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The Hidden Business Opportunity in Rising Inflation

Aug 12, 2021

Successful business owners understand the importance of looking for the good things that come from bad situations. Whether that be an opportunity to give back to their community in troubled times or offer a valued new service to customers in need, they are ready and willing to explore the possibilities. Those situations can be a win-win for businesses and their clients.  

MSPs are masters of seeing the good in bad situations. For example, over the past year and a half, when businesses were left scrambling to adapt to pandemic-related restrictions, IT services firms admirably stepped in to save the day for scores of clients and end-users. Many providers worked tirelessly to procure, implement, and support remote workforce solutions to keep everyone running before, during, and after the government-mandated measures took effect. In many cases, MSPs adopt “temporary” systems to work in a hybrid environment while their clients determine what their operations will look like in the future.

Turning bad into good is a common theme for MSPs. Pessimists normally have a hard time being successful. Savvy business owners understand that a positive attitude makes it easier to forge strong relationships and create new sales opportunities. The carrot approach usually works better than beating customers with a stick.

The well-founded concerns about inflation are a great example. Everywhere you look, prices seem to be escalating at an alarming rate. With the economy heating back up as pandemic concerns subside, demand for many items is rising and supply chain issues are creating shortages of many goods and services. As companies nationwide are raising prices due to increasing costs of doing business, smart MSPs can leverage the timing to get enthusiastic buy-in from their customers on new procedures that introduce better automation and operational efficiencies into their businesses.

Inflation Enters the Discussion    

The numbers don’t lie. U.S. consumer prices experienced the largest gain since 2008, according to the Labor Department. While new and used vehicles account for 1/3rd of that growth, food and housing costs are rising on a similar trajectory. Median U.S. home prices increased a staggering 23.4% from the previous year. Labor and supply shortages are putting comparable pressure on the restaurant industry, forcing many stores to continually adjust menus and prices to keep up with the escalating costs of wages and food.

Inflation is a rising concern for everyone. A key priority for business owners is ensuring a balance between revenue and expenses. With expenditure increases considerably outpacing income growth and shows no signs of abating, organizations need to evaluate their options. On the expense side of the ledger, that may involve laying off personnel, dropping unprofitable products/services (at least temporarily), or seeking real estate/ lease alternatives. With all the remote work tools available to businesses today, the latter point is a very viable cost-cutting option − and MSPs can certainly help companies make that transition.     

These are issues that IT services firms should be considering when pitching contracts to prospects and working to renew existing clients. Automation and efficiency should be top of mind to all businesses looking to not only ease the sting of inflation but effectively scale their operations and enable their workforces. MSPs can deliver in each of those areas.

Minimize the Financial Strain for Existing Clients   

Every business owner should be prepared for prices to go up this year. Based on the effects of inflation across virtually every segment of the economy, suppliers must raise their rates to protect their margins and livelihoods. Your clients should understand that situation, and most will likely be bracing for increases as contracts come up for renewal this year.

That puts MSPs in the driver’s seat. Strong IT services partners are invaluable − even more so today than before the pandemic and rise in cybercrime. Even without inflation, businesses should be looking to increase their budgets to bolster defenses and remote work capabilities and spend more on automation. Those investments ensure your clients are adequately protected and remain competitive in markets with resource availability and pricing concerns.

While MSPs are in a strong position, every good relationship requires some give and take, even with contract renewals. Long-term clients understand the value of the products, services, and support that your firm delivers and, more than likely, wish to continue or possibly expand the alliance. Few truly satisfied customers will walk away from a renewal discussion, even with a modest price increase proposal on the table.  

On the other side of the equation, IT services companies strongly benefit from the strong cash flow from predictable monthly payments, so refining financial terms during contract renewals are crucial. You deserve to be paid on time for quality support and the various services your company provides.

Inflation can play an important role in negotiations. The amount and timing of monthly payments are the give and take points and, while MSPs have leeway on the pricing side, clients control the “when” and “how” pieces of these transactions. A satisfied and well-supported customer’s bargaining chip is considerably smaller.

Win the Payment Process You Deserve

Clients may protest strongly if an MSP pitches a significantly higher renewal rate during contract discussions − and no one can blame them. Businesses have to watch the bottom line, and every owner/manager has a responsibility to look out for their company’s best interests. The great thing for IT services firms is they serve the best interests of their clients while addressing similar concerns and responsibilities in their own organizations.

That doesn’t mean MSPs should settle for a less-than-optimal payment process. Leveraging current inflation worries as part of the bargaining process helps ensure those systems get put in place, and the “give” may be much less than the “get.” Every new contract for current and prospective clients should include a rock-solid collections policy with clear instructions and stipulations.     

The use of a secure payments gateway like ConnectBooster should be a mandatory requirement for every customer. MSPs can incentivize or penalize clients to ensure the adoption of these cash flow-critical solutions, though it is much easier to dangle the carrot to secure contract renewals.

Including an inflationary “rebate” to ensure adoption of these platforms and their adherence to payment policies is far easier than calling, emailing, and visiting customers to track down overdue invoices. In some cases, businesses owners may be reluctant to sign up for autopay today and must still be convinced that recurring ACH is the best option. Providing an incentive that speaks to their wallet during negotiations can help.

For example, rather than raising monthly charges by 10% or more in the proposed renewal contract to account for inflation, MSPs can cut that increase in half for companies that agree to adopt autopay. That number could be larger or smaller depending on the negotiations, but it gives providers more wiggle room to protect their margins and add essential new services.

Of course, each IT services company must evaluate changes in its projected cost of doing business before pitching future numbers to a client, or inflation may take a major bite out of its profits. Contract renewals don’t need to be stressful with a good negotiation strategy in place.

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