How Legacy Customers Can Build Up a Managed Services Business Model
Read more in Chapter 5 of ConnectWise’s “The Ultimate Guide to As-a-Service”
In the world of a typical systems integrator, the Pareto Principle, which promotes the generalized “80/20 rule,” definitely applies to legacy Pain In The Ass (PITA) clients. In this case, 80% of the service headaches are generally caused by 20% of clients.
To dig down even deeper, it’s not uncommon to hear an integrator say that 95% of service problems are routinely caused by 5% of incorrigible customers.
So what can you do?
One adage is to simply “fire” those PITA customers. The easiest way is to hike prices on them … even double prices. If the customer stays, then you have just doubled your revenue; if the client leaves, so be it.
But another tactic is to examine exactly how legacy customers (both good ones and bad ones) can help be the building blocks for a managed services business model. But taking that first step can be intimidating. So where do you start?
I once heard one of those self-help gurus define the word “walking” as “the act of falling and then catching yourself on every step.” It sounds a bit dangerous, but the idea is that even the simple act of walking requires the leap of faith to get started.
Likewise, taking that first step into managed services is also the scariest part of the endeavor. According to business software provider ConnectWise in Chapter 5 of “The Ultimate Guide to As-a-Service,” there are four simple tips on how to make the leap:
THE ULTIMATE GUIDE TO AS-A-SERVICE
Tips, advice, and long-term solutions on how to transition your business to an as-a-service model, and why it’s beneficial to do so.
Part 1: Why Change Your Business Model? – analysis by CI editor Tom LeBlanc
Part 2: How to Plan for the Big Transition – analysis by CI editor-at-large Craig MacCormack
Part 3: Managing Cash Flow – analysis by CI web editor Chelsea Cafiero
Part 4: Adapting Your Sales Strategy – analysis by CI senior web editor Jessica Camerato
Part 5: Transitioning Your Existing Clients – analysis by CE Pro editor Jason Knott
Part 6: Business Process Automation – analysis by TechDecisions managing editor Jonathan Blackwood
Part 7: How to Retain Clients – analysis by CI editor Tom LeBlanc
Check back for analysis of each section of the Ultimate Guide to As-a-Service to be released on SecuritySales.com.
1. Change your Mindset. To successfully operate a managed services business model, you have to alter your mindset that the revenues will be coming in over a period of time vs. all at once. There are benefits to this, including keeping you in consistent communication with your clients, anticipating failures, providing improved customer service and most importantly, increasing your cash flow.
2. Transition in Stages. It is not feasible to immediately start a managed services business model like making a bowl of instant oatmeal. There must be a transition time period in which you are providing traditional truck roll service while at the same time rolling out managed services.
More importantly, there is a necessary transition time among your customers who will not understand what you are trying to achieve and if they do understand it, they won’t know how it benefits them. One effective way to explain the change is to map out for them the process that takes place when they call you after something goes wrong. You have to pencil them into your service schedule and you may not resolve the problem for days.
Then, transition the discussion to how the proactive monitoring elements of a managed services program reduces or even avoids downtime altogether. Internally, integrators will need to potentially adjust their compensation programs upfront also.
3. Just Do It. The next stage is that first “walking step.” As ConnectWise says, “They can’t miss what they’ve never had,” so start pitching the new business model to clients.
4. Fall Back to Traditional Model If Necessary. You are not going to close every deal as a managed service. ConnectWise recommends you fall back to your traditional business model should you encounter resistance.
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