Managed Services The Win-Win Model for Your IT Support Success. By Robert Peretson

Transcription

1 Managed Services The Win-Win Model for Your IT Support Success By Robert Peretson

2 About the author >> Robert began his career as a Network Administrator for a mid-size New York accounting firm in Soon after acquiring his first IT industry certifications, Robert s entrepreneurial spirit kicked in and he left his full-time job to start his own IT Support firm, Perry Consulting, where he continued to support his former employer as well as several other companies as their outsourced IT Department. Perry Consulting continues to thrive today as a successful Managed Service Provider to hundreds of New York City s most prestigious and progressive small businesses. In 2009, Robert began a web portal designed to help his fellow IT Support Providers and MSPs to develop sound business practices and implement proven, effective marketing strategies that will ensure fast growth and maximum profitability. Robert can be contacted via at [email protected]. Page 1

3 Synopsis >> Break / Fix support has long been the IT Industry standard for providing small businesses with outsourced maintenance for their computer systems. IT Consultants continue to cling to the hourly support model, thinking if they can just get enough clients, the revenue will be there. And small business customers stick with the model because they think it s cheaper than a monthly Managed Service fee. This white paper discusses why Break/Fix is broken, why flat-fee Managed Services is a far more efficient and cost-effective solution for an IT Support Provider to offer, and how to easily transition reluctant clients over to a Managed Service Plan. Content Introduction Fire!... Aim Ready? Know your needs first then determine the client base you need to survive Calculate your expenses and income requirements Identify the client base that can best support your business Break/Fix is broken. Move to Flat-Fee Managed Services and Win-Win The Break/Fix, Hourly Support Model The Flat-Fee, Managed Service Support Model So are Managed Services the right solution for every client? When Managed Services IS the right solution even though the client doesn t 7 realize it yet. 5.1 How do you help a client recognize that they need Managed Services? If they need Managed Service, but still don t want it, why not give them the break/fix 9 service they want? 5.3 You don t have to try and force Managed Service on a client that s not ready for it 9 yet and you don t have to turn them away either. 5.4 Ease clients into Managed Support with Building Blocks Nothing beats an effective demonstration for making the sale. 10 Page 2

4 Introduction >> Achieving success as an IT Support Provider or Managed Service Provider doesn t need to be difficult when you build your business on the proper foundation. IT Support is needed by just about every small business that uses computer systems. Outsourced support is a very attractive solution for small business owners, and is therefore in high-demand. And providing this support has become incredibly affordable for the IT Consultant, thanks to very inexpensive monitoring and remote support utilities. Yet the majority of consultants who start their own support companies continue to fail and close their doors within three years. Why? Because they build their business on a foundation that is essentially guaranteed to fail from the start. 1.0 Fire!... Aim Ready? >> It s common sense You look at your target, and then take your shot. Yet many, many consultants will start their computer business without first taking a good look at the goals they want to achieve. If they did, they d realize the shot they re taking has almost no chance of hitting the target. Far more computer consultants who set off to build their own consulting empire meet with failure than with success. And I m absolutely convinced that the vast majority of those that fail do so because they start out without a clear idea of exactly what they need to survive, and therefore they fail to ever develop a specific plan that will ensure they will meet those goals. Here s an example of where I see this almost every single day. I frequently participate in on-line forums. One that I participate in heavily caters to techs who run a computer repair business. Some of these techs have storefronts where they count on people bringing them their broken computers, but most simply try to build a local reputation for themselves as the neighborhood computer guy, doing break/fix service. Usually they provide service for a few small businesses here and there, but mostly the support is provided to residential customers at an hourly rate, which is typically around the $60/hr. mark. It s easy to see why a consultant might want to jump in with both feet before making sure there s water in the pool. After all, $60/hr. is a decent income, and even if he were to only work part-time hours, he should be able to make a very respectable salary. Page 3

5 But let s consider for a moment that the average annual salary for a network administrator with a few years of experience is around $60K. If you do some quick, simple math (which clearly very few of these guys do before printing up their business cards and posting their flyers at the local supermarket), they would see that they need to bill 83 hours a month each and every month to maintain a salary of $60K. Granted, 83 hours a month IS only part-time hours a little more than four a day. But even if this is the nicest, most personable computer guy in the world with the fanciest flyers and the tech skills to match it s going to be damn hard, if not impossible to guarantee a minimum of different people calling each and every month to have their PC fixed. Residential customers will always be reluctant to call because they don t want to be spending a hundred bucks or so whenever their computer slows down. So the calls from each customer will be rare probably no more than 3 or 4 times a year at best, and they certainly won t want a consultant spending more than an hour or two to get their problems resolved. So, in this one forum alone, I see hundreds of techs every day that are thinking that at $60/hr, if they put up enough flyers and hand out enough business cards and maybe get their car covered in graphics, that they ll surely be able to make a solid living running a computer repair business. But if they took five minutes to do the math, they d see why so few guys actually ever achieve their goals following the residential, computer repair path. 2.0 Know your needs first then determine the client base you need to survive. >> I realize that most of the readers of this document probably focus more on supporting the small business market rather than the residential market, but the same exact principals hold true. Whether you operate on a break/fix model, a flat-fee managed service model, or a hybrid of the two, you still need to evaluate what your financial requirements are and what you need from your client base to meet those financial requirements. When I did this evaluation for myself many years ago, that s when it became crystal clear to me that I needed to be operating on a flat-fee managed service model and get off the break/fix treadmill I was on ASAP if I had any hope of saving my own business. Page 4

6 2.1 Calculate your expenses and income requirements The first step I took that put my business on the right track was to put together an expense spreadsheet that let me calculate exactly how much revenue I needed to generate each month to keep my business alive. This exercise was pretty revealing in itself. It can be scary to put down all of the individual expenses on paper and add them up. Because that number will most certainly be higher than you expect or hope it will be. I know it took me by surprise. But it s a necessary exercise that apparently very few new business owners go through. 2.2 Identify the client base that can best support your business. Then I created another spreadsheet that showed me how much income I was earning from each of my clients, based on the actual time I dedicated to each of them. Since I was doing a combination of flat-fee, remote work and monitoring, plus additional hourly-rate work for onsite support, I calculated the total time I spent on each client and what that broke down to as an hourly income. The results I found were actually pretty shocking. I found that the clients that kept me very busy and who I considered my most important and valued customers were actually my LEAST profitable customers and those little clients that I hardly spent any time with each month were generating hundreds of dollars per hour of my time! I ll get more into this shortly, but the important thing is to be able to accurately calculate what each of your customers is worth to you in true, recurring revenue and to ensure that those totals meet or exceed your revenue needs. If you want to calculate your expenses and your clients revenue value for yourself, we ve made the same spreadsheets available to you for download at: >> Break/Fix is broken. Move to Flat-Fee Managed Services and Win- Win! >> Just think of the term Break/Fix for a second. You re actually waiting for things to Break so you can come out and Fix them and generate some income. How can you possibly, accurately forecast your income based on the complete unknown factor of when your client s computers will fail? Let s take a look at some major differences between charging hourly rates vs. flat fees Page 5

7 3.1 The Break/Fix, Hourly Support Model Break / Fix Hourly Support Model Work flow is feast-or-famine. Some months you'll be busy. Some months will be dead. Busy months generally mean your clients are having lots of problems. Lots of problems mean unhappy clients. If you get a big check, chances are your client is writing it after experiencing some significant problems. Do you think they'll feel happy about cutting that check? Every time you walk through the door, the client is getting billed. Do you think they want to see you very often? Since they want to see you as little as possible, you're going to need more clients to keep yourself busy and meet your financial goals. If several of those clients have problems at the same time, it'll be hard to take care of them all fast enough. Again... you've got some unhappy clients. And if nothing is breaking, you'll be calling around to propose some projects to get the income flowing. You ll appear to be fishing for work, and your clients will be saying, "Not now... cash is tight. Can we hold off on the upgrade till next month?" Break/Fix is a constant "You need to do more / They want to see you less" relationship. It s a Win/Lose scenario for both of you in almost every way. 3.2 The Flat-Fee, Managed Service Support Model Now let s take a look at the Managed Service Model, where you ll charge a flat, monthly fee to keep your clients running at peak performance. Flat-Fee, Managed Service Model Your revenue will be consistent and reliable. You'll be able to forecast your monthly income well in advance of generating your invoices. Your income is based on keeping your client's systems running smoothly. The fewer problems they have, the higher your profit margins (you need to work less hours to generate the same income). The less often your clients see you, the happier they are to write your check ("Things are working great! Let's keep it that way! Pay the man.") You charge a fair, predictable rate, they get reliable, productive computing. Flat-fee managed services can provide you with clients that are more productive and better satisfied with your services, while giving you a more reliable and more profitable source of revenue. It s a win-win scenario for everyone involved! Page 6

8 4.0 So are Managed Services the right solution for every client? >> Of course not. There are tons of small businesses out there that simply don t have a need for regular monitoring or remote support for their users. There are businesses that operate primarily on hosted applications, with little or no data stored on-site. There are others that use minimal amounts of shared data, which is kept on a simple, shared storage device and is backed up remotely. Now, these businesses will have the occasional need for some break/fix support if a workstation fails, the Internet goes down, they want to setup a new device they re unfamiliar with, etc. But they probably wouldn t benefit from a Managed Service solution, as there s very little to actually manage on a regular basis. You ll undoubtedly come across businesses like these at one point or another, and you as the support provider can make your own decision as to whether or not you want to provide the occasional hourly support to these clients. They might grow into a client that eventually needs your managed service. They might also be a great source for referrals to other clients that would be in greater need of your managed services. So if you have the time to serve them on a break / fix agreement, it might not be a bad idea. For myself though, I tend to turn these businesses away. What I ve come to realize is that my time is my most valuable commodity. So every hour I dedicate in one area I recognize is taken away from another. And as a result, I ve become very particular about where I spend my time. Clients that call on me only a few times a year to fix a workstation that won t boot or to clean up a virus simply isn t a very effective or profitable use of my time. 5.0 When Managed Service IS the right solution even though the client doesn t realize it yet. >> Now, while there are the businesses here and there that simply don t need managed support, there are countless small businesses out there that absolutely DO need proactive monitoring to keep their companies safe, secure and operating at maximum efficiency. The problem is, often the business owner might think he s just fine supporting his systems by paying an hourly rate whenever something breaks, or only when a specific need arises. Your challenge and responsibility is to show this client why Managed Service is the most efficient and effective way to maintain the network. Page 7

9 5.1 How do you help a client recognize that they need Managed Services? Often, it s all about asking the right questions. Ask good questions and the client will recognize their need for proper maintenance on their own, without you trying to sell them on it. Will the company suffer financial loss if they experience downtime of more than an hour or so? Will the company suffer financial loss if they lose their data? Would the company be able to survive if they lost their data and found it to be unrecoverable? Did the company make a significant financial investment in the computer equipment they currently have? Does the company rely heavily on for communication with customers, partners or vendors? If the company s computer systems aren t operating properly, does the performance of the staff suffer? How deeply does this affect the firm financially? We re not even touching on if the company needs to meet compliance standards required for firms in their industry, such as HIPPA regulations for the Medical field or Sarbanes-Oxley Compliance for financial firms. We re just talking about the basic level of reliance a company has on its computer systems so that the company can function and survive. If a small business relies on their computer systems then they MUST properly monitor and maintain them. Because if they don t, the potential for disaster is very real, and very scary. Did you know According to SCORE: Counselors to America s Small Business: A Company that experiences a computer outage lasting more than 10 days will never fully recover financially. 50 percent will be out of business within five years. 70 percent of small firms that experience a major data loss go out of business within a year. Companies that aren t able to resume operations within ten days (of a disaster hit) are not likely to survive. Of those businesses that experience a disaster and have no emergency plan, 43 percent never reopen; of those that do reopen, only 29 percent are still operating two years later. If a small business network goes down, there s a very real possibility that the entire company can go down with it. Page 8

10 5.2 If they need Managed Service, but still don t want it, why not just give them the break/fix service they want? It is your responsibility as the consultant to make your clients aware of the dangers of NOT properly monitoring their systems. If they re aware of the risks and still insist on staying with a break/fix support solution, then again, it s up to you if you want to support that client and accept the possible risks that go along with supporting them. After all, if all hell breaks loose, you re the one that s going to be hunched over the dead server trying to bring it back to life as the boss stands looking over your shoulder asking how much longer till we re up?! every ten minutes. And heaven forbid you tell them the data s gone because the backup hasn t run properly in six weeks. Do you think they ll care when you say I tried to warn you this could happen. All they ll care about is that you re the computer guy who let their server fail, let them lose their precious data and even if they re one of the fortunate few who figure out a way to survive the disaster, it s a long-shot at best that they ll keep you on board as their computer consultant as they try to rebuild their business. In fact good luck trying to collect on that last invoice for the 12 straight hours you spent trying to rebuild their server. If you intend to build a strong, healthy computer consulting business, then it s your responsibility to provide a service that protects both you and your client. 5.3 You don t have to try and force Managed Service on a client that s not ready for it yet and you don t have to turn them away either. Listen, we all know that thanks to years of break/fix being the only support model available, many small business customers are reluctant to make the shift to the newer Managed Service support model, no matter how much more efficient and cost-effective it may be. It won t be long before Managed Services becomes the industry standard, but change in the beginning is always a challenge, and a shift from paying by the hour to paying a flat-rate is a pretty significant change for a lot of small business owners. So rather than try to force your clients or your potential clients into a change that they don t feel quite ready for, ease them into the transition with simple Building Blocks. 5.4 Ease clients into Managed Support with Building Blocks. If a client is reluctant to take on your full managed service offering, thanks to low-cost monitoring options available today you can transition them in to your Managed Service offering slowly, a few pieces at a time. You can allow your clients to experience the benefit of a proactive monitoring approach, without having them commit to a large financial investment that is likely keeping them from making the transition. Page 9

11 If you re using a low-cost monitoring solution like GFI, you can create a very affordable and attractive entry-level support offering for your clients. Consider the following approach: I ll be glad to continue supporting you by the hour. But it s just simply irresponsible on both our parts not to keep tabs on at least the critical areas of the network like the backup and antivirus systems. Heaven forbid the server crashes and I have to give you the news that the backup hasn t worked in weeks. You ll have my head on a platter! Or what if a virus spreads through the office like wildfire because the Antivirus software failed to update? I honestly don t physically have the time to rebuild every one of the workstations on the network. And even if I did, I know you wouldn t appreciate the downtime... or the enormous invoice. So how about I just setup the monitoring for just these two systems? If the backup fails, or if the antivirus fails to update or stops running, we ll get an instant alert. I can set this up for you for just $0.50 a day. For what s really a very insignificant financial investment, we ll have peace of mind that at least the data is safe and that we re as protected as can be from having a virus shut us down. Any responsible business owner who understands the importance of keeping his data safe would be pretty crazy to not take you up on this offer. 6.0 Nothing beats an effective demonstration for making the sale. >> Offering an entry-level Managed Service solution is also a great way to get your foot in the door with new clients who: Are currently using another Break / Fix Consultant Who Self-Manage their network Or who just aren t ready for a complete Managed Service Solution Plenty of times I ll approach a prospect who s quick to tell me they ve already got someone supporting the network. But when I ask, Did the backup report you got today confirm that your backup was successful? and they tell me they don t get a report like this and then I ask, Well, did your monthly status report tell you how many times your backup failed in the past 30 days? and they tell me they don t get any kind of reporting like this there s my opportunity to make the following offer: How about I simply setup the monitoring of these systems for you for the next 30 days completely free? If everything s working great fantastic. You ll know your guy s got things under control. But if your backup fails, or your Antivirus doesn t update, or your server is reporting hardware errors or anything of that nature, you ll get an instant alert and you ll know for certain that your network isn t quite as healthy as you are being led to believe. Page 10

12 Because providing the monitoring through GFI is so affordable, I m glad to provide a free trial of my service for the opportunity to show this business owner how I can protect his company and potentially win him as a new client. Nothing is more effective for making a sale than being able to provide a powerful demonstration. And for literally pennies a day, you can provide your prospective new client with an incredibly compelling demonstration of how effective you can be at managing their network. WP/0003/v1.0/EN GFI isn t just a great monitoring tool. Because it s so affordable and easy to demonstrate, it s become one of the strongest marketing tools in my arsenal as well. MSP Business Management is a collection of real-world tips and resources to help busy IT support companies and Managed Service Providers grow their businesses profitably. It is brought to you by the GFI MAX team because we want to simplify the business of managed services and IT support. For more information please visit MSP Business Management. All rights reserved. Page 11