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Selling Managed Services: Getting Inside Your Customer’s Mind

Successful selling requires an understanding of the buyer’s mind, and most MSPs fail to develop a clear understanding of their customer’s true needs. Specifically, many MSPs don’t understand why buyers do — or don’t — buy from them. Great businesses take the time to understand their buyer’s psyche. Let’s delve a little deeper.

First, there’s the psychology of buying. People buy based on emotion rather than logic — even large corporations. Why do we all yearn for BMW 7 Series when a Honda Civic gets us from point A to point B just as well and for a lot less? Spending $90,000 on a car defies all logic and reason when you think about it. Here’s why we do it.

Maslow’s Hierarchy of Needs:

Remember Maslow’s Hierarchy of Needs from psych 101? Well, it applies to sales, too. We want the BMW because it tickles the desires at the top of Maslow’s pyramid. Driving a nice car makes us feel important, like we have achieved greatness. It earns the respect of our clients and friends. These needs trump the basic transportation needs at the bottom of the pyramid.

The BMW Hierarchy of Needs:

  • Physiological Needs: We need transportation.
  • Safety Needs: A car allows us to work and earn income to support our family.
  • Belonging Needs: Having a nice car like the people we aspire to be means we belong.
  • Esteem Needs: A luxury car earns respect and adoration.
  • Self-Actualization Needs: A luxury car gives us the edge we need to be successful.

The MSP Hierarchy of Needs:

  • Physiological Needs: My business needs a computer network to function.
  • Safety Needs: My business needs a safe and secure IT infrastructure.
  • Belonging Needs: Good businesses use technology effectively and have competent IT departments. So should mine.
  • Esteem Needs: Being a successful technology leader in business will make our company the envy of employees, customers, and competitors.
  • Self-Actualization Needs: Effectively leveraging technology will allow me to build a more profitable and successful company.

The Seller’s Mistake:

Here is where most people falter. They sell from the bottom of the pyramid up, rather than from the top down. We tend drill in on the technological (“physiological” and “safety”) needs rather than higher level business concepts. We’re going to keep your equipment running, backup your data, patch your servers, and so on. Blah, that’s boring. These are important aspects of what we do, but they don’t inspire CEOs to pay top dollar for managed services.

The Right Way to Sell:

Selling from the top of the pyramid down excites people. No CEO gets hot and bothered by patch management. Instead, focus on high level concepts. Show them how they can better use technology to increase sales, keep their employees productive, and reach their ultimate business goals. Demonstrate how their competitors are using technology more effectively than they are. Making more money and achieving success excites CEOs. Work from the top down. Show them how you can enable their business to be great.

Paul Barnett is VP and COO at Network Depot, the MSP that launched Virtual Administrator. Monthly guest blogs such as this one are part of MSPmentor’s annual platinum sponsorship. Read all of Barnett’s guest blogs here.

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If I Was Launching an MSP Today: 10 Steps to Consider

Generally speaking, I think most MSPmentor readers have been building their managed services businesses for five to 10 years. But what if you were building that business from scratch right now? Here are 10 steps to consider for startup MSPs — though the steps certainly apply to established MSPs that are looking to rethink their strategies for the second half of 2011.

1. Rethink Services: Take a look at ConnectWise CEO Arnie Bellini’s Modern Office blueprint. It’s not sexy. Instead it covers all the basics of IT services — everything from printer management to VoIP. Pieces of the strategy have floated around here and there for about five to seven years. But Bellini crystallized the discussion: Even as big cloud companies move into the SMB market there are dozens of IT services that VARs and MSPs can offer. Bellini made the point last year that VARs and MSPs should focus on help desk and vendor management:

Click here to view the embedded video.

I concede: At first I thought the advice was somewhat basic. Fast forward to the present and I’m starting to see the light. Seems like the best MSPs think of their help desk as an Apple Genius Bar — deliver superior customer experience and your customers will never leave you. Also, as a small business co-owner, I can see the value of vendor management. Our own Web integrator handles a range of vendor relationships for us — which allows us to focus on our core business: online media.

2. Rethink Pricing and Branding: At the recent Schnizzfest conference, TruMethods CEO Gary Pica told MSPs to offer…

  • One Comprehensive Solution: Stop promoting individual ingredients (patch management, remote monitoring, etc.) and instead sell chocolate cake (the total customer experience).
  • One Comprehensive Monthly Price: Stop offering line-item pricing for each ingredient, and instead offer a complete per-user, per-month price that covers everything. Of course you need to figure out your costs before setting a price, but the best MSPs charge more than $100 per user per month for all-in services.
  • A Firm Monthly Minimum: The best MSPs don’t accept business from super-small customers, and insist on monthly engagements that start at about $2,000 per business (roughly).

3. Rethink Cloud: At Schnizzfest, Pica told MSPs that they were over-complicating cloud discussions. He organized and prioritized cloud services into four simple categories for MSPs to pursue. And he reinforced his all-in pricing. Instead of charging a storage fee, a security fee, etc. — just charge a single flat fee (per user) for everything each month.

4. Rethink Devices and Bet the Business on Mobile: During meetings in Silicon Valley this week I’ve heard a consistent theme from Oracle and other major software companies: The big opportunity going forward is for channel partners to deliver a consistent user experience across all devices — desktops, notebooks, netbooks, tablets and smart phones. MSPs that master the mobility challenge are well positioned to profit for years to come.

Bonus: Start spending time at a local college campus. See and learn how students are using mobile devices and related applications.

5. Rethink Target Customers: Sure, focus on SMB. But at the same time pick three verticals to evaluate — perhaps health care, retail and financial services. Assign a specific person in your organization to own/research that vertical for three months. That dedicated person should:

  • Join an association focused on that vertical, and attend relevant meetings.
  • Meet with one target customer per week to learn more about pain points, legacy infrastructure and other information about the vertical.
  • Create a shortlist of horizontal solutions (PCs, networking, VoIP) that can be easily sold into the vertical.
  • Research a shortlist of vertical solutions that the target customers may need.

After the three months of research you should have enough info to evaluate which vertical is a potential long-term target for your business.

6. Rethink Ownership: Avoid the temptation to form a business with a partner who has skill sets that are largely similar to yours. Instead, go into business with peers who operate in different sandboxes — one person focusing on sales, the other on technology, another on financial management, etc. If your ownership team has entirely redundant skill sets you’re raising your monthly overhead without addressing weak spots in your business.

7. Rethink Debt and Lines of Credit: Develop lines of credit before you need them. Partner with vendors’ financing organizations before you need to. Check out the Channel Finance 25 for some potential financial partners.

8. Rethink Your Devices: Don’t spend outrageously on IT, but do carry the latest disruptive devices — tablets, Chromebooks, etc. Tell customers why or why you don’t like your latest device during meetings… Establish yourself as a thought leader on disruptive technologies that can either help or hurt your customers, then figure out how to monetize those learnings.

9. Rethink Talent: While you’re spending time time on local college campuses (see tip 4 bonus, above), be sure to partner up with colleges’ Career Development Centers to find potential interns and entry-level employees. Also, Always Be Interviewing — schedule one meeting per week with a person you’d like to potentially recruit to your company. Even if you don’t have positions open right now all that networking will pay dividends when you’re ready to hire.

10. Rethink Your Exit: Manage your company from Day 1 as if it was publicly held.

  • Track all of your key financial indicators closely — revenues, operating margins, profit margins, EBITDA (earnings before interest, taxes, depreciation and amortization), etc. Consider using an open book policy so that employees can get a feel why they need to help manage expenses while driving revenues.
  • Join a peer group organization to see how other MSPs manage their finances.
  • Standardize on PSA (professional services automation), RMM (remote monitoring and management), sales quoting and IT acquisition software to automate as much of your business as possible.

And most of all: Build your own assets. Instead of “reselling” or “brokering” the sale of third-party cloud services, figure out how to build your own branded services to generate monthly recurring revenue (MRR). Keep growing your MRR and profits and you’ll increase your company’s valuation. As your own brand and profits grow, potential suitors will likely seek you out.

In short: Your exit strategy should involve (1) building a highly valuable business rather than (2) focusing on a potential company sale before you’ve even booked your first customer.

What Did I Miss?

Which of the items above directly relate to your business? Which ones miss the mark? And what strategies did I completely overlook? I’m open to constructive criticism. Also, despite the headline I’ve got no plans to ever launch a managed services business because, frankly, I don’t have your skills. I offer the guidance above based on what I hear from a range of MSPs. I look forward to hearing how your business continues to evolve in 2011 and beyond.

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You Stink At Sales; Here’s Why

If you’re like me, you were a great technician who decided to start your own business. As your company grew, you learned to be a good leader by being the best engineer your company. But sales? In order to be a good sales leader, you have to embrace sales and drive the adherence to a sales process. Not easy when you’re a techie at heart.

The reality is that most IT solution providers suck at sales, so we have boiled down the essential ingredients for sales success to make it easy for you to catch up and even get to the front of the IT sales wolf pack. In our experience consulting with our partners, we’ve seen some partners who are doing some of these steps, and some who are doing none. A rare few are executing all five.

1. Set Sales Quotas: You can’t measure achievement when you have no goals. Sales people need goals to measure success and to enable you to evaluate and reward their results.

2. Enforce Opportunity Recording: Make sure your team records all of their sales opportunities in your system so they are easily track-able and actionable. Don’t let them keep it all in their head or in disorganized disparate systems.

3. Hold Weekly Sales Meetings: Conduct weekly sales meetings at the beginning of each week to focus your sales team on their action plan for that week. Regular public accountability is a powerful motivator. Small team or large, this is vital.

4. Make Sales Capture Easy: Opportunity is everywhere; sales data needs to be easily captured so anyone in your company who finds a potential sale can quickly relay that information to a centralized location. This includes client referrals and even the landing pages on your website.

5. Follow the Sales Process: Choreograph the sales effort of your team and use a repeatable process that includes the 4 other Sales Success ingredients. Follow the best practices and sales process that is built into your professional services automation tool.

Adding those five ingredients will help you increase your sales and profits while adding accountability for your sales staff. Salespeople can easily juggle 20 times more opportunities than they had before, just by following the process and seeing it all in one place.

To hear more about the secrets to winning sales agreements and key strategies for increasing profit margins, you’re invited to join ConnectWise for a free webinar June 22nd with MSP legend Gary Pica, as a part of our Success Wise webinar series.

David Bellini is president of ConnectWise. Monthly guest blogs such as this one are part of MSPmentor’s annual platinum sponsor program. Read all of Bellini’s guest blogs here.

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