MSP growth from 10 to 20 + people
MSP | 11 March 2020
A boutique IT recruitment agency based in Australia, selecting, tracking and nurturing IT talent for IT companies and forward thinking IT Departments.
MSP | 11 March 2020
One of the hardest growth jumps for an MSP is the jump from 10 to 20 employees. When you've got 10 employees, you're the biggest of the small fish. You're competing against one-man bands up to companies much bigger than yours.
Against the one and two-man bands you look good because you've got depth of technical resources and people to cover when staff go on holidays, yet your overheads are reasonable and you are often considered a lower cost or at least more personable alternative to the MSPs that have 20 people or more. It's a nice kind of sweet spot to be in and it's the size at which I sold my IT business.
Since selling Lindentech and starting Transparency IT and recruiting for these MSPs, I’ve been able to look back into the MSP industry in Australia from the outside and understand so much more about why it’s so hard to grow an MSP past 10 people.
At 10 people you can rely on word of mouth and organic growth to keep the wheels turning and make good money. At 20 people, you're a different beast. You need regular leads converting to regular sales to feed work to all the engineers you've got in your company. You can't rely solely on word of mouth anymore. You have overheads that you're committed to and you need a professional structure in place to manage those employees, pay them all appropriately, and maintain professional standards. You're also above the payroll tax threshold which means that you'll be paying more per employee than smaller MSPs.
So, how do you make the jump from 10 to 20 employees? My recommendation is you make it quickly and you make it after building the appropriate platforms for that scale of growth. Making sure your back-end systems for managing clients and managing accounts are efficient, clean, and working well. That your processes and procedures regarding HR, employment, recruitment, and reporting are systematized and proved to be working. You'll then need to be very clear on who you are, what you do, who your customers are and have written definitions for that, which can be then translated into clear marketing material for websites, online ads, and capability statement brochures. Testing and measuring then needs to go on in all marketing activities that you engage in as well as the sales process.
The sales process needs to be defined in terms of who speaks to prospects, how they position the company in front of those prospects, and how to close a sale. Different methods of positioning and closing sales need to be tested before they can be rolled out and salespeople recruited and trained.
So, why build the platforms before the growth? The answer is simple. It's not so difficult to manage a 10 person MSP without strong systems in place, once you hit 20 people it’s a real headache if you don’t have a solid structure. Without those platforms and structure, not only will you find it difficult to manage, you'll also be very inefficient and probably find that you’re working harder and making less money. Scaling can be done with less headaches when the platforms are already in place. And yes this does mean you need to invest before growing but it means as you grow you’ll capitalize on that growth, make more money year on year with less stress and have a business that’s easy to scale up or scale back as conditions dictate.
Next blog I’ll focus on the common characteristics of larger MSPs in Australia and what makes them successful.