Guest Blog: Better Call an MSP Part 3: Managing Potentially Non-Profitable Clients


Ray Vrabel HeadshotBy Raymond Vrabel, Director, Technical Account Management, Continuum Managed IT Services

The third installment of a new monthly blog series offering tips and

best practices on various ways MSPs can help their SMB clients work through the most challenging daily business issues.

In last month’s installment of “Better Call an MSP,” I discussed how to hire employees that will be effective and will go the distance long-term. This month, let’s talk about clients that might be costing you money. These clients may be potentially non-profitable to your business because they’re either not on board with your new business model, or they aren’t willing to make suggested technology and business changes that you are recommending, including standardizing on an IT services provider, hardware and set pricing.

Let’s examine a few steps to see if you can both come to a mutual agreement when it comes to these recommended changes.

1.) Having the Uncomfortable Conversation. It’s difficult to have conversations with clients that don’t start with, “Everything is going great!” and, “We are very happy with the relationship.” There have been several books and blogs written on how to have uncomfortable conversations with clients that involve money, change and possible differences of opinion. While I can’t cover every point here, I can start with a few helpful tips.

First, I recommend waiting until an appropriate point in the relationship to have this discussion; for example, when the client’s contract is about to expire. This is a good time to bring up a possible change in the relationship structure. If you have recently renewed the client’s contract, wait until the end of the calendar or fiscal year to bring up the conversation. A new year is always a good time to have a discussion about new products and services, as well as these other topics.

2.) Demonstrating True Value Proposition. When you have this important MSP/client discussion, make sure you present a list of points that encourage the client to move along with the changes that you are making within your business. Remember, even though you are being proactive in making the changes, you need to demonstrate the benefits for your client, especially if the goal is to keep their business. Some questions to ask yourself might be:

  • Where is your client’s company headed in the short- and long-term?
  • What is the service contract that’s currently in place?
  • Can I bundle any current on-site work with an opportunity to restructure the existing agreement, without asking for any additional money?
  • How is the overall relationship? Is the client generally easy to work with or are they costing you both additional time and stress—as well as money?

The best way to introduce any type of change to this conversation is to put a positive spin on the situation. Leverage that they are already an existing client, and if they are using an “a la carte” menu of services, demonstrate that with this new model, they are getting something extra – a fully managed, recurring IT services package, including bundled service with standard pricing and hardware, not just simply someone who will help them when something breaks. MSPs will have a better handle on their monthly IT services costs with this recurring model as well.

3.) Discussing Benefits of Standardizing Pricing and Hardware. Some MSPs have taken a strict approach with standardizing pricing and hardware. There is one extreme where I have seen MSPs “fire” or phase out clients that are not willing to standardize their hardware because it doesn’t fit with their new business model. While I am not suggesting you take this approach, you shouldn’t deal with supporting a “hodgepodge” of several different contracts and architectures for each client. There has to be an equal balance—one where you don’t have to let them go and where they understand and accept that your new model will also help their business over the long term.

If you are trying to standardize a break/fix client, show them the value. Otherwise, you will not change their mind. Part of the transition process is allowing them to understand that by moving away from the a la carte model, they can make more money, cut down on project work and on-site visits from your staff (which can add up), and work with one vendor via their MSP, instead of several different companies.. This goes for both standardization of hardware as well as pricing. With hardware, gradually help them make the switch, but let them know that it’s important to standardize. They can start with one service, such as BDR, to see how they fare. Once they see the value proposition, it leads to standardizing more services.

Another important part of this step is to remain consistent. Don’t just tell your client to standardize and then not follow up. Like everything else, this is a process, and you need to groom your clients. If you think they are worth it for your profit margins, think like this over the course of the entire year. Each quarter, report back and show them—don’t tell them—how much time and money they are saving by moving from an a la carte pricing menu to standardizing.

Don’t get in a situation where you have a non-profitable client that is not on board with your business model. It causes stress, costs extra money, and potentially alters your scalability and work scope. Remember that even if you try to work with a potentially non-profitable client, at some point you might have to walk away. Even if it does come to that, view it as a short-term loss for a long-term gain.

Raymond Vrabel is Continuum's Director of Technical Account Management and participates in product and service growth initiatives. He manages Continuum's Technical Account Management team, supporting over 3,500 partners worldwide. Vrabel has more than 15 years of experience in the IT industry, specializing in managed IT services, disaster recovery and cloud solutions. Follow him on Twitter: @rayvrabel.