Most salespeople are limited in their effectiveness at getting referrals for three reasons:

1. They don’t have a process for asking for them
2. They don’t develop a network of strategic referral relationships to leverage
3. They don’t have a formal referral program that clearly identifies rewards

Without doing these three things, you will still get referrals; you just won’t get nearly as many of them as you possibly could.

A process for asking for referrals

If you just expect people to think of giving you referrals on their own, you’ll get a very small percentage of your satisfied clients to actually do so. The reality is that even if they love your service, it’s just not top of mind for them to work to get you additional business.

You have to ask, and you have to have a process for doing so if you want to reach your full potential.

The strategy for this goes back to our section about asking smart questions earlier in this document. If you ask someone “do you know anyone else that could benefit from my services?” you will more often than not get a “Hmmmmm….nope.” in return.

It’s not that they don’t want to help you; it’s just an easy answer that gets them off the hook, whether they are consciously doing it or not. You have to have a better script to ask for referrals if you want to raise your chances at success. I would recommend something like this:

“Bob, as you can imagine, I get a lot of my business from referrals given to me by satisfied clients. Since you seem pretty happy with the work we’ve delivered to you, I was wondering if you would be willing to introduce me to other people you know that might be a good fit for my services?”

They will say yes or no here. If yes, proceed to the rest of the script. If no, you’ve just uncovered that you probably have a problem with this client that you need to dig into.

“Great, thank you. Bob, do you mind if I try a quick exercise to see if we can come up with any names of people you could put me in touch with? Great. Keep in mind, these don’t have to be people you think or know have an immediate need for our services – I’d just like to meet people that could potentially find value in our services – it always pays to have more contacts out in the marketplace.”

At this point, take them through an exercise to get their brains working on your behalf, and should provide you with names of qualified clients or strategic relationships:

1. Do you know anyone starting a new business?
2. Do you know anyone moving offices?
3. Do you know anyone that recently downsized their business?
4. Do you know anyone running a company that is experiencing rapid growth?
5. Do you know a good small business attorney?
6. Do you know a good small business CPA?

These questions are specific, so they get specific results. Just about everyone you talk to will be able to come up with a few names when asked this list.

When you get the names, it’s best if you can get your client/contact to make an introduction for you. Have them send an email copying both of you, or even make a call while you are sitting there. If they aren’t comfortable or don’t have the time, don’t press the issue. Just get the name and contact info and give them a call. Make sure you reference the referrer’s name!

“Hi Susie Lawyer, Bob asked me to give you a call…”

MRC

To make your people successful, you need to have a team structure in place that clearly delineates each person’s role and how they work together. However, it can get tricky to pick which roles to add to your team and how to delineate responsibilities.

To help, we’ve put together a guide with perspective on who to hire when and how to divide responsibilities in a way that makes your team a cohesive whole.  Click here for this free MSP Coach guide on MSP team structures.

Every MSP is unique and every employee has a unique set of skills and capabilities. Therefore, there is no perfect team structure that every MSP should adopt. Just use our advice in the way that best fits your needs.

MRC

“The customer is always right.”

Why is this one of the most damaging statements ever? Because too many people take that statement and expand it in their minds until they think that they have to do anything and everything for every customer.

Not all customers are created equal!

We’ve all had customers that want everything in the world, but don’t want to pay for it. We’ve also all had customers that won’t actually listen to our advice, then get upset when they haven’t had their problems solved.

These customers are called Killer Customers, and you need to learn to identify them and deal with them appropriately, or they will suck the life out of your business.

This idea – that I could run my business without bowing down to every demand of every customer – was a revelation to me. I first grasped the concept when I read the book Killer Customers: Tell the Good from the Bad–and Dominate Your Competitors . It’s a great book; you should add it to your business library.

The point of the book is that you should get really good at telling the good customers from the killer customers, and then ditch the killer customers so your competition can have them and get bled to death (that may not be how the author would summarize it!).

How to segment

In my experience, the keys to customer segmentation are the following:

1. Know your target customer very well
2. Train your salesforce to find target customers and provide incentive to make sure they don’t sign killer customers

You will not turn a bad prospect into a good customer!!! It doesn’t matter how big the deal is or what the prospect tells you about how the relationship will be after you have signed a deal- it won’t turn into a good customer. You must make sure that you don’t bother bringing the wrong customer into your portfolio of business. The sale won’t stick and neither will the commission – it’s a waste of time for everyone involved.

1. Have a process for continuously reviewing your customers to weed out the killer customers that you accidentally let on board
2. Have enough service offerings to match the various needs of your clients’ desired service levels

Doing any one of these things will help you out a lot, but doing all four will result in increased profits, happy customers, and happy employees – a combination that’s hard to beat.

MRC

The TLV calculation does exactly what its name implies; it tells you the total value of the client over its lifetime. In other words, it tells you how much your client is worth to you, which is the number that determines how much you are willing to spend to get a client.

How do you calculate TLV? I would suggest you use the following formula:

Average revenues from client over lifetime of service relationship X Gross Margin %

So let’s say that your typical client is worth $5000 per month and on average they stick around for 3 years. This means that this client brings in a total of $180,000 in revenue over its lifetime.

Let’s further say that you operate at 50% gross margins. This means that the amount of money that is actually returned to you from your work with this client to cover expenses and generate profit is $90,000.

Theoretically you could spend $90,000 to acquire this customer and still break even. Now, that wouldn’t leave you with any money to cover any of your operating expenses, so it’s not a realistic strategy in the long term.

A more realistic strategy can be found by multiplying the $90,000 by whatever percentage of your budget your business model says you can spend on sales and marketing and still have a viable business. Let’s say that the total combined number is 15% of total revenues.

That means you could spend up to $27,000 (15% x $180,000) in total sales and marketing expenses and still be operating within the framework of your business model! If you were to find a way to operate with even higher gross margins, you could spend even more money.

There is an old saying in direct marketing circles that goes something like this:

“The company that can spend the most money to acquire a customer wins.”

Effectively, if I know the TLV of my clients and you don’t know the TLV of yours, you are going to be very hesitant to spend the kind of money you could to win new business, which means that I’m going to beat you all day long out in the marketplace!

You must calculate your TLV so you know how much money you can spend to acquire a customer; otherwise you may not be putting in the appropriate amount of effort to be competitive in the marketplace.

MRC

This is a saying we use at Everon when building and running our managed services business, and it has served us very well.

There are two realities in the managed services industry:

1. You are in the PEOPLE business
2. Just about everything you do for your clients is done by people

Both of these realities seem obvious and just common sense but they are often forgotten or neglected so they’re important to address.

People are first, technology comes second.

Reality 1: You are in the PEOPLE business

This means that we expect our engineers to solve the people problems related to the service just as much as they are expected to solve the technology problems. We’ve found that when we’ve hired very tech gifted people they can solve tech problems easily but they don’t necessarily have the best people skills. Though they can solve the technology problems, they leave the clients feeling like the service was only so-so and that they weren’t really taken care of.

We’ve found that we have to hire people with great interpersonal skills first. The tech skills, though obviously important, are secondary. Our philosophy is that we can teach the tech skills but it’s much harder to teach the interpersonal skills. We look for people with the right personality, the right people skills and then we tech the tech skills.

Reality 2: Just about everything you do for your clients is done by people

Since the managed service industry started, there’s been lot of focus on tools that deliver these services. These tools are very important and have taken this industry far in terms of automating some things. However, the reality is that the far majority of services are still performed with some sort of people interaction. You must make sure that the people delivering these services are equipped to do so and are happy to provide those services.

There’s a saying that if you want to deliver great service, you have to have happy people delivering the service. Do they like taking care of customers? Do they like delivering the services? Do they feel like the company they work for cares about them and creates a positive environment for them? We at Everon put a lot of focus on having happy people that will deliver great services.

MRC

With a systematic “onboarding” process for your new clients, you can build the foundation for a productive long-term relationship and increase client retention dramatically. A successful onboarding process must be scalable, repeatable, and measurable and be designed to “wow” your clients as you become an indispensable resource to their business.

We call it “establishing first position” and it is a philosophy that should drive your entire client lifecycle roadmap, including onboarding. Essentially, you should strive to ensure that any time the client is facing a technology issue or any major business decision that might affect technology, he always seeks your counsel first.

To achieve this position with clients, you must lay the right groundwork. An onboarding process that focuses on the first 90 days of a client relationship can help you get there.

To help, we’re providing a free guide on how to implement a successful onboarding process at your company.  Click here for this FREE guide from MSP Coach.

MRC

We want them to think of us first. If they have a question about something technical, if they want research about something technical, whatever it is, we want them to think of their managed service provider first. That’s what we mean by “first position” with clients.

Now, that’s easier said than done. If you’re lucky, you have someone who has such great relationships with clients that the clients call them whenever they need something. That’s security for your business. That protects your business from competition. If clients think to call you first when they think about technology, it doesn’t open the door for them to think of other companies.

You can’t leave this to chance. Some people are better at this than others.

If you have five account managers, each managing multiple clients, you can’t expect that all of them will be excellent at gaining first position with clients.

Such processes could include things like:

• Quarterly business reviews with clients to discuss their business needs and how technology can meet them
• Occasional check in calls with a specific purpose
• Newsletter articles written by account managers/others in your company that make them look like technology experts

Design and implement a clear process that has all of your key employee/client contacts doing these things.

Don’t leave them to chance.

MRC

If you offer flat fee service offerings but don’t have processes to support them, you’ll be in real trouble very quickly.

If you offer desktop support on a flat fee basis, your clients will be able to call you any time they need you. If you’re still operating on an hourly service model basis, going out to client sites and answering service calls on your cell while on the road, you’ll never make it.

If you’re moving to a flat fee model, create service processes that are:

• Scalable – You have to scale up in a way that keeps your costs in alignment.

• Automated – Automate as much as possible.  Take advantage of the tools in the market.

• Easily taught and repeatable – Your processes that aren’t automated should be easily taught and repeated. This is essential as your company grows and you hire new people.

• Consistent in cost – If you’re offering a flat fee service, you need to know that your margins are pretty secure across clients. There will be outliers but, as much as possible, you want your service to minimize these differences.

• Well documented - – I can’t stress what an advantage it has been internally at Everon to have our processes documented so that employees can refer to documentation to know what to do. When we got started, we hired process experts who documented our key sales and service processes. This got us off to a good start and eventually we developed our own internal skill sets so we document our own now. The clear documentation of what we do is vital for making sure everyone in our organization understands and follows the optimal approach.

Have a “process process” – seriously! If you have a process for creating your processes that your people can easily follow, they will start creating and documenting clear processes on their own.

To help you develop and document strong processes, buy and read this now: Emyth Mastery by Michael Gerber. This is a great resource that discusses how to document and execute all of the major processes that companies should have.

Get a copy today and apply it!

MRC

Now, I’m not saying that everyone has to become an MSP, but there are many out there that have decided to but still haven’t gotten it done.  As Yoda said,

“Do or do not, there is no try.”

That Yoda was wicked smaht!

Burn your boats!

When the Spanish explorer Hernando Cortez landed on the shores of what would later become Mexico, he commanded his crew to burn all their boats so that they would have no option of retreat. Their only option was to advance to conquer the new territory.

This really has to be your mentality about managed services. You have to have this level of commitment.

To give an example, prior to starting Everon I had an hourly service firm. When I decided to start Everon, I started from scratch. Done with the old business, I started the new business with the focus on managed services (though we didn’t know what it was called at the time!) and that’s all we sold. Flat fee services. To this day, that’s the only thing we sell. That was my level of commitment. I jumped right in full force.

I know that most of you are coming from the perspective of having a business that already has clients that you’re billing on an hourly basis. I’m not telling you that you have to sell your business or start from scratch though, to be honest, that would be the easiest way to do it.

Changing your culture and changing your operations from an hourly model to a flat fee model is tough. You have to be extremely, extremely committed or this business model just will not stick in your organization.

I talk with people in the industry all the time who say “I’ve tried this managed services stuff, I’d like to get into it, I’ve tried it a couple of times but it was tough, our market is different than yours….”

That’s BS.

I know that’s blunt, and I don’t mean to be rude or condescending but the reason that the business model is not working for them is because they have not committed to the business model. In any market, there are tons and tons of businesses that are willing to sign up for these services with the managed services model. Don’t use that as an out to enable yourself to avoid this level of commitment to managed services.

If you’re ready to commit to this business model, you need to make sure you’re fully changing your organization’s processes, culture, selling approach, and tools. Jump in with both feet and keep them firmly planted.

MRC

Your clients don’t want a technical sales team, they want a service team.

When the tech team feels pressure to sell, clients very often feel that instead ‘of getting good advice, they’re getting sold. That leads to disgruntled clients and client churn and sabotages your business. By compensating your service team on sales metrics, not service metrics, they’ll focus on sales.

Create a wall between sales and service – It’s the best thing you can do for both your sales and service teams.

There has to be a “wall” between your sales and your service team. They should be two distinct parts of your organization. Your sales team should be focused on getting new clients and projects. Your service team should be focused on providing truly remarkable service to clients.

Your sales team should be all about finding new recurring revenue and that’s how they should be compensated. Your service team should be focused on providing fantastic service to your clients and generating referrals. That’s how they should be compensated. If you compensate your service team on sales metrics, sooner or later they will be forced to choose between providing the best possible service or taking the opportunity to sell the client on something.

If you draw very clear line, it’s the best thing for both sides. Think about it:

• Your sales team is making a bet that your service team will deliver good service so that the client will stay, generating ongoing commission for the sales person. If the client gets poor service, the commissions disappear. They are making a bet on the service team and they don’t want the service team doing anything that sabotages the client.
• From the service team’s perspective, most of them hate sales – they’re technical people and they don’t enjoy selling. They just want to take care of the technology, take care of the clients. Enable them to focus on this.
• Finally, it’s good for your clients. They’ll appreciate that once they get through the initial sales stage with your company, they’ll get trusted advice and service and won’t feel like they’re constantly getting sold. That’s where you’ll get the strong referrals in the end.

I know it’s tempting to have everyone in your organization focused on sales, but learn from our experience and build the wall.

MRC