Maturity level can mean two things for an MSP. One school of thought focuses on the adoption of advanced business acumens and the development of broad services portfolios. The other involves an evolution of the size of the target clients. Some MSPs include both objectives in their long-range plans. Fundamentally, operational maturity is a measure of an MSP’s growth, scalability, efficiency and ability to execute its strategic plan.
IT services businesses should monitor maturity level to ensure continual improvement through planning and attaining specific development goals. Advancing various aspects of an MSP’s operations makes it more valuable to everyone—including clients, employees, owners and potential buyers.
Many consider an MSP to be a “living” or dynamic organization. By nature, IT services firms must continually evolve their portfolios, support programs and even business models to keep pace with clients’ rapidly changing needs. Those changes also allow MSPs to increase their revenue streams, margins, cash flow and customer satisfaction.
More than ever, stagnation and complacency can force IT services firms to close their doors. Innovation in technologies, services and business models keep MSPs relevant with clients and prospects and allow them to optimize back-office operations, efficiency, and profitability.
Many investors prefer to acquire operationally efficient IT firms that closely adhere to (if not exceed) industry standards and overall business best practices. MSPs with ambitious yet sustainable development plans and solid sales track records typically garner more attention in the M&A dance and receive a higher sales factor than their less structured peers.
MSP Maturity Levels
The best way to effectively manage the growth and development of a business is with a properly structured plan. Achieving a higher MSP maturity level requires an effective strategy and a cross-company commitment to each objective, with continual tracking, frequent reporting and accountability for individual and group goals. No task should be taken for granted, and owners must remain committed to each step of the development process.
The good news is, with the advent of managed services and the cloud, many IT companies skip the so-called “bottom-rung” of the maturity model. While the Value-Added Reseller or VAR community remains a viable opportunity in some areas, most new providers invest their limited resources in growing recurring revenue opportunities. The relatively low cost of entry and high ROI are just two factors driving that trend, but many IT services business owners won’t stop there. Providers with higher profit aspirations typically begin building out their portfolios with cloud offerings and hire skilled technicians who can support more advanced solutions.
Strong cash flow is key. With a solid business plan and steady increases in revenue streams and profits, MSPs can invest in new tools, people, programs and other resources to advance their operations and maturity level.
The second rung on the maturity ladder involves standardizing the company’s operational processes while maintaining a strong focus on technology: keeping systems online and upgrading the IT environments. Any consultation or design support is typically related to the “nuts and bolts” of the applications and devices, not to the business processes or strategic plans and project work. Many companies comfortably reside in this space, as moving to the next level requires providers to implement Remote Management System (RMM) and Professional Services Automation (PSA ) tools and to adopt higher level business acumen.
That’s because the third stage of the maturity model involves more comprehensive strategic engagements. MSPs of this level have a more developed business structure with stronger policies, procedures, and accounting/budgeting practices. Management portals and documentation tools help bring stability to the chaos and infrastructure improvement is more of a priority than device sales and maintenance. While most companies are quite advanced at this level, there are a few final refinements and investments needed to reach “IT services nirvana.”
Consistent quality and operational excellence are two common descriptors for MSPs reaching the top maturity level. These organizations adopt industry, business and accounting best practices and effectively communicate and collaborate with their clients, outsourcing partners, vendors and distributors. They fine-tune and energize their sales techniques, invest in advanced lead generation and marketing programs and strengthen account management and customer service teams. Mission alignment is a top priority. These high-level MSPs typically take a business consultancy approach, selling clients on operational efficiency and policies first, with technology and automation as enablers.
Plan, Execute and Elevate
A common expectation is that every business will grow and evolve over time, on a steady climb toward peak efficiency and profitability—though those outcomes are never assured. Most companies ebb and flow in terms of sales, client counts, staffing and portfolio options. Forward momentum may stall for many reasons, including market conditions, owners’ health issues, and unplanned employee turnover.
Mature MSPs design business models and strategies to address those unexpected shifts and overcome potential hardships.
First, the leadership team should research best practices and industry standards and spend time gaining insight from peers and industry experts.
After assembling and digesting all that valuable information, they can put pen to paper (or fingers to keyboard) to build a long-term plan with the appropriate timetable.
Strategic goals should never be rushed. MSPs can often fund much if not all of their expansion and refinement plans through organic sales growth, leveraging revenue rather than paying interest on loans or credit lines.
Strong cash flow is key. With a solid business plan and steady increases in revenue streams and profits, MSPs can invest in new tools, people, programs and other resources to advance their operations and maturity level.
Your MSP can achieve efficiency and cash flow to elevate its maturity level with an all-in-one accounts receivable automation solution—ConnectBooster.
With ConnectBooster, MSPs can stop spending so much time on billing and collections tasks, and instead focus on more productive parts of the business. ConnectBooster connects with the solutions MSPs rely on—CRM/PSA, quoting and accounting software—to automate tedious and error-prone accounting tasks and automatically collect payment according to variable agreements. Request pricing and see how ConnectBooster capitalizes on efficiency and automation to increase cash flow.
