Virtually everyone and every business is dealing with escalating expenses this year. While costs rarely go down, or at least rise at a rate in line with normal salary increases, inflation is taking a major bite out of budgets and paychecks in 2022. The March figure hit a staggering 8.5%, the largest twelve-month increase in forty-one years. Up from an already concerning 7.9% in February, those constantly high inflationary numbers could significantly cut into any company’s profitability without offsetting price increases.
Managed services businesses can’t afford to wait until 2023 to address any cost/income inequities. Fuel costs have doubled over the past year, and some of MSP’s other critical expenses are rising almost as much. Passing on most if not all of those increases to clients is essential for preventing margin and cash flow concerns. While some businesses might feel taken advantage of if an MSP raises prices every time prices tick up, if expenses rise significantly more than revenue, something has to give. Finding a price/value equilibrium is critical.
MSPs should always be in a position to raise rates justifiably. Providing a low-cost value-add to offset increases can alleviate the pain. Few clients will get upset if they receive more benefits and better support in exchange for paying a higher rate. Delivering continual efficiency improvements helps soften the blow of price increases.
Creating Mutually Beneficial Opportunities
MSPs often get paid to address bad circumstances. Dealing with all the pandemic-related restrictions and business challenges of the past two-plus years clearly demonstrates the capabilities of the greater provider community. IT services firms admirably stepped up to drive, secure, implement and deliver ongoing support for remote and hybrid workforces in a matter of weeks (if not days, in some cases).
Similar consideration should go into developing a 2022-2023 portfolio and pricing strategy. How can you continue advancing and improving the security of your clients’ IT systems without hitting them too hard in the pocketbook? At the same time, what steps can you take to boost your company’s financial situation − or at least ensure your margins don’t slip)?
A good place to start is with your offerings. No client should be surprised when an MSP announces new pricing in the current economic environment. However, providers who create a win-win proposition by delivering additional services or more support with a price increase typically receive less negative feedback and enjoy an easier transition.
Everyone knows that inflation is a real problem today. If their MSP provides a new solution that will improve their efficiency, communications, or security posture along with a 10%-15% price bump per seat, that extra “value-add” may justify the additional expense. For example, UCaaS or hosted VoIP could be part of a technology refresh program that brings higher margins on top of raising rates. Your clients will gain tremendous cost savings compared with traditional phone services while enjoying all the benefits of an advanced communications platform.
The key is keeping the cost of those extras or portfolio changes below expense increases. Successful MSPs understand the things their clients need and provide new services to justify price increases, helping inflation-proof their businesses while boosting support levels and capabilities. Communications is one area where providers can create new opportunities (and savings) for themselves and their customers.
Drive Productivity, Strengthen Value Opportunities with UCaaS
Strong IT services partners are invaluable − even more so today than before the pandemic and rise in cybercrime. Your clients are similarly looking for ways to trim their expenses to avoid passing on huge price increases to their customers. Similar to the value-add option mentioned above, MSPs are the innovators that can leverage their ingenuity and beneficial technologies to create new business efficiencies.
The move to WFH and hybrid environments is the perfect example. Encouraging clients to downsize offices and better enable remote workers can significantly lower costs. They can reinvest that money in new sales and marketing activities and technologies that drive additional revenue, increase customer satisfaction and reduce employee turnover. Of course, MSPs can also deliver a host of new services, including UCaaS, to bridge the distance gaps between employees and strengthen their productivity.
Those technology investments allow providers to boost monthly recurring revenue, renew and increase IT contracts, and bolster their margins.
How are you dealing with inflation? MSPs can mitigate rising costs and shrinking profits with the right approach and deliver broader and deeper communications support to existing and new clients. Developing mutually beneficial portfolio options like UCaaS that help “future-proof” your customers’ businesses is a proven recipe for success.
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