Episode 146: Should you buy a client out of a contract?

Episode 146: Should you buy a client out of a contract?

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Paul Green's MSP Marketing Podcast
Paul Green's MSP Marketing Podcast
Episode 146: Should you buy a client out of a contract?
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Episode 146 includes:

  • 00:00 When MSPs should buy clients out of contracts
  • 06:47 The financial numbers that are important to your MSP
  • 18:12 An MSP sales expert joins Paul to break sales down into simple steps
  • 27:42 A book recommendation to help you combine your life skills and business experience to boost your success

 

Featured guest:

 

Fiona Challis is a featured guest on Paul Green's MSP Marketing Podcast

Thank you to MSP sales expert Fiona Challis for joining Paul to discuss how sales can be turned into a series of small simple steps.

Fiona helps MSP’s to overcome one of the greatest challenges they face which is filling top of funnel, winning new clients and having a structured sales process to grow and retain those clients.

Find out about Fiona’s course ‘How to win, grow and retain new clients for your MSP’ on Paul’s affiliate link:
https://www.mspsalesmastery.com/a/2147515389/iJJozk7q

Or use Fiona’s regular course link:

Connect with Fiona on LinkedIn:
https://uk.linkedin.com/in/fionachallis

Extra show notes:

Episode transcription

Paul Green:
Hello, and welcome back to the podcast. I have got a cracker for you today. This is what we are going to be talking about.

Fiona Challis:
Most MSPs, we’re not waking up and going, “We need new customers. We need to start marketing.” But they don’t have a process.

Paul Green:
That’s Fiona Challis. She’s a very good friend of mine and an MSP sales expert. Her particular superpower is breaking your sales down into a series of step by step instructions. And she’ll be telling us more about that later on in the show. We’re also going to be talking about running the business by the numbers. What are the numbers you should be running it by, and how do you get that information?

Paul Green:
So imagine this scenario. You’ve got this prospect, you’ve had a few meetings, your proposal’s gone in. You are perfect for them and they are perfect for you. They’ve got the right number of users. They’ve got the right attitude towards technology. The price is right. The package is right. It looks like there’s going to be a marriage. However, they are still in contract with another MSP. And there’s a good 6, 7, 8, 9 months left to run on that contract. And your prospect says to you, “Hey, look, don’t worry. We’re not going to sign anything with you now, but we are going to switch to you in nine months’ time.” What would you do in that scenario? Would you hang back and say, “Okay. Yeah, no problems. See you in seven, eight months’ time.” Or would you push for them to sign now, and then just sit and wait? Would you start to do some work with them now?

Paul Green:
What would you do? Here’s the real question that I want to ask you. Would you buy them out of that contract with another MSP? Now, if I had the cash to do so, I would. I would always buy someone out of their contract. And here’s why. You see, today, if it’s perfect and they’re ready to pick you today, you want them to go ahead with that. Because I don’t know about you, but nine months, even six months, even three months is a very long time for business. It’s a very long time for a decision-maker’s mind and heart to think about things and to ponder on things. And you might be the perfect choice for them today, but you might not be the perfect choice a few months down the line. They may have just clouded their thinking, or their heart may be going off in a different direction.

Paul Green:
If I had the cash available, I would always, always, always buy out the contract. And in fact, create a closer bond with my future client by saying to them right now, “Look, you are stuck with an MSP that you’ve told me several times you don’t get on with anymore. You don’t feel that they’re right for you anymore. You feel that the service levels have gone down. Why would you put up with that any longer? We are willing to buy you out of your contract. So you can start work with us in a month’s time, rather than in six months’ time or whatever it is.” Now, there are a couple of different ways that you could do this. Possibly the easiest way to buy them out of the contract is they don’t pay you anything. So let’s say it was six months left on a contract. You say to them, “Right, sign here.”

Paul Green:
“I want you to make a small payment to us because that solidifies the contract, just from a legal point of view.” I’m not sure what the law is, where you are. But if someone has signed a contract and actually physically given you some cash, even if it’s only $500 or 500 pounds, then there is a level of commitment. They’ve given you some money psychologically. And from a legal point of view, in many jurisdictions, people can, it’s a start of a contract. They have given you some money to start that. You may then not charge them for the next six months. So they are paying money to their old MSP, but not receiving the service. That’s one way of doing it. Perhaps the cleaner way to do it is that they start paying you, and you buy out the contract.

Paul Green:
So let’s say there was 20,000 left, or it was a 20,000-pound or dollar penalty to pay to the other MSP. Again, if you’ve got that cash or if you can borrow that cash or find that cash somewhere, then obviously you give that money to the other MSP. I know that would sting. I know that would hurt. But the bigger picture is, you have won a new client. And I would ask for two things to go into their contract, or I would demand that two things go into their contract to make that happen. The first thing is some kind of clause that if they leave you for whatever reason within, I don’t know, a year, two years, of them starting with you, then you are entitled to ask for that 20,000 pounds back from them. So let me say that another way. So you are giving that 20,000 to the MSP that they have left, but you write it into their contract.

Paul Green:
That if for whatever reason, you guys split up within a certain time period, a year or 18 months, whatever, then they have to pay you a 20,000-pound exit fee. So essentially, your investment that you’ve given to their old MSP, you will get back if for whatever reason the relationship doesn’t work out. That’s the first thing. I think the second thing is to ask them for a longer contract. So assuming that you’re going to build a good relationship, and they’re going to be a good client going forward, let’s say you normally ask someone for a one-year contract. Then you ask them for a two. Or if it’s normally a two, you ask them for a three. If you normally ask for three, which is nothing wrong with that, then you ask them for a four-year contract. And that’s your way of saying to them, “Hey, we are very happy to take you on board and to pay off your old contract, but we want something in return, which is a longer commitment to us.”

Paul Green:
Now, you and I both know, the reality is they’re going to stay with you for years and years and years. And this is why you can take the cash flow hit. The short-term cash flow hit is because you know the average lifetime value of that client to your MSP is easily six figures. They are easily going to stay with you five to 10 years or longer. And so you can build that short-term cash impact in over a long period of time. It’s a very smart thing to do. That’s how I feel about this. How do you feel about it? Is this something you’d be comfortable with? Or would you rather not be giving some of your valuable cash to another MSP? Let me know what you think. Drop me an email. It’s hello@PaulGreensMSPmarketing.com.

Female Voiceover:
(Voiceover)

Paul Green:
If ever you go and get yourself an MSP coach or any kind of business analyst, one of the things they will say to you at some point is that you should be running the business by the numbers. What does that mean? It means taking the numbers, the KPIs, the key performance indicators for your business, and actually running your business by those. So you are making forward-thinking decisions based on past performance and the trends that seem to be happening within the business. Now there’s two issues with this, because this is sound advice. It’s very sound advice. It’s the kind of advice I would give you. In fact, I am right now. However, the two issues that most MSPs have with this. Number one, which KPIs do we use? And number two is, how do I actually do this? Because a lot of people have a kind of a number blindness.

Paul Green:
I don’t know if there is some kind of dyslexia for numbers. I know certainly, I struggle. I’ve been in business since 2005, and I’ve been on courses where I know in theory how to read a balance sheet, I know how to read a P&L. And yet I will look at those documents and I have to really concentrate. Because I’ll look at all of the figures. And even though I know how it’s ordered and how it’s all laid out, I don’t know if you know, this isn’t probably not a medical condition. This is probably just the part of my brain that’s supposed to work well on numbers just doesn’t seem to work well. I will look at the P&L or I look at the balance sheet, or indeed any of the numbers. And often I will struggle. And I have to really focus to think, what does this mean?

Paul Green:
Because that’s really the only thing I’m interested in with numbers. What does this mean? Now I have formed a partnership with my accountant, Rob, over a number of years, where I have come to rely on Rob to interpret numbers for me. He’s an accountant. Where I’m good at words and video and audio and all of this kind of fluffy, tree-huggy type stuff. He’s completely the opposite. He’s really good at numbers. In fact, he looks at numbers and he sees stories. He doesn’t see numbers. He sees facts and evidence and trends and stories. And we’re actually quite complementary in that way. And I’ve been trying to acquire a business for what feels like 718 years. And Rob is one of my wonderful partners in that. I’ve got two other partners in Ben and James, who work with me in this business.

Paul Green:
And actually as the four of us, we are a very complementary skill set. We have a whole series of complementary skills. But Rob is absolutely critical for me. Because I’ll get the accounts from a business that we are looking at acquiring, and I’ll look at it and I’ll see that, well, they’ve made some money. And then Rob looks at it and four minutes later he says, “Well, no, they haven’t made any money. It says they’ve made money here. But if you look at what they’ve done here, here, and here, they haven’t made any money at all.” So that kind of partnership, whether that’s with your accountant, your bookkeeper, or just maybe someone else in the business, who’s good at analysing those kind of figures and accounts for you. That’s certainly a smart thing to look at doing. But let’s come back to the original question, which is which KPIs should you be looking at?

Paul Green:
How do you run the business on the numbers? So I’m not going to give you an exhaustive list, but some of the KPIs, the numbers, I believe that you should, at the very least be tracking in order to start to see how they’re trending. You should certainly look at things like your tickets. So how many tickets are you opening? How many tickets are you closing? What’s the average ticket length? I think tickets are an indication of the quality of the service that you are providing, but also how efficient your team are. If it’s taking six hours to open and close a first-line ticket, that either tells you that you don’t have enough resource in the business. Oh, and I don’t mean, by the way, on a specific day or in one week. I mean over a period of time, what’s the average ticket length for a first-line ticket?

Paul Green:
If it’s six hours, say, and I’m not an expert in this specific area, there are many more experts at this. But let’s say it’s longer than you would want it to be. Then you would expect it to be. Then you’ve either got a resource issue on your help desk, or your staff aren’t being efficient enough. And obviously that figure doesn’t tell you which of those problems you’ve got, but you can go and investigate it further. Looking at things like customer satisfaction, using tools like customer thermometer. And there are other alternatives to that where when a ticket has been closed, someone can click on the smiley face or the un-smiley face, the unhappy face, and send an indication back of whether they’re satisfied or not satisfied. Those kind of figures can be incredibly, incredibly important in tracking the customer satisfaction, the efficiency of your business.

Paul Green:
Now those are the technical ones I’d look at. In terms of management KPIs, I would look at the number of new leads that you are generating. The number of those that are being turned into sales appointments. Most MSPs don’t generate a huge number of leads. Well, you could track leads, prospects and clients. So leads are people who are in your email system or connects to you on LinkedIn, or perhaps they’re subscribing to you on YouTube or a podcast or something like that. So you would have hundreds, if not thousands of leads, but what percentage of those become a prospect? So a prospect is when someone inquires. They’ve got a specific need or want or problem, or a fear or a worry or something you can take away. The point is that they’re not just a random person stuck in a database, they have engaged with you.

Paul Green:
They’ve started a conversation. So how many leads are you adding? It’s easy to add leads, relatively easy to add leads. If you think that LinkedIn connections are leads, it’s relatively easy to add them. But it’s harder to get those to become prospects, because you have to get them to take action. They have to inquire to you and have a specific conversation. How many of those prospects then turn into quality sales appointments? So you may have a 15-minute video call with someone, with a prospect. That’s not really a sales appointment. The point of that 15-minute appointment is to qualify them, to check that they could be a good client of yours, and then to push for that proper sales appointment. So we’ve got leads to prospects, to sales appointments. Plus of course, sales appointments to clients, which would probably be very high.

Paul Green:
I’d be very surprised if you were closing less than 80 or 90% of the sales appointments you were having. Then of course, you should be tracking monthly recurring revenue. So how is that going up and going down each month? That’s almost one of the most critical things to look at. You might track as well, monthly recurring revenue per user per month. That shows you how good you are at selling more things to your existing clients. Because of course, growing your MSP, both your turnover and your net profit. It’s not just about getting on new clients. It’s also about growing your monthly recurring revenue. And that means doing strategic reviews, quarterly business reviews, as they’re known, and selling more monthly recurring revenue to your clients. And then of course, finally, net profit is probably the final KPI that you need to be tracking. Net profit is so important because ultimately it’s the reward for you.

Paul Green:
It’s the money that you take home. So you should be tracking what percentage of your top line revenue, your turnover, is actually working its way down to the very bottom line of the accounts, which is the net profit. That is the indicator of the efficiency. Now I know as the business owner, we are not just reliant on net profit. We have a number of different ways of taking income earnings out of the business, but ultimately net profit shows you how efficient your business is. So those are, I mean, that’s not to say, that’s not an exhaustive list, but those are some of the numbers that certainly I run my business on, and my different versions of those. And they’re certainly the numbers that I would run an MSP on if I owned one. But don’t forget, you might and probably will benefit from a partner in crime to help you with this.

Paul Green:
Maybe it’s your accountant. Maybe you should be sitting down with your accountant on a monthly basis or maybe a quarterly basis and looking at the numbers, and what they mean. The problem with doing it on a quarterly basis, or even just when you do it annually, is you’re looking at historical data. I get monthly management accounts, which are just generated out of zero for me to look at. And I do a little bit of analysis and we track a whole series of figures on a weekly basis.

Paul Green:
But if you really struggle with numbers in the same way that I do, I would recommend you pay extra to sit down with your accountants or someone who works with your accountants on at least a monthly basis. Because then the historical data you’re looking at isn’t quite so historical. If you are sitting down at the very end or the very beginning of a month, looking at the month just finished, then that gives you timely-ish data. And ultimately, you’re looking for the long-term trend. So what’s happened in the most recent time period, but what’s happening in the big trend? Are we trending up? Are we trending down? And what do we do to send it off in a more satisfactory direction?

Paul Green:
One of the most exciting things about marketing your MSP is that you are not alone. There are so many cool places to get help and support while you are improving your marketing. And I have a service that does exactly that. It’s called the MSP marketing edge. So on one side, we give you all of the marketing content that you need every single week and every single month. We have so much content available, plus a whole series of tools to use on your website and in your social media. But the other side of what we offer is, it’s not just a load of stuff for you to use and that’s it. There’s nothing for you. We have support. In fact, we have unlimited, neverending support from me and my team. So you can work one on one with me directly. Plus, we have a community of more than 600 non-competing MSPs, all of whom are working together to improve their marketing.

Paul Green:
And all of this goes together in a very affordable package. Now the most incredible thing about this is that we will only supply it to one MSP per area. That is really important. Because it wouldn’t help if we had two MSPs in the same area using the same material, and getting the same support. So the very first thing is for you to go and check whether or not this is still available in your area. If you go to MSPMarketingEdge.com, select your country, and then you put in your local postal code or zip code or whatever it is. And our system will tell you if the service is available in your area, or if not.

Paul Green:
If it is available, then start your trial. It’s free for your first month. It’s actually a pound in the UK, due to the different payment platform we use, but it’s free for your first month. And then after your month, it’s only 99 pounds plus that in the UK or 129 US dollars a month everywhere else in the world. There’s no contract, cancel any time. And by the way, if your area isn’t available, do join the waiting list. We have hundreds, if not nearly a thousand MSPs now on a waiting list for an area. And as an area becomes available, we do release that to the waiting list. So go and check if your area is available at MSPMarketingEdge.com.

Fiona Challis:
Hi there, I’m Fiona Challis, and I’m an MSP sales expert. And I help MSPs with the biggest challenge they have, for just filling top of funnel and winning new clients.

Paul Green:
And that is the biggest challenge that so many MSPs have. And I’m delighted to have you back on the podcast and in this video, Fiona, to talk about this incredibly important subject. And of course, you and I have actually known each other for what seems like about 40 years. I know it can’t be that old. It can’t be that long, because you are not clearly yet in your 40s, but we have known each other well over a decade. And then we both did individual tracks. We ended up working with MSPs. And it’s always awesome to get you on a call like this, and talking about one of our-

Fiona Challis:
You’re back full circle, Paul. The circle of life.

Paul Green:
Yeah, the circle of life. I can hear Elton John striking up the orchestra now, talking about it. So why do you think so many MSPs struggle with such an important thing? Because there are so many businesses out there that they need sales on a daily, weekly, monthly basis. Otherwise they don’t survive. And yet there are plenty of MSPs that are really bad at sales, and yet they survive. So why do MSPs put up with this?

Fiona Challis:
Well, I mean, the biggest reason they struggle with it, Paul, in my experience, is most of them set the business up because they were technical, they were passionate about solving customers’ problems. Most of it started in somebody’s bedroom. They managed a few customers, and then all of a sudden, the business grew organically and it grew through referrals. And they got to the stage where actually they had a steady enough business. And years ago, it would’ve been okay just to have a business like that. But because now the competition is growing, the managed service IT spend is growing.

Fiona Challis:
The whole marketplace is changing. So most MSPs are now waking up and going, “We need new customers, we need to start marketing. We need new customers.” But they don’t have a process to do it. And most MSPs, I know they like to have a step-by-step process, a funnel to know everything’s going to happen this way. And they need to have that in place before they start sales and marketing. And that’s normally what put them off. Because they think it’s going to take a long time to do it. They just need a process. They need a step-by-step process. How do we do it?

Paul Green:
Yes. And you have direct help with that, which we’re going to come on to talk about a little bit down the line. So when you do work directly with MSPs, do you find, is it an issue not only just of having that process, but of also understanding how sales work? Because I think sometimes for technical people, sales seems a bit tree-huggy. If you know what I mean by that. In the same way for people like you and me who are tree-hugging sales and marketing people, that the technical aspects can sometimes be a bit foreign as well.

Fiona Challis:
Yeah. I mean, I don’t think they see it as tree hugging. I think they see it as more of jumping into a volcano. I mean, they literally see sales and marketing as being sleazy, about being tacky. It just puts them off. They just think, “I’m not very good at selling. I can talk tech, but I’m not very good at relationship building or selling or putting the messages out there.” And it just scares them. The whole thing of sales and marketing just scares them. But the good thing is they’re actually really, really good problem solvers. And when you put them in the right customer environment, they can actually be really good at sales and marketing. They just need to have a structure for having that kind of business-focused, problem-focused sales conversation rather than a really hardcore closing, close the sale, keep on selling. That’s not what works in this industry anyway. They just need a structured, conversational sales process to go through.

Paul Green:
Yeah, absolutely. And at the moment, you are focusing very much on helping MSPs to fill up the top of that funnel.

Fiona Challis:
Yeah. Yeah. It’s always the biggest problem. Most of the time when they’re actually in front of customers, when they get the right type of client to talk with, they’re actually normally okay. It’s actually filling top of funnel, getting enough customers to have conversations with, and getting enough qualified customers. Right at the kind of customers they want to work with for not just today, but in four or five, six years time, they want the right type of customers to have the right conversations with. And it all starts top of funnel, and getting that messaging right at the very start of the funnel. Which is what we specialise in.

Paul Green:
So I appreciate, I’m going to ask you to cut down something that’s actually quite big and quite important into a couple of short soundbites for an interview like this, but what would your top advice be for MSPs who are really struggling with that top of funnel and filling that up?

Fiona Challis:
Yeah. So my top pieces of advice would be, carve out a battleground to start with. Because when you’re trying to sell and market to everybody, it’s too hard to find them top of funnel. So pick a battleground, pick a niche, pick a vertical, pick a sector of the market that you know are already investing in managed services, and then start to target them. Then the second piece of advice is, make sure your message is not about technology. Customers don’t want to buy technology. They want to buy business results. So anything you do top of funnel, make sure you’re selling them what they want, what you’re giving them, what they need. So talk about the business outcomes. Talk about the results that customers get when they partner with an MSP like you. When you do lots of marketing like that, when you’ve got a clear target market, you’ve got a really clear message.

Fiona Challis:
What you’re then going to do is stop the scroll. Now me and you both know what stop the scroll means, Paul. We want to make sure the customer sees your marketing, sees your post, sees whatever you’re doing top of funnel. And they come to you as the expert. When we position you as the expert, you have a clear market, clear message, and you’re the expert, price becomes irrelevant. So top of funnel ticks a strategy. You need to have that clear customer avatar, clear market, clear message. And then let’s build all of your top-of-funnel campaigns around that. And then that’s the best way to do top of funnel.

Paul Green:
I love this. So what your superpower is, Fiona, I think is taking something that is quite a complicated subject and just breaking it down into doing these things. So tell us about your new product that you’ve launched. What exactly is it? Who should get involved with it, and how does it benefit you as an MSP?

Fiona Challis:
Great. So it’s a new online product called How to Win, Grow, and Retain New Clients for your MSP Business. And the product, Paul, is basically an overview of everything I’ve been teaching MSPs over the last seven years that we’ve been running this course. It’s always been one on a face-to-face basis, whether it’s in a group team environment or in live coaching calls over a seven to 12-week period. But I don’t have enough time to be able to keep teaching it all live and to serve the amount of MSPs that want the training. So instead, I create an online program that basically walks all MSPs through the entire sales and marketing funnel, right from the very top. How do you start to build the top of funnels? So create all of your marketing, all of your campaigns. So you have enough qualified leads coming in.

Fiona Challis:
We go the whole way through to then how do you run a discovery call? How do you qualify them? How do you run a business sales meeting? What do you ask? What questions should you be asking in the sales meeting? What is the whole format for running sales meetings? Then we do how to present your pricing, how to create proposals that convert, how to close, how to do objection handling. And then how to onboard the customer, how to grow them and how to keep them. So think of a funnel. We’re literally starting seven steps, right from the very top of top of funnel, the whole way down to onboarding, growing and keeping the customer in a nice step-by-step process with all the templates and everything given to you. So you know exactly what to do.

Paul Green:
This is what I love about you, Fiona, is you’ve covered off absolutely everything that an MSP needs there. And this is why you and I have actually done some kind of affiliate deal. Now I get approached very often. In fact, almost once a week by someone, somewhere, who wants me to promote what they’re doing in return for some kind of revenue or affiliate deal. And normally my answer to this is no. Now Fiona, obviously I’m happy to promote you, because you’ve paid me a hundred thousand dollars. Oh no, no, that wasn’t right. That was someone else.

Fiona Challis:
You wish.

Paul Green:
No, I wish. I wish. No. The reality is in all the years I’ve been talking to MSPs, this is only the third affiliate deal that I have done. And I’m always nice and transparent about it. So if you are interested in having a look at Fiona’s course, and you don’t mind me earning a very small fraction of your money if you go and buy it, then there is a link on the webpage. So on our website where you’ve seen this podcast or this video, there’s a link there and that’s the affiliate link. And Fiona’s now going to give you the link to just go and check it out, where there is no affiliate deal. The price is the same on both. So if you enjoy my videos and whatsoever, and you’re happy to give me a small financial thank you through Fiona, go through my affiliate link. If not, Fiona, what’s the link that we should visit?

Fiona Challis:
So the website address, Paul, is www.MSPsalesmastery.com/onlinecourse, but I would highly encourage you to give Paul his little treat. He has been a little superstar, and I think together with you doing the marketing and me doing sales, it’s the perfect combination for all MSPs to get the best of both worlds.

Paul Green:
Less the little, though. I’m 5’7.”

Fiona Challis:
Less than the little, we’re both little.

Ben Spector:
Hi, I’m Ben Spector, product manager at Zomentum. A book I’d really recommend reading is Principles by Ray Dalio. I’m not a big reader, but I absolutely love this book

Owen:
Hi, my name is Owen, CEO of SweetProcess. I’m excited because I’m going to be here next week to talk about documentation. How can you document procedures and processes for your business? I know you probably have documentation in place for your clients, but sometimes you might neglect documenting how work is done within your company. So next week, I’ll be here to talk about how you can do it, and how to collaborate with your employers to get it done fast.

Paul Green:
Make sure you subscribe wherever you listen to this podcast, so you never miss an episode. Because that interview with Owen next week is going to be great. We’re also going to be talking about being an adult when a client leaves you. Just earlier, we were talking about paying off a contract with another MSP when you steal a client from them. At some point, someone’s going to steal a client from you. And we’ll explore next week, how you can be an adult about it and why. There is a very specific reason why you must behave in a very specific way. We’ll also be talking about the concept of a loss leader. Now shops do this. To draw you into the shop, they will happily lose money on a specific product because they know they’ll make money elsewhere. Can you use this concept for an MSP? Let’s explore that in next week’s episode. Don’t forget, we have got a ton of extra content for you right now on youtube.com/mspmarketing. Join me next Tuesday, and have a very profitable week in your MSP.

 

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