Starting a managed service provider (MSP) business in 2024 is a venture worth considering given the ever-increasing reliance on technology and the need for specialized IT services. The MSP landscape includes various players, including general MSPs, vertical market MSPs, and managed security service providers (MSSPs) among others. Regardless of the type and scale of MSP you want to build, there’s a process for creating a successful MSP, and best practices to consider.
7 Steps to Start an MSP Business
Starting an MSP business involves more than just technical expertise; it’s a multifaceted undertaking that will have you carefully plan, strategize and constantly seek to understand your market. Choose what you want to offer and structure it, develop customer profiles, choose who to work with, and select the tools that best suit your use case planning. You must also properly price your services and constantly look to improve your business.
Here are seven key steps to guide you through the process of starting an MSP business.
1. Decide on Your MSP Product Specialties
First, decide what you’d like to offer that will set your MSP apart from others. Pinpointing a gap and specializing in it allows you to offer targeted solutions and value-added services to your prospective market based on your expertise and market demand. These targeted services also allow you to focus on an area of the market and constantly refine your product, as opposed to vaguely covering multiple markets, especially at an early stage.
The process of choosing your product specialties includes the following steps:
- Evaluate Your Team’s Skills: Start by assessing your team’s existing expertise in technologies, industries, or specific IT functions and upskill as needed to improve your services.
- Study Market Trends: Keep an eye on current and emerging trends in the MSP industry to identify areas with high demand, or market gaps that your MSP can fill.
- Know Your Audience: Define the types of clients you aim to serve, then tailor your services to meet the specific needs and challenges of these clients.
- Analyze Your Competitors: Research other MSPs to identify gaps or areas where you can offer unique value and use this information to differentiate your services.
- Assess Scalability and Profitability: Evaluate the long-term viability of potential specialties, and consider factors like cost, resources, and market demand.
- Gather Client Feedback: Engage with existing clients to understand their needs and challenges, and use their input to refine your service offerings.
- Test Your Specialties: Before fully launching, consider running a pilot program to gauge market acceptance and make any necessary adjustments.
- Stay Updated on Your Specialties: Continuously invest in learning and development through practices like continuous improvement, and a culture of sharing knowledge and experimenting.
Selecting the right product specialties helps you stand out and enables you to offer more value to your clients. After deciding on your product specialties, you’ll be ready to structure your managed service offering.
For more insights on understanding your MSP’s options and developing your catalog, read our article on choosing your product specialties.
2. Structure Your Offering
Knowing your product specialties opens the door for you to build your service offerings around them. Your managed service offering should be up-to-date with developments in technology that impact either you or your customers. It should also consider aspects such as security and customer support to ensure that it offers more than just the services you’d expect from such an MSP.
To curate a thorough managed services offering, you should:
- Identify Your Core Services: Choose services that align with your expertise and are in high demand to ensure a strong market presence.
- Bundle Your Offerings: Develop comprehensive service packages that solve specific client issues and add value to your MSP business.
- Select Vendors: Partner with vendors that complement your services and fit within your budgetary constraints for a balanced portfolio. We’ll expound on selecting vendors in step four.
- Determine Your Initial Pricing: Set competitive initial prices based on thorough market research and a deep understanding of customer needs and expectations. We’ll go into more detail in step six.
- Market Effectively: Target specific industries and utilize the most effective marketing channels to reach your ideal customer base.
- Standardize Delivery: Automate processes and standardize service delivery to ensure optimal customer satisfaction and streamlined operations.
- Scale Strategically: Analyze market trends and adjust your offerings to facilitate sustainable business growth and competitiveness.
- Expand Your Services: Continuously add new, complementary services to meet evolving client demands and keep your offerings fresh.
Building a successful managed services offering requires careful planning, market analysis, and continuous adaptation as you define the scope of your services, service-level agreements (SLAs), and more. Follow these steps to create a service offering that not only meets market demands, but also positions your MSP for long-term success. You can then focus on creating customer profiles.
For a deeper understanding of service offerings, read our comprehensive guide on the steps to building your managed services offering.
3. Craft a Comprehensive MSP Customer Profile
Creating a detailed MSP customer profile is a systematic process that involves identifying key customer segments and collecting relevant data across multiple categories. A comprehensive customer profile will help you better understand your target market and enable you to tailor your services and marketing strategies effectively. This helps you align your services with market needs and nurture leads who are most likely to buy and find value in your services.
To build a thorough MSP customer profile, you should do the following:
- Identify Client Segments: Analyze your client base to pinpoint characteristics, trends, or behaviors that define your most valuable customers.
- Select Profile Elements: Choose the categories that will give you a holistic view of your ideal client, such as demographics, firmographics, and technographics.
- Gather Demographic Data: Utilize surveys, interviews, and CRM data to collect information like the age, gender, and education level of your target clients.
- Collect Firmographic Information: Use online databases, industry reports, and CRM systems to gather data about company size, revenue, and industry.
- Obtain Geographic Insights: Leverage CRM systems and online tools to identify your clients’ operational locations and the markets they serve.
- Analyze Technographic Data: Use specialized software and surveys to understand your clients’ current technology stack and their technology needs.
- Understand Psychographics: Conduct surveys and analyze online behavior to grasp the attitudes, values, and personality traits of your target clients.
- Compile Behavioral Data: Use CRM systems, surveys, and analytics tools to get data on how clients interact with your services and what influences their buying decisions.
Knowing who your ideal group of customers is will enhance your service delivery and sustain your competitive edge. A well-crafted customer profile gives you insights into your ideal customers, guiding you in choosing the right vendor partners.
To learn more about these profiles, read our guide on creating an MSP customer profile, which includes templates for profiling customers and illustrates how customer groups in your market can differ.
4. Choose MSP Vendor Partners
Vendor partners offer the technological support that enable MSPs to provide valuable services to clients. However, it’s important to get the right partner to ensure that your services are of value to your customers. Selecting these vendors is a deliberate process that cuts across your business needs, partner programs, finances, user friendliness and extensibility, and firsthand experience.
Here’s how to approach the task of selecting vendor partners:
- Assess Your Business Needs: Evaluate vendors that align with your current services and future business needs.
- Evaluate Partner Programs: Look for vendors with structured, clear partner programs and support mechanisms.
- Check Financial Alignment: Make sure the vendor’s pricing and financial health align with your budget and goals.
- Scrutinize Vendor Expertise: Opt for vendors with a proven track record and vast industry knowledge.
- Examine User Experience and Integration: Prioritize vendors whose solutions are easy to integrate and user-friendly.
- Conduct Hands-On Testing: Engage in demos and trials to experience the vendor’s offerings firsthand.
Your choice of vendors is make-or-break, as it will affect your profitability and your service quality. Following the above steps will help you choose the right vendor for your MSP and foster a healthy relationship with the vendor and your end users. With vendors in place, your focus should shift to the tools that you’ll employ to enhance your services.
For a play-by-play on considering vendors, refer to our guide on selecting the right vendor partners and ensuring you have the right technological backbone to offer your services.
5. Optimize Your MSP with the Right Software
Next, choose the right software that will optimize your business since your selection will directly influence your success. From IT service management to backup and recovery, each software category serves a unique purpose in your operational chain. There are lots of types of MSP software to consider, but it’s dependent on your use case. It’s highly unlikely that you’ll need all of them; you may only need one solution, or a combination of a few MSP software tools.
Below are some of the essential software types you should consider:
- Information Technology Service Management (ITSM) Software: Helps streamline the end-to-end management of IT services from creation to delivery.
- Remote Monitoring & Management (RMM) Software: Enables remote supervision and control over client IT systems and infrastructure.
- Help Desk Software: Facilitates efficient issue tracking and customer support operations.
- Professional Services Automation (PSA) Software: Integrates various business processes such as project management, time tracking, and billing.
- Incident Response Software: Provides structured approaches for identifying, addressing, and managing cybersecurity incidents.
- Cloud Migration Software: Simplifies the process of moving data, applications, or other business elements to cloud environments.
- Ransomware Backup Protection Software: Offers robust defenses and recovery options to safeguard data against ransomware threats.
- Backup and Recovery Software: Ensures data integrity and retrievability in the event of data loss or system failures.
- Partner Relationship Management (PRM) Software: Manages and strengthens the relationships and interactions with business partners.
- Channel Incentive Management (CIM) Software: Helps design, implement, and manage incentive programs for channel partners to boost performance and loyalty.
Choosing the right software tools is not just about features; it’s about finding the solutions that fit seamlessly into your business model. Make the most of free trials and demos to solidify your decision based on your MSP’s needs and goals. After establishing the tools you’ll use, you can confidently set an in-depth pricing strategy.
For a variety of tools to consider for your business, check out our list of the top MSP software that will optimize your business and improve service delivery.
6. Price Your Offerings
Determining the right pricing strategy for your MSP business is a critical factor that impacts your profitability and competitiveness. It doesn’t just involve assigning costs to services — it also means understanding pricing models for MSPs and determining which ones will most benefit your business. You’ll need to assess whether you need one or a combination of pricing models to best price your offerings.
Here are seven steps to help you navigate the complexities of MSP pricing:
- Understand Your Costs: Calculate both direct and indirect costs, including labor, software, hardware, and overhead, to establish a profitable and sustainable pricing foundation.
- Plan for Future Growth: Design your pricing strategy to accommodate scalability, considering both your business growth and the evolving needs of your clients.
- Pinpoint Your Target Market: Analyze the specific needs and expectations of your target market segment to tailor your services and pricing accordingly.
- Stay Updated on Tech Trends: Maintain parity with emerging technologies and industry trends to ensure your services and pricing remain relevant and competitive.
- Keep an Eye on the Competition: Research competitors’ services and pricing models to identify gaps and opportunities for differentiation in the market.
- Select Your Pricing Model: Choose the most suitable pricing model based on your costs, value proposition, and target market, and set your prices accordingly.
- Regularly Review Your Pricing: Periodically evaluate and adjust your pricing structure to ensure it remains competitive, profitable, and aligned with client needs.
Setting the right pricing strategy is not a one-off task but a dynamic process that needs regular review and adjustment. By following these seven steps, you can develop a competitive and profitable MSP pricing strategy that meets the needs of your clients and aligns with the market and tech landscape. The key to long-term success is a pricing structure that is both flexible and robust, capable of adapting to market changes.
Head to our MSP pricing guide, which includes a free template, the top pricing models, the steps to set your own pricing, and more.
7. Better Your MSP
Since the MSP market is highly competitive, there’s no opportunity to rest on your laurels. Strategize on how to become more profitable, improve operations, and efficiency, and implement these strategies wisely. Ensure you have the staff and resources you need to achieve your goals, as well as the right partners, while keeping your costs in check. All of these will come together to help you meet changing customer needs.
- Sensibly Plan for Growth: Develop a comprehensive business plan that includes scaling, marketing, and leveraging your existing market strengths.
- Implement Your Plans Effectively: Turn your strategic plans into actionable tasks, focusing on data-driven decisions and continuous execution.
- Hire and Train Personnel: Prioritize recruitment and training to ensure you have the necessary workforce to meet customer demands and business objectives.
- Strike Vendor Partnerships: Partner with other vendors to quickly add new services, avoiding the pitfalls of developing everything in-house.
- Choose Your Partners Wisely: Be selective with your choice of partners, considering their capabilities, potential conflicts of interest, and market expertise.
- Meet Your Customer Needs: Continuously align your services with customer demands, and be prepared to adapt as those needs evolve.
- Control Your Costs: Implement cost-saving measures like automation and thorough cost analysis to maintain profitability without sacrificing quality.
The above steps offer a structured approach to improving your MSP business, but remember, they should not be treated as a one-off. Consistently applying these strategies will help you meet customer needs and maintain a healthy bottom line.
Periodically revisit and adapt these steps based on internal changes, like new use cases and services, and external changes such as shifts in technology and markets. Doing so will not only help you get your MSP off the ground, but also grant your business the consistency, continuity, ambition, and agility needed to flourish in the use case you choose.
For more on how to stay relevant and competitive, read our strategies and tips for improving your MSP.
Top 5 Tips for Starting an MSP
In addition to the steps above, when starting an MSP, you should adhere to certain best practices to ensure your business doesn’t die in its infancy. Your MSP needs to come out of the gates with a strong brand identity. Find a support system to position yourself effectively to access resources that’ll help your business grow and avoid blindsides in a new market. Also think about security, automation, and pivoting should drastic market changes occur.
- Develop a Strong Brand Identity: Choose a memorable name, get a professional logo, and set up a consistent brand voice to stand out in your market.
- Build a Support Network: Join industry associations, seek mentorship, and engage in online communities for advice and all forms of support for an early-stage business.
- Focus on Cybersecurity From the Start: Implement security controls, educate your team on cybersecurity, and consider offering some security features to enhance your MSP’s reputation.
- Be Agile and Ready to Pivot: Always be updated on industry trends, be open to customer feedback, and have a contingency plan to adapt to market changes.
- Leverage Automation: Utilize automated tools for tasks like client onboarding, monitoring, and reporting to increase operational efficiency and reduce manual errors.
With these tips, you’ll be better equipped to navigate the initial stages of your MSP business as effectively as possible, while giving yourself every chance to maximize the steps we discussed previously. Always consider cybersecurity in your offering, regardless of the type of MSP.
Bottom Line: How to Start an MSP
Starting an MSP requires a combination of thoughtful steps and proven best practices to form a roadmap that primes your business for short and long-term success. Remember, these steps and tips need to work in tandem to provide you with a balanced experience of venturing into the MSP landscape. Should you be looking for how to augment your offerings with security capabilities like endpoint protection, read our guide on how to start a managed detection and response (MDR) business.