing mistake is setting prices that will fall over time, which ultimately cannibalizes your gross margins. When offering cloud software solutions to your customers, it’s essential that they are profitable for your business.
Other mistakes arise from the sales process: when you emphasize the features of cloud software rather than the value it provides to your customers. Of course, it’s important that your clients understand the features of the solutions they’re buying, but what they really want to know how these solutions will benefit their business in the long run.
How To Leverage Your Cloud Solutions To Increase Recurring Revenue
When done correctly, implementing or expanding your cloud offerings can increase recurring revenue for your business.
To ensure that you remain profitable, convert the new cloud service offering to an average monthly cost per seat. Then add that amount to your current cost per seat. Based on the new cost, ask yourself, “Can I still sell my offering at 70% gross margin or higher?”
If the answer is “no,” you may want to wait for the price to fall before bundling cloud software into your current offerings. On the other hand, if the answer is “yes,” it’s likely bundling cloud services into your offering will help you increase your recurring revenue over time.
Cloud software offerings have the potential to be incredibly profitable for your business, but when implemented correctly, it can also improve client service. By helping your clients achieve greater results through cloud-based technology, you benefit from a better relationship with your clients.
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