NexTI: Becoming A World-Class MSP Requires Planning, Process

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Any solution provider can become a managed services provider and take advantage of ever increasing recurring revenue streams, but the required planning, introspection, and reorganization to do so is no trivial matter.

That's the message from Gary Pica, an early pioneer in the managed services business and now the president of TruMethods, a Morristown, N.J.-based mentor to budding MSPs.

Pica, speaking to an audience of solution providers at NexTI, an event hosted by CRN publisher The Channel Company, said becoming a legend in the MSP business is easy.


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"The first step: Tell everyone you are a legend," Pica said. "Step number two? There is no step number two."

Becoming a world-class MSP, however, takes more time, Pica said.

Pica also said there are three types of MSPs.

The average MSP has an inconsistent monthly recurring revenue stream, and an average service price of under $100. That results in revenue per employee of about $100,000, or a total of $1.2 million for a 12-person company, Pica said.

A best-in-class MSP, however, has more consistent monthly recurring revenue and a slightly higher average selling price per service, giving a yearly revenue of $1.5 million for that same 12-person company.

A world-class MSP, however, sells services with average prices of $120 to $160, and can have a per-employee revenue of $150,000 with 25 percent to 35 percent margins, Pica said.

Being a world-class MSP should be the goal of every solution provider that wants to enter the managed services business, he said.

"Your people can be part of a thriving business, and everyone enjoys it," he said. "And you as a business owner can get return from your risk."

Pica's outline of how to be a world-class MSP was very quite illuminating, said Christopher Haight, president of Prevare, a Beverly, Mass.-based managed services provider.

"Gary has a very good reputation in this space," Haight said.

Having the kind of metrics to determine what is an average, best-of-breed and world-class MSP is important for measuring one's own degree of success, Haight said.

"We don't always know how well we're doing," he said "I know my own numbers, but I may not know if we are doing as well as we can."

Pica outlined his five-step system for becoming a world-class MSP.


NEXT: Developing A Business Planning Process

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