It's Time To Fire Some Customers...
As I write this, it’s Q4 of 2022, and the year isn’t material to my thoughts here, but rather the time of year. If you’re like many MSPs, the fourth quarter of the year begins your preparations to renew expiring Managed Services agreements with your clients to continue your business relationships in the new year. But beyond that, it’s a time for reflection and fine-tuning your growth strategies for the following year.
This growth planning should include candid evaluations of not only challenging external business factors and internal operational issues and plans to address them; but also an honest appraisal of every client relationship for its suitability for you to continue it. Documenting and ranking clients into “A,” “B,” and “C” categories (with “A” being best) is an excellent first step in developing an understanding of what you consider the most and least attractive traits of your overall client base. Some of these traits may include:
- Cultural fit
- Business growth potential
- Strategic leadership
- Values your guidance
- Revenue generated
These traits are in no particular order, and you will most likely add more to the list, weighing each value according to your own preferences. After you’ve determined your evaluation criteria and applied them to each client, you can more objectively establish whether they fall into the top, middle, or bottom third of your client list.
The next step can be difficult, as it requires you to determine which of your “C” customers you can no longer justify moving forward with (from now on, I’ll designate clients as “A” and “B” and customers as “C”). The first time I did this in my own MSP practice, I struggled with it (I sold that practice in 2007). It was tough for me to get over two aspects of this necessary business exercise – one, I was worried about losing the revenue that these customers represented, and two, I really didn’t relish the conversations I would have to have with them to let them go.
But after executing this strategy for the first time, I did it every year afterward with much less anxiety because I learned a couple of things that surprised me. The first thing I learned was that, although we lost some top-line revenue, it was by far our lowest-margin revenue. In fact, in many cases, I discovered that we were actually losing money on many of those customers we fired when I analyzed our financials after that first exercise. This really surprised me. Now don’t get me wrong, I knew these were typically our least profitable customers, but I had no clue that we actually lost money on them. By the way, they also represented our noisiest customers, the ones we had the most customer satisfaction challenges with, and the ones that tended to argue every invoice and charge – and many succeeded at having us reduce our charges, write off items on some invoices and request or demand on-site visits from us for services that could easily have been delivered remotely.
The second thing I learned was that firing these customers noticeably improved my staff’s morale and my own. We reduced the noise and stress of dealing with customers that didn’t fit our ideal client profile. By setting this strategy in motion, my staff knew that we were maturing as an organization and would only be taking on new “A” and “B” clients in the future.
The third thing I realized was that these “C” customers that we fired were taking up a valuable spot in our client list that prevented us from taking on more “A” and “B” clients. In fact, I might argue that in some cases, we could serve two similarly sized and categorized “A” clients more efficiently and certainly more profitably than one poor “C” customer.
This was when I began to see my role as that of a professional sports team coach building a team to win the championship every year – in the sense that you have to make player trades to get there. No matter your favorite sport, there are opportunities for the team you root for to rejuvenate the team with new players through trades and drafts. In this exercise, you are the coach, and your “C” customers are the players you need to trade to make room for the new “A” and “B” clients you will take to next year’s championship.
I mentioned earlier that this exercise got easier for me after the first time, as it will for you. Once I established what “A” and “B” clients looked like, we actively recruited new ones and turned away any prospects that were “C”s. We were also able to spend more time with our “A” and “B” clients (and bill them for it) to have more valuable strategic technology meetings and measure our business relationship and performance together objectively, aligning our goals and enforcing shared accountability. This increased client satisfaction, grew more profitable revenue, and reduced churn.
- “C” customers are your noisiest and least profitable
- Firing “C” customers improves staff morale and efficiencies
- “C” customers prevent you from serving more “A” and B” clients
- It’s Q4, and it’s time to fire some “C” customers
Business Coaching Openings Available Now
There’s something to the old adage “it’s lonely at the top.” Many MSP business owners seeking guidance on how to grow their company have a scarce amount of resources to turn to for help.
There simply aren’t that many experts and thought leaders that have “been there and done that” – built and sold successful IT and MSP practices and helped hundreds of other IT business owners achieve dramatic, positive business transformation.
I’ve accomplished these outcomes and more for myself and my clients many times over.
As my coaching client, I’ll work to refine your and your team’s talents, hone your goals, guide your decisions to accelerate growth and avoid costly mistakes, and help ensure that you and your business are successful in growing more profitable monthly recurring revenues.
I deliver the one-on-one guidance & support you need to help get you to the next level of business growth.
My cost-effective MSP Mastered® Coaching programs are designed for growth-minded IT Business Owners looking for help and accountability to get to the next level of performance and profit. Click below to set up a call with me to find out if my coaching program is right for you.
Webinar: Build Your Required Cybersecurity Offering
Thursday, October 27th @ 11am PT
Let’s face it – it’s not easy getting all your clients on the same page with you on Cybersecurity. And it’s tough to come up with your minimum, required offering that you must get all of your clients to say yes to. And now, there is simply too much risk for you as an MSP to delay getting this done, because the more you delay, the worse the potential outcome for you and your clients.
Are you ready to solve this dilemma once and for all? Then join me as I reveal the minimum Cybersecurity services you need to deliver to your clients that dramatically minimize your respective risk. I will also demonstrate how to present the adoption of these services properly and confidently to your clients as a non-negotiable requirement to continue receiving your services.
This must-attend session for MSPs struggling to get Clients to say YES to enhanced Cybersecurity will include specific strategies and how-to’s that you can implement immediately to grow profit, reduce risk (improving staff morale and client satisfaction), and increase your value to your clients.
Attendees will receive the following MSP Mastered® asset: Erick Simpson’s Cybersecurity Portfolio Bundling and Pricing Calculator
My MSP Sales App Prices Your Services & Creates Your Proposals, SOWs, and Business-Winning PowerPoint Sales Presentations in Minutes!
When preparing your sales proposals, statements of work, and sales PowerPoint presentations for new business opportunities:
- Does it take way too much time to do?
- Is it so complicated that it falls to the bottom of your to-do list?
- Are you challenged when pricing to maintain consistent margins?
- Do you have to use too many different tools/platforms/calculators?
- Are you the only one that can do this critical function, hence the bottleneck?
- Are late proposals to prospects and clients the norm, delaying new revenue?
If you’ve used tools like MSP Pricing Calculators and Sales Proposal and Statement of Work Templates, you know how time-consuming it can be to price your services for 3 distinct bundles and transfer all of that information between these distinct assets.
Or maybe you’re using a “Swiss Army Knife” platform for your business that promises to do it all, but is simply too kludgy and takes too many clicks and screens to deliver an unattractive, simplistic quote?
Let’s face it, to win more business what you really need is a truly consultative sales proposal that wins business fast, along with the appropriate SOW and a business-winning sales PowerPoint slide presentation deck that you can create in mere minutes.
This is just what my new MSP Sales App does. It creates my MSP Mastered® Consultative Sales Proposal for Managed Services and Cybersecurity with 3 options (good, better, best), along with each option’s Statement of Work for you, along with my proven MSP and Cybersecurity Sales PowerPoint Presentation, with pricing and terms in minutes!
I’ll say it again – with my new MSP Sales App, you can build and price your offerings customized for each prospect or client to maintain your margins and export a professional, consultative sales proposal, SOWs, and sales presentation in minutes!
Founder & Chief Strategist
2271 W. Malvern Ave., #169
Fullerton, CA 92833
Subscribe to my Webinars!
Discover Your MSP’s Value: Free Valuation Toolkit!
Erick Simpson built and sold one of the very first MSPs in the industry and co-founded MSP University, where he grew and coached a channel of 30,000 IT Solution Providers through their MSP transformation. He is the creator of the MSP Mastered® Methodology for business performance improvement that has been licensed by numerous IT channel distributors and vendors. Erick is a technology business & channel growth expert, influencer, thought leader, speaker and author with 4 best-selling books and 50 white papers to his credit, and he co-hosts the ChannelPro 5 Minute Roundup Podcast. He builds channel improvement programs for IT distributors and vendors and his consultations help IT organizations overcome business challenges to realize rapid, profitable growth. Erick’s industry recognition includes Channel Futures’ 7 Thought Leaders Defining the MSP Market, Jay McBain’s 100 Most Visible Channel Leaders, 2 Time ChannelPro 20/20 Visionaries, 2 Time MSP Mentor 250 and SMB Nation’s SMB 150 award recipient.
This newsletter may contain affiliate links to products that generate a commission to us when purchases are made through them.
The post Erick Simpson’s MSP Newsletter | October 2022 | It’s Time To Fire Some Customers appeared first on Erick Simpson.