Let’s face it, every MSP hits a rough patch. Whether it’s a few lost clients, inflation squeezing your margins, or just slower-than-expected growth, there comes a time when you need to tighten the belt. But cutting costs without cutting corners on service? That’s the real challenge.
The worst thing you can do is make reactive, panic-fueled decisions. It’s not wise to slash your marketing budget or lay off a valuable tech without understanding the long-term ripple effects. This guide walks you through a smarter, more strategic approach to expense reduction. It’s designed specifically for MSPs that want to maintain their reputation, keep clients happy, and stay on track for growth.
Start with a ‘Reality Check’ Audit
Before you cut anything, know where your money is actually going. Many MSPs are surprised by how much they spend on tools, services, and processes that are either redundant or underutilized.
Take some time to review:
- Monthly SaaS tools or licenses that aren’t being used to full capacity
- Replaced but never canceled legacy tools
- Subscriptions and partnerships that no longer serve your business model
Don’t just look for waste; identify what’s essential and what’s expendable.
Cut Unused or Underused Tools
You might be shocked by how many overlapping or forgotten tools you’re paying for. Take a hard look at your stack. Do you have multiple RMMs or PSA tools because no one wanted to deal with migration? Are there backup tools still on the books for clients you no longer support?
Start by listing every software tool you pay for and ask:
- Is this mission-critical?
- Does it have a direct impact on client service or internal efficiency?
- If I removed it tomorrow, who would notice?
These are low-risk areas to trim, and your bottom line will thank you.
Pause or Reduce Discretionary Spending
Not all spending is frivolous, but some of it can wait. If you plan to travel for non-essential conferences, expensive branded swag orders, or generous perks that aren’t tied to performance or retention, hit pause.
Amy Bailey
“Evaluate the cost of attending the event relative to the value it provides,” advised Amy Bailey, owner of Unusually Unusual Consulting and a distinguished event planner and marketing consultant. “This includes registration fees, travel expenses, and time away from the office. Too many clients forget to include the time away from their office as part of the expense.”
This doesn’t mean turning into a miser, it just means putting your dollars where they count the most. Team lunches are great, but not at the expense of payroll or patch management software.
Scale Back Marketing Strategically
Marketing is often the first thing on the chopping block, and that’s a mistake. Instead, do it strategically.
Keep what’s working and cut what’s not. If your monthly spend on paid ads isn’t delivering quality leads, it’s time to reevaluate. But if your email campaigns or referral efforts are cost-effective, keep them going strong. Cutting visibility in a downturn is like turning off your headlights in the dark.
Prasanna Perera
“As an MSP, you need to know if your sales and marketing work well,” said Prasanna Perera, managing partner of MSP marketing company RiseOak. “Are you meeting industry standards or falling behind? One way to know is to be aware of which key metrics to track.”
Instead of canceling everything, shift focus to low-cost, high-impact strategies like organic content, LinkedIn outreach, or referral incentives.
Reassess Vendor Contracts
Now is the time to renegotiate existing agreements. Reach out to vendors and ask about contract flexibility, downgrades, or bundled discounts. Many vendors would rather keep you at a lower spend than lose you altogether.
In some cases, you could consolidate multiple services under one vendor for cost efficiency. Be cautious, though. Don’t let cost savings outweigh functionality or reliability.
Delay New Hires, but Don’t Sacrifice Support
If you plan to hire a new tech or salesperson, consider delaying the hire — unless your service levels are suffering. Hiring at the wrong time can create more overhead than value.
Instead, look for ways to increase internal efficiency through better ticket triage, automation, or cross-training staff.
Keep in mind, if your team is drowning and clients are feeling the impact, holding off on hiring might cost you more in the long run.
Do Not Cut Client-facing Value
This one is a non-negotiable. Don’t cut corners on cybersecurity, backup, or anything else tied directly to service delivery. That’s the fastest way to lose clients and dig yourself into a deeper financial hole.
When clients feel the pinch, they start shopping around. Keep their trust by protecting your service quality, even if that means making tough internal trade-offs elsewhere.
Final Thoughts: Be Transparent with Your Team
If you’re trimming expenses, your staff is going to notice. The best thing you can do is communicate clearly. Let them know you’re being proactive — not reactive — and that your goal is to protect the business and their jobs.
Invite them to participate in identifying cost savings. They’re often closer to the tools, processes, and vendors than you are and might spot inefficiencies you’ve missed.
Being transparent builds trust, and trust is what will get you through tough times with your team intact and your clients still onboard.
Next Steps
- Want more helpful guidance on this topic? Check out our Running a Profitable MSP Answer Center.
- Have a question for our experts? Send it to editors@channelpronetwork.com
ChannelPro has created this resource to help busy MSPs streamline their decision-making process. This resource offers a starting point for evaluating key business choices, saving time and providing clarity. While this resource is designed to guide you through important considerations, we encourage you to seek more references and professional advice to ensure fully informed decisions.
Featured image: iStock
