I was talking to a new MSP yesterday about how they should structure their service plans, when a saying from Kent Erickson at Pointivity in San Diego rang in my head:

“It’s all about risk management, Mike.”

Sometimes a few words can turn on a light bulb in your head and make things so clear.  Kent’s phrase was one of those times for me.

The business of managed services is about risk management.  You are assuming a level of risk on behalf of your client, relieving them from some of the headaches and unknowns of technology.  In return, you are getting paid.

It’s all quite simple, but easy to forget in the course of your daily business operations.  I have a simple formula that can  help you put this simple insight to work at your managed services practice every day:

More Risk = More Compensation, Less risk = Less Compensation.

Pretty simple, right?  But totally powerful as well.

In all dealings with your clients, and in all cases where you are designing and pricing new services for  your business, keep this formula in mind while you evaluate the decisions you are making.

Would adding this feature to your service offering increase the risk you are assuming?  Then it must increase the compensation you will receive as well?

And if your client wants a lower price from you, what are they willing to take out of your service equation to lower the risk that you are managing?

Keep this formula in mind at all times and I guarantee you will see increased margins in your business over time.

Thanks Kent!

MRC

We discuss this and other topics in our membership site for MSP executives, MSPCoach.com.

We just got back from attending the Zenith/Pointivity training in San Diego and all I can say is “wow!”

The training essentially covered two areas:

1. Zenith’s new Box Office and Datacenter as a Service (DaaS) products
2. How to operate your business at higher margins, based on Pointivity’s success in the marketplace

First, Zenith’s new technology is a game-changer for our industry and our customers. I knew this before going to the training, but I really didn’t fully grasp the full scope of how it would change our marketplace.

It very effectively accomplishes three key things:

1. It makes technology much more accessible for our small business customers
2. It makes technology dramatically easier to manage for service providers
3. It gives the IT service provider channel a viable way to defend against the idea of our customers potentially moving everything to “the cloud”

All of this adds up to an offering that can be delivery with very good margins and scalability using the best-practices suggested by the Pointivity team.

Kent Erickson very graciously shared with all of the attendees his business model and the key factors that have made it very successful. He is taking a different approach than anyone I’ve seen in the marketplace, and I have to say that I think it’s the right approach.

All of this combined gives me a renewed energy for our business. I think we are going to be able to offer tremendous value for our customers in the next year, and I think we are going to be able to do it at margins that make our current margins look anemic. Good stuff!

If you are a service provider that is not familiar with Zenith, I highly suggest you spend some time getting to know what they have to offer. I don’t get paid anything for saying that…I just don’t know how anyone in our industry that doesn’t have access to their technology is going to be competitive two years from now.

Thanks to Zenith and Pointivity for an insightful and energizing three days.

MRC