Cherryl Pressley explains how B2B resellers can increase revenue and attract more clients by becoming managed service providers
How quickly the technology landscape has changed, and with it the role of the reseller. If you’ve been a traditional reseller for any length of time, the business model is pretty straightforward. You sell a product or products, then you touch base when it’s renewal time. Otherwise, it’s on to the next customer; rinse and repeat
This might not be your best approach anymore. In fact, many resellers have found their golden ticket by evolving into a managed service provider (MSP). By going down this route, you stand to increase your revenue and improve your customer retention, in addition to numerous other benefits. Here’s how to get started and make the most of your new role.
1 Understand the why
If you’re not completely bought into this shift, it’s all too easy to maintain the status quo. Yet, doing so is a big risk. Gartner predicts that 40% of VARs will go out of business if they don’t adopt a recurring revenue model, so making the transition to become an MSP clearly deserves your consideration.
What, then, are some of the key differentiators between the two models?
The traditional reseller model is transactional, requiring upfront investment from customers. Such relationships are known to be short-lived: once the initial deal is done, both parties typically move on. This leaves resellers with unpredictable income spikes and dips, often leading to problems with cash flow.
In contrast, a service model is ongoing. The subscription-based nature of managed services allows you to be proactive; it keeps you in the loop with the customer and allows you to identify – and remedy – problems they might have and in doing so forge a stronger relationship. A partner offering solutions is preferable to a salesperson pushing multiple products; it increases retention and in turn increases customer lifetime value in terms of revenue.
Recurring revenue also means that you’ll have the benefit of regular income, which will help eliminate cash flow problems and leave you better equipped to handle budgeting and planning.
Finally, and just as importantly, such a model is better aligned with current expectations. Customers enjoy the cloud experience they get elsewhere, including reduced costs and greater flexibility, and want a similar experience from you. Only as an MSP can you provide them with this.
2 Think about ancillary advantages
Some resellers worry that customers with existing licenses won’t be willing to migrate to a subscription, arguing that it’s like returning a car to a dealership, just to lease it back immediately afterwards. This is a myopic view, as McKinsey explains: “(Such a) migration gives (customers) an opportunity to clean up years of complex perpetual contracts, to eliminate unused licenses, and to negotiate a subscription contract aligned with the true needs of the business.” This type of thinking is in everyone’s best interest, yours and the customer’s.
These are just some of the advantages of becoming an MSP. Others include more flexibility, improved scalability and greater efficiency.
3 Take the right steps
Once you feel ready to move to an MSP model, the first thing you should do is audit your customer base – gather information about the applications they are using, when their renewal dates are, whether they’ve contacted you with any issues and any other important notes you’ve made about their situation.
Next, consider how you can improve your customers’ experience by offering personalised managed services. What combination of services can you provide? Will you offer onsite tech support, remote troubleshooting or some combination of both? Will you do hardware repairs? Network monitoring and security? Built-in creative services with marketing solutions? What will your consultation offerings look like? Think through the specifics and make sure you have an idea of how you can tailor your services to meet a customer’s needs, wants and product(s).
After this, it’s time to tackle pricing. This can be one of the toughest nuts to crack in the transition from reseller to MSP, but it’s certainly not impossible. Keep in mind that striking the right balance between high subscription prices and high rates of adoption can substantially increase the customer lifetime value. Remember the MSP model is a long game. Long-term retention equates to increased revenue, so set your pricing with this in mind – and do homework to see what others are doing.
Something else to pay attention to in this transition is your sales force. They are likely to be set in their ways and may find change difficult. Make sure you come up with ways to incentivise them to sell subscriptions. Salespeople have to understand what’s in it for them as they make the shift.
Becoming an MSP after years or even decades of being a reseller isn’t necessarily a quick or simple transition, but it’s essential to your business longevity and success. It’s also a big step forward that can be taken in order to increase your revenue and improve customer retention. When all is said and done, the MSP model brings with it these and numerous other positive benefits.
Cherryl Pressley is CEO of Black Pearl Mail, provider of a software-as-a-service (SaaS) solution for making email more Manageable, Actionable and Insightful. Integrating seamlessly with Microsoft O365 and G-Suite, it offers centralised signature management for brand consistency and compliance; banner messaging that turns passive email communication into a value-add digital marketing tool; and enduser insights into when and how recipients interact with their email. The company is headquartered in Scottsdale, Arizona and has a growing R&D hub in Wellington, New Zealand and a support office in Zurich. Prior to joining Black Pearl Mail, Cherryl Pressley spent 14 years at Microsoft where she led strategy, sales and marketing worldwide for Microsoft’s distribution partner channel.