Five Ways to Recession-proof Your MSP in 2023

The uncertainties of running a business often weigh heavily on owners. The relatively stable parts of an operation—including clients, contracts and portfolios—may shift over time, but MSPs can typically influence the degree of change and counter some of the potentially negative effects. The things that remain out of their control cause the most sleepless nights.

These “unknowns” or external forces may negatively impact clients’ perceptions and inhibit their willingness to increase IT investments and build longer-term business plans.

For example, the current economic conditions indicate an impending recession that highly concerns many business owners, including MSPs and their SMB clients. Businesses have been dealing with elevated inflation rates and ongoing supply shortages for more than a year, and global market experts predict those challenges may further escalate in 2023. Experts suggest worldwide economic growth will slow from 6.0% in 2021 to 3.2% in 2022 and to just 2.7% in 2023. Those numbers represent the weakest financial outlooks in more than two decades.

Providers must understand how these concerns factor into their clients’ budgets and affect those businesses’ long-term IT plans—and work proactively to overcome potential obstacles. Fear can drive clients to make poor choices with their technology investments. Rather than scale back on tools that can elevate sales or reduce labor requirements, savvy business owners continue to fund projects that will help them attain critical growth objectives or provide other vital benefits.   

The good news for the managed services community is that economic slowdowns have less effect on technology than most other industries, and the reasoning is two-fold.

  • First, channel firms primarily support the SMB segment, which relies on the personnel and expertise of MSPs to optimize and manage their systems. In other words, those businesses are already outsourcing an increasingly more costly and invaluable responsibility to more experienced professionals. Bringing those skills back in-house will likely require greater investments and higher risks than letting current providers continue to work their magic.    
  • Second, the solutions MSPs deliver allow SMBs to weather the storm better. Many IT services help businesses trim expenses, including payroll, while improving operational efficiency. MSPs that can design, implement, and support those solutions are even more indispensable during times of trouble.    

Further Recession-Proofing an MSP

While the nature of managed services softens the blow of economic downturns, there are other steps providers can take to insulate their businesses from the harsh effects of a recession.            

  1. Sell deeper. A proactive approach to account management can significantly increase customer satisfaction and client retention. When the economy takes a hit, MSPs with the strongest relationships typically fare much better financially than those that take a “sign and wait for renewals approach.” Over time, every client should understand all the services, products, and solutions their MSP can deliver and have an opportunity to utilize those offerings. Growing wallet share is also a way to align business models and earn more revenue even during a recession. Clients who feel both parties have substantial “skin in the game” are more likely to invest and collaborate.  
  1. Emphasize “efficiency by design.” IT infrastructure improvement recommendations are frequently ignored by business leaders because their concerns lie elsewhere. However, when those organizations need to optimize their efficiency by reducing labor and resources, they’ll pay closer attention. Successful MSPs continually emphasize the ongoing return on investments from business-enhancement tools and other forms of automation and highlight all the benefits in their sales and marketing efforts. In good times and bad, those services are invaluable to SMBs.   
  1. Build a “cash flow enhancement” practice. While most businesses focus on operational efficiency, there are other ways MSPs can boost the financial situation for themselves and their clients. For example, assisting companies with optimizing and integrating accounting, quoting, sales, and payment solutions allows their teams to close more deals and collect accounts receivables faster. Automating those processes can improve cash flow and help the organization and its IT services provider better weather any recessionary storms.      
  1. Trim the fat. In some cases, MSPs may need to make internal changes to address economic slowdowns. Providers that support less recession-resistant verticals may lose clients or watch their A/R balances escalate quickly during a recession. In those cases, MSPs may need to reevaluate their portfolios, people, systems and operations and make changes to address potential financial shortfalls.
  1. Automate. The fewer hands, the fewer mistakes and expenses. While that concept is certainly not rocket science, some MSPs forget the value of automation and integrations in their own businesses. Optimizing everything from alerts and ticket creation to invoices and payment collection is not only possible in 2022, but a necessity for any IT services firm that wishes to compete in good times and bad. Assigning employees (typically technicians) to champion integrations and new business tools is a good way to ensure MSPs are hedging their bets for the future.    

The Ultimate Key to Recession-Proofing an MSP

The most successful IT services firms become part of their clients’ businesses. Being an integral and indispensable cog in the machine should be a goal for every MSP—it’s a solid way to recession-proof the provider while ensuring effective lines of communication between both organizations.

Trusting relationships create stickiness. Building an environment that fosters engaging discussions and encourages open exchanges of information inspires clients to fight harder for their IT services partners. Sharing concerns early and often is a sure way to get the creative juices flowing to develop alternate ideas and new solutions.

People tend to fight harder for those they respect and value. Clients are more willing to brainstorm and explore alternate paths to maintain those relationships while addressing their respective business challenges. One of the best ways to recession-proof an MSP is to become one of those essential partners. With well-honed IT services and operational practices and keeping the client top of mind, that objective becomes much easier.          

A crucial tactic to surviving a recession is to manage your cash flow. And the best way for MSPs to optimize cash flow is to get paid with set-it-and-forget it automation that’s amenable to variable billing. Schedule a demo to see how ConnectBooster can transform your cash flow inside one billing cycle.


MSPS Guide to Predictable Cash Flow in Uncertain Times

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