How MSPs Can Generate More Leads And Have Better Conversations Around Recurring Revenue

Solution providers looking to grow their monthly recurring revenue must meet more qualified prospects and have conversations around business results, according to a managed service provider.

Channel partners should set their price points above those of the competition so that the conversation with end users can be framed around boosting productivity rather than cutting costs, said Kevin Studley, president of The Network Pro LLC. The Fullerton, Calif.-based MSP has grown its base of monthly recurring revenue from just $30,000 five years ago to some $300,000 today, Studley said.

"Customers don't understand the true costs of IT and technology," Studley said Tuesday during a session at XChange 2016 in San Antonio, hosted by CRN's parent, The Channel Company. "You have to talk about the results of your process, your company's way of doing things."

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An MSP should begin its recurring revenue journey by setting a life plan, or liquid net worth goal, for the next decade. Studley said the life plan creates the passion or drive necessary for commitment to a business plan.

"Once you understand what you're really working for, then you can start with your business plan," Studley said.

Solution providers almost always underestimate the numbers of calls needed to secure a meeting and the numbers of meetings to secure a deal, Studley said. When The Network Pro was trying to break into recurring revenue, Studley said the company needed to meet with 20 or 25 different clients in order to land a single deal.

Studley encouraged MSPs to create a uniform lead-generation and sales pitch process so they can systemically evaluate win rates and test the impact of revisions or tweaks to the formula.

He also said that partners should schedule more appointments than needed to hit their goals since some clients will back out at the last minute; The Network Pro, for instance, targets 3.1 client meetings each week, Studley said, but recognizes it will complete just 2.7, on average.

Each prospect entered into The Network Pro's database receives a rating of "unqualified," "qualified" or "Warm 250," the term the company uses to describe its best leads.

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Studley said a prospect doesn't go from unqualified to qualified until The Network Pro has identified the decision-maker within the organization and gotten a sense of how they spend on IT. Roughly 80 percent of The Network Pro's sales calls take place to prospects that have already been qualified, Studley said.

Once The Network Pro has ascertained that the decision-maker in the client organization will take their call, the prospect is upgraded to Warm 250, which is where Studley said most sales come from.

The Network Pro decided in 2014 that it would only meet with presidents, CEOs, owners or partners in organizations with 40 or fewer employees, Studley said, after realizing that just 2 percent of its meetings with non-decision makers ever turned into purchases.

"We set a lot of appointments with the wrong people," Studley said.

Centers of influence tend to be warm sources for generating sales leads, Studley said. People with inside knowledge of how an organization works and what it needs from an IT standpoint include those involved with enterprise resource planning or electronic medical record implementations, setting up a phone system, outside HR consultancies and certified professional accountants, Studley said.

Referral programs and LinkedIn are also great ways to kick up additional leads, Studley said, and solution providers should give referral sources some type of an award just for providing a name.

Even more important than generating additional leads is having a conversation with clients that goes beyond what you'd do differently from a technical standpoint, Studley said. Successful conversations focus 100 percent on the business side of the equation, he said.

In order to get past the standard client objection that their IT is "fine," solution providers must expand the definition of fine to mean not just "nothing is crashing" and also address issues surrounding predictability, performance, functionality, reduced risk, capital costs and productivity.

Since labor is the largest cost facing clients in every vertical except manufacturing, any change that increases employee productivity is bound to save clients money in the long run, Studley said.

One good metric is "problems per employee per month" based on how a company's technology is being managed. Studley said The Network Pro is usually able to take customers from one to two IT problems per employee per month to just one per employee every four months, dramatically increasing productivity.

Studley likes to frame the conversation with customers in terms of the additional income generated as a result of increased employee productivity, compared with the additional (usually smaller) cost incurred by switching to a single monthly bill from The Network Pro. Solution providers should use the increased costs to their advantage as a signal of higher-quality service, Studley said.

"When we come in, we have to be more expensive," Studley said. "Every once in a while, we'll run into a competitor that's priced the right way, so I'll increase my price."

One solution provider, Stratus IT Group, of Salt Lake City, has excelled at executing on leads and enjoys a high close ratio, but lacks a defined lead-generation plan, according to Craig Vickers, the company's owner, who attended the session. Stratus' primary lead source today is referrals, but Vickers wants to be more intentional going forward and is considering hiring dedicated cold callers.

"We're not feeding the funnel like they are," Vickers said.