session sponsor 7 - mitch...size fit with cust. base fit with growth area 1 manufacturing, large...
TRANSCRIPT
SESSION SPONSOR
HERE, NOW, NEXT - REWIRING FOR
GROWTH & SUCCESSMitch Morgan
Principal, Growth Achievement Partners
What we know in 2016…
• Aftermarket in traditional business is under continuing (volume & margin) pressure.
• The trends for Equipment and Aftermarket revenue and profit pressure will continue…and perhaps accelerate.
• Medium sized independents are doing well if they are able to diversify and achieve market segmentation.
• The Managed Services/Cloud Services market has become mainstream in the SMB space.
Determine Your Target Revenue Mix
Get Better at Cross Selling to your Base
Move from Technician to Consultant
Managed IT Services: Manage to the Metrics
Determine Your Target Revenue Mix
Get Better at Cross Selling to your Base
Move from Technician to Consultant
Managed IT Services: Manage to the Metrics
Equipment Sales34%
Aftermarket & Supplies
33%
Managed Services,
Solutions, etc.33%
Diversified Model
These market segments are
flat to slightly declining
This market segment is projected
to grow by 25% to 30%
Equipment Sales, 50%
Aftermarket & Supplies,
50%
Traditional Model
Equipment Sales34%
Aftermarket & Supplies
33%
Managed Services,
Solutions, etc.33%
Diversified Model
These market segments are
flat to slightly declining
This market segment is projected
to grow by 25% to 30%
Strategic Revenue = Enterprise Value
Metric/Value AverageAcquisition
ValueAcquisition Price $1,175,000
Recurring $897,264 1.31Topline $1,220,000 0.96
Contracts 31 $38,524Average MRR/Contract $2,521
Headcount 8 $146,875
Every new contract adds $38,524 in value.
Each $100,000 in topline adds $96,000 in value
Each $100,000 in Recurring adds $131,000 in value
Determine Your Target Revenue Mix
Get Better at Cross Selling to your Base
Move from Technician to Consultant
Managed IT Services: Manage to the Metrics
In our industry…
WE TELL OURSELVES …
• Our customer list is our #2 asset behind our service/aftermarket.
• We are totally committed to diversification, with a goal of 30% of topline revenue in non-core within 3-5 years (beginning in 2014).
THE REALITY…
• Our list (and our CRM) is very spotty, with incomplete information (at best) and we have really only used it for reps to keep track of follow ups and managers to monitor pipeline.
• Senior management spends (by our estimate) less than 5% of time on new markets, and we don’t allocate resources to this to match the goal.
This Market is Getting
Decidedly More Vertical
12
Confirming the Target Market – M.G.R. Assessment
Confirming the Target MarketRanking Potential Target Markets
13
Market
Size
Fit with
Cust. Base
Fit with
Growth Area
Education (K12)
Manufacturing, Large (101+ empl.)
Construction
Manufacturing, Small (6-50 empl.)
Manufacturing, Medium (51-100 empl.)
Energy / Utilities
Government
Healthcare (Hospitals)
Banking (Retail & Commercial)
Business Services (21+ empl.)
Market
Size
Fit with
Cust. Base
Fit with
Growth Area
Advertising and Design
Entertainment and Recreation
Personal Services (51+ empl.)
Insurance Carriers
Banking (Investment)
Hospitality
Healthcare (Life Sciences)
Media and Communications
Healthcare (Payers)
Non-Doc. Intensive Industries
Most Attractive Segments Least Attractive Segments
Confirming the Target Market Example - Strategic Initiative: Managed Print Services (MPS)
Market Segment Market
Size
Fit with
Cust. Base
Fit with
Growth Area
1 Manufacturing, Large (101+ empl.)
2 Education (K12)
3 Manufacturing, Small (6-50 empl.)
4 Manufacturing, Medium (51-100 empl.)
5 Construction
6 Banking (Retail & Commercial)
7 Business Services (21+ empl.)
8 Healthcare (Hospitals)
9 Government
10 Education (Higher Ed)
11 Automotive
12 Printing and Publishing
13 Legal
14 Retail, Large (51+ empl.)
Tier 1
Tier 2
Tier 3
Priority
14
Big Data and Ideal Client Profile (ICP)
The model is effectively identifying key signals on which to base scores. There are
currently 187 Key Signals the model has identified as significant contributors to the
likelihood of a win consisting of Firmographic (57), Social and Web Presence (47),
Website Technology (74), and Spam Filtering (9). In aggregate those scores are
telling us that the high opportunity scored companies will have traits such as:
• Private ownership
• Non-enterprise level businesses
• Companies that are “technology friendly” but not sophisticated
• Companies that are using technology that smaller companies use
72
4229
0
10
20
30
40
50
60
70
80
Average Win Average ND AverageLoss
Model Scores
“A” Scores• "A" accounts represent 57% of the wins
• "A" accounts delivered 69% of the revenueLead Score # to get a Win
A (70 and above) 3 Deals
B (50-69) 8 Deals
C (25-50) 17 Deals
D (Under 25) 58 Deals
Determine Your Target Revenue Mix
Get Better at Cross Selling to your Base
Move from Technician to Consultant
Managed IT Services: Manage to the Metrics
Technology Roadmap• Primary sections should include the following items:
• Current industry trends and business goals of the client
• Operational Review over the current period
• Current state of the environment relative to the Roadmap
• Upcoming client goals/initiatives
• Mutual Action Plan for the upcoming period(s)
• Leveraged to administer the program and position the ongoing maintenance and expansion of the account
vCIO Services
• Features:• Our vCIO helps you with a Technology Road Map,
customized for your business.• Our vCIO spends all of his time helping businesses
like yours to navigate their technology direction.• He is backed up by a team of technical resources
• “With the changes in technology, it would be great to have a Chief Information Officer…rather than hire one full time you can use ours when you need him.”
Before going on the Call
• Website Review
• Technology Trends in ________ Industry
Determine Your Target Revenue Mix
Get Better at Cross Selling to your Base
Move from Technician to Consultant
Managed IT Services: Manage to the Metrics
How Healthy is your Managed IT Services Business ?
• Are you on a path to Double Digit Operating Income?
• Is the business going to achieve 30% of your topline revenue in the next 36 months?
• Do you have 18 Initial Appointments and 2.4 closed Managed Services transactions per month?
• Is the business trending toward achievement of Critical Success Factors for high performance?
MSP Critical Success Factors Target1 Average Seats Per Contract 20.2
2 Revenue Per Seat
3 Number of Contracts
4 Revenue Mix (MRR/Project & Hourly/HW & SW)
5 Seats Managed Per Engineer (internal HD/Outsourced HD)
6 Service Margins (Pre-Labor)
7 Service Margins (Post-Labor)
8 Hardware/Software Margin
9 Revenue Growth
10 Admin Expense %
11 Sales Expense %
12 Operating Income %
There is also a set of Sales Pipeline and Conversion Metrics that are critical.
Critical Success Factors Lead to Success
Average Revenue per Seat
x
Number of Seats
x
Number of Contracts
=
MRR Target Attainment
MSP Critical Success Factors Target1 Average Seats Per Contract 20.2
2 Revenue Per Seat 74.40
3 Number of Contracts 65
4 Revenue Mix (MRR/Project & Hourly/HW & SW)
5 Seats Managed Per Engineer (internal HD/Outsourced HD)
6 Service Margins (Pre-Labor)
7 Service Margins (Post-Labor)
8 Hardware/Software Margin
9 Revenue Growth
10 Admin Expense %
11 Sales Expense %
12 Operating Income %
Revenue Mix
MRR
Hardware
& Software
Projects
&
Hourly
It starts with
MRR… those
65 contracts
provide provide
$106k in
recurring revenue
Land & Expand with
technology replacement
and
a solid HaaS program.
If the contracts are
structured properly,
and you manage
the account properly.
MSP Critical Success Factors Target1 Average Seats Per Contract 20.2
2 Revenue Per Seat 74.40
3 Number of Contracts 65
4 Revenue Mix (MRR/Project & Hourly/HW & SW) 52/16/32
5 Seats Managed Per Engineer (internal HD/Outsourced HD)
6 Service Margins (Pre-Labor)
7 Service Margins (Post-Labor)
8 Hardware/Software Margin
9 Revenue Growth
10 Admin Expense %
11 Sales Expense %
12 Operating Income %
• The outsourced partner does 85% of the work, and you collect +/- 70% of the revenue.
• In order to achieve appropriate margin, Gross Profit from day 1, and ability to scale…select the best option here.
0
10
20
30
40
50
60
70
80
90
Revenue Split Incidents
MSP Continuum
Division of Revenue and Labor
MSP Critical Success Factors Target1 Average Seats Per Contract 20.2
2 Revenue Per Seat 74.40
3 Number of Contracts 65
4 Revenue Mix (MRR/Project & Hourly/HW & SW) 52/16/32
5 Seats Managed Per Engineer (internal HD/Outsourced HD) 149/189
6 Service Margins (Pre-Labor) 75.8%
7 Service Margins (Post-Labor) 48%
8 Hardware/Software Margin
9 Revenue Growth
10 Admin Expense %
11 Sales Expense %
12 Operating Income %
67% with
Outsourced
HelpDesk
52% with
Outsourced
HelpDesk
HaaS Impact
• HaaS opportunity – a change in mix can impact margin 15+%, and improve the bottom line by 5+% (as a % of revenue)
• Model calls for 35% GP• GAP clients are experiencing up
to 42%
• 34% of initial sales have a HaaS component
• 47% of expansions have a HaaS component
• This is a really important component to account retention
MSP Critical Success Factors Target1 Average Seats Per Contract 20.2
2 Revenue Per Seat 74.40
3 Number of Contracts 65
4 Revenue Mix (MRR/Project & Hourly/HW & SW) 52/16/32
5 Seats Managed Per Engineer (internal HD/Outsourced HD) 149/189
6 Service Margins (Pre-Labor) 75.8%
7 Service Margins (Post-Labor) 48%
8 Hardware/Software Margin 26.6%
9 Revenue Growth 23.7%
10 Admin Expense % 18%
11 Sales Expense % 9%
12 Operating Income % 11.5%
Sales & Marketing
TYPICAL MSP
• The typical MSP has limited sales and marketing capability
• Sales expense is low, and sales capabilities are weak
• Very little lead generation
• Reliance on referrals, and word of mouth, for growth
TYPICAL OE DEALER
• Sizeable customer base looks good on paper
• The performance in mining the base and cross selling services is “average to weak”
• List development, list management, marketing, and predictive analytics needed
MSP Critical Success Factors Target1 Average Seats Per Contract 20.2
2 Revenue Per Seat 74.40
3 Number of Contracts 65
4 Revenue Mix (MRR/Project & Hourly/HW & SW) 52/16/32
5 Seats Managed Per Engineer (internal HD/Outsourced HD) 149/189
6 Service Margins (Pre-Labor) 75.8%
7 Service Margins (Post-Labor) 48%
8 Hardware/Software Margin 26.6%
9 Revenue Growth 23.7%
10 Admin Expense % 18%
11 Sales Expense % 9%
12 Operating Income % 11.5%
Recommendations
• Focus attention to your CRM and your customer base
• Determine Ideal Client Profile for your products and services
• Segment your Base
• Build consulting capabilities
• Build vertical market capabilities
• Manage to the metrics