Here are three of the top pitfalls that keep IT solution providers from reaching their recurring revenue potential.
There’s no shortage of advice telling IT solution providers they should be selling managed services and earning monthly recurring revenue (MRR). Yet, when it comes down to it, making the transition from project-based or break-fix IT services to managed services is hard.
One of the biggest obstacles resellers face in making the move often starts with their own sales team. Here are three of the top pitfalls that keep IT solution providers from reaching their recurring revenue potential:
- You’re Not Helping Customers See the Big Picture
New managed services providers sometimes struggle with getting their customers to switch from break-fix to managed services. The No. 1 objection goes something like this: “Our IT is fine. Why should we spend more money with you?”
The problem is that you have a different idea about what "fine" is than your customers do. When they use that term, they mean that servers aren’t crashing and you’re just a phone call away if they have a problem. When an MSP uses the term "fine," he or she is thinking about providing a predictable IT performance instead of just reacting to every IT problem that comes along.
The key to overcoming this objection is to show customers the real cost of reactive IT, including downtime, security breaches and potential industry violations of standards (such as HIPAA, FINRA and PCI DSS). One way to do this is by attaching a value to these threats, such as the cost of a server crash or HIPAA fine. After establishing the true cost, a salesperson can then talk about the price of mitigating threats proactively with much less resistance.
- Your Salespeople Aren’t Sticking Around
Most IT solution providers know that investing in training for engineers and technicians is a necessary requirement for delivering good customer service and differentiating themselves from competitors. But, when it comes to training salespeople, the same rules usually aren’t applied. In some cases, sales quotas that have negative consequences for missed deadlines are the only incentive given.
In some break-fix environments, business owners can get away with such shortsighted practices, but this isn’t the case with managed services. The latter requires a consultative sales process and the ability to develop and nurture relationships with higher-level decision makers (such as business owners and/or office managers, as opposed to IT personnel). It’s nearly impossible to do this in a threatening, high-turnover environment.
The most successful MSPs make investments in sales training and peer accountability groups. If your goal is to build a sustainable managed services practice, you may want to consider doing the same.
- You Think All Break-Fix Salespeople Can Sell Managed Services
While attending an industry event, I was surprised to hear the keynote speaker say to a group of VAR business owners that some salespeople simply cannot sell IT solutions and managed services. Many successful MSPs I’ve spoken with concur. Fortunately, you don’t have to make a long-term commitment before finding out who’s a good managed services sales candidate and who’s not.
For starters, a low-cost personality assessment test such as the DISC profile can go a long way toward identifying the right sales candidates. While successful traditional sales reps tend to rank high in the “D” (dominant) and “I” (influential) categories, MSP business owners find that candidates with high “S” (steadiness) and “C” (compliance) traits have the most success selling managed services.
Put simply, some salespeople are wired to go after the big, immediate sale (for example, an IT server and multicomputer refresh), and others are more patient, building small, recurring revenue streams that grow over time.
Ideally, you shouldn’t think of one sales personality as being “bad” and the other as “good.” The fact is, each one complements the other, and while you’re building your monthly recurring revenue stream, it’s nice to have a few large active projects generating immediate revenue for your business.
Rob Merklinger is vice president of sales at Intronis, a Boston-based provider of world-class backup and data protection solutions for the IT channel. He is also an experienced software sales leader with a proven track record for driving success and developing sales talent. Guest blogs such as this one are published monthly and are part of MSPmentor's annual platinum sponsorship.