MSP Sector Specialist Startup
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SO, MSP Startups.. I have worked in IT in the manufacturing industry for a few years and have always seen glaring holes in how things have been done by companies before.. but the more I read from MSP pro's (such as you fine people) the more reservations I have around setting up a MSP at all due to the tiny success rate. Is it worth it? Initially I would be a one man band living on savings and a business loan, with a consultant at hand and an outsourced white-label 1st and 2nd Tier company taking care of most of the daily tickets. Recipe for disaster or worthwhile venture?
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Well there are so many factors going into your success. Here are a few off the top of my head and with a lack of coffee yet today.
- Do you have any clients to start with or are you just jumping in?
- How are you at sales (as in have you been successful at it before)?
- Have you talked to an accountant?
- Do you have a proven need in your area for an MSP?
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Have you talked to an attorney to setup an LLC or S-Corp to protect your assets?
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Thanks for the responses guys, see below.
@Dashrender - Being UK Based I will be setting up a Limited company to cover me so I am not personally liable.
- Currently no clients but without investing in a front end ie website, branded company materials, and limited company status, no manufacturer would take a second look.
- Sales-wise I used to hold a purely commission based sales role with success before deciding IT was the way for me!
- Yes I met with an accountant on Friday to discuss the venture
- Only anecdotal experience, in that there is a need for MSPs in the Manufacturing Industry that have the know-how to manage IT outside of just the office environment.
The biggest thing I have noticed current general MSPs providing manufacturers is that they are not aware or do not understand the impact and therefore priority of different areas of a factory/site. One of my key USPs would be the management of this and how much emphasis is given to escalation and vendor relationship management. To top this, I searched an have yet to find a MSP specifically targeting the Manufacturing Industry, meaning we could specialise in a 'niche', but the niche would be so big there would be a massive scope for expansion.
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@Robin5170 said:
To top this, I searched an have yet to find a MSP specifically targeting the Manufacturing Industry, meaning we could specialise in a 'niche', but the niche would be so big there would be a massive scope for expansion.Niche markets can lead to success, but avoid over-specialisation such that you don't become a one trick pony; be open to all business.
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Starting a new MSP is very scary. So much risk. You need a certain size to me sustainable. If you fail to get there you can face burnout very easily.
If you can outsource almost everything, at least until you have solid scale, that's one if the best approaches.
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I'm kind of on the other end of the spectrum. I worked for a $100Mil MSP, and did not feel like I was being treated or compensated fairly so I took "The Leap". I don't outsource anything, I took out a 5K loan to give me a month to get busy. Ultimately you need to figure out "how big how fast" you want to get and put the pieces in place to succeed. I've loved starting small. I grew 100% my first year, and will grow by 40-50% this year if trends stick. I am still a one man show, kind of preferring to do work in the 100ish employee medical clinics and healthcare environment. There are so many books, webinars, blogs, websites, seminars, DIY, etc etc out there it's easy to get overwhelmed. the A #1 most important thing, is to have the Entrepreneurial Spirit. If you do not, it will be a tough road ahead. It takes a special kind of crazy to leave a comfy 8-5 and plunge into many many months of working til you can't stay awake. But for me, I wouldn't have it any other way. I love the freedom it now allows me to work from home, spend time with my family, and the financial rewards aren't too bad either.
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@scottalanmiller Yes I intend to outsource as much as I can through a white label IT company here in the UK. Initially it wont be the most profitable as they take a large chunk of the rates but it means I can start getting my client base up while still employed until I have enough cash flow to sustain a wage.
@Hubtech I was thinking of doing similar ie taking a loan to get things moving. I've been looking at this as an option for a few months but the time restraints with a young family on top of work commitments mean there's not enough hours in the day to make meaningful progress. Before 'taking the leap' I presume you already had some clients lined up waiting for you to start or did you use that month to find them?If you guys don't mind divulging.. There are so many business models for pricing I think I am just going with the norm ie X per PC, X per server, then on-site day rates or higher monthlies for no-cost on-site visits. Is this really the best way to go or is there a better way of doing things? I've found I could have a company of 30 users who call once a week with a printing issue, or a company with 15 users who constantly need assistance. The cash-to-work ratio just doesn't seem to add up sometimes.
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Keep in mind that NTG offers outsourcing in the UK as well. Just in case you were interested. NTG offers a larger spectrum of services than pretty much any SMB IT Outsourcer and includes availability of US resources as well which is handy for off-hours support.
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Be wary of taking out loans to get going. It's a solid plan but takes on risks that make success even harder. It can help you to be successful, but it can also hasten a demise. Basically it just ups the ante.
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I did not have any clients lined up. After I left my previous employer I had to fight a Non-Compete that would have essentially required me to move out of the Southeast US. Post legalities, many of my previous clients came a running to me because my replacement wasn't up to snuff for them.
As far as pricing structure.....it's tough to have a super rigid structure when you start up because well....you just want revenue initially. There is usually a provisional month of hourly billing to learn a new client, get all of their pain points out of the way, and get in the groove of their business, then I offer a managed package. managed package (depending on the client) could be x/workstation and x/server if it's a pretty "simple" environment. If there are a bunch of specialized applications that are "needy", you up the price accordingly. Managed Contracts are important, the cover what is in and out of scope. for my managed clients, if there is out of scope work, it's billed at a discounted hourly rate.
Loans aren't a bad thing, if anything it's a motivation. But it seems like you're willing to give away a lot of your revenue up front to outsource, that's not my cup o tea
Perhaps a line of credit is more your style, that way you're not paying for anything you're not using. Without having some sort of collateral up front, a LOC would be a tough sell to a bank.On an aside, what is your current position?
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Essentially I am a glorified server/network administrator as I look after everything (internally). My job title is Systems Administrator but I wouldn't consider myself in that bracket. Previous to this, I became the backbone for a one-man-band IT company and Cloud Service provider who decided after hiring me he didn't need to do anything. So I ran his show for 2 years making him a shed load of cash while I did the graft. A lot of pain, but a lot of experience, so alls well that ends well.
I am only keen to farm out work while I am still in employment, to curb the necessity for borrowing. If I can keep employment while bringing in clients that are supported elsewhere it gives a small user base to get things right before jumping ship.@scottalanmiller You've certainly peaked my interest with the outsourcing option. I'd definitely be interested in discussing that further. Do you have UK based technical specialists available should I need it for technologies out of my personal portfolio?
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Yes we do have a few people based in the UK. I would be happy to discuss details with you anytime. We also have customers over that way that we need extra hands for from time to time.
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@Hubtech I like the concept of your provisional month of hourly billing to get to know a client. This sounds a great idea to prevent under quoting for time-hungry customers!
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The first 60-90 days is really getting to know the customer never flat rate yourself too quickly with anyone. It can really bite you in the butt either because you under quoted on your end or over quoted on theirs. A client who doesn't "see" your value and are paying too much will get cranky and leave. However there is no making some customers happy either.
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@Robin5170 said:
Essentially I am a glorified server/network administrator as I look after everything (internally). My job title is Systems Administrator but I wouldn't consider myself in that bracket. Previous to this, I became the backbone for a one-man-band IT company and Cloud Service provider who decided after hiring me he didn't need to do anything. So I ran his show for 2 years making him a shed load of cash while I did the graft. A lot of pain, but a lot of experience, so alls well that ends well.
I am only keen to farm out work while I am still in employment, to curb the necessity for borrowing. If I can keep employment while bringing in clients that are supported elsewhere it gives a small user base to get things right before jumping ship.@scottalanmiller You've certainly peaked my interest with the outsourcing option. I'd definitely be interested in discussing that further. Do you have UK based technical specialists available should I need it for technologies out of my personal portfolio?
Yup. Some people in the UK and more in the US.
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Do you guys find you get much work through your site or is that more of a formality than anything else?
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Thanks @Minion-Queen Really good advice, I'll definitely take that approach.
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@Robin5170 said:
Do you guys find you get much work through your site or is that more of a formality than anything else?
Formality. You need one so that people know you are real. But no one hires you through the web site.
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Actually most people go there and are surprised at all we do as they were heading there looking for one thing. So it is helpful just not our main draw of customers.
