Mergers and acquisitions has been a hot topic in the IT channel this year, especially in the minds of owners and shareholders considering the future of their businesses. Many of the published articles have been focused on the legal and technical concerns, but I wanted to discuss the strategy of selling your business to get the highest possible return.
There is a myth that service-based businesses do not experience the same pains of inconsistent cash flow that a project-based business will experience. In the perfect world, customers would pay you every single month and never be late. After all, you’re providing fantastic service, right?
How often does your MSP get asked if you provide hardware? It’s a massive cost for a small business to pay for the necessary tools they need to run their business. Whenever a company is shopping around for an MSP, they are going to ask if you can provide their business with hardware.
Everyone in life likes multiple options. We like multiple options when it comes to ordering our food and even the color of our vehicle. MSPs are the same; any MSP likes to choose from the best technology and tools that save money and offer the best value for their business.
Earning a client’s business is not easy, you have to work on building a relationship and overcome several barriers to earn trust. One of the best ways you can build trust is to show how much you care about your customer’s business and how you will handle their payments.
QuoteWerks just released their new and improved integration to the BNG Gateway. For those of you who are unfamiliar, the BNG Gateway is the secure payment handling service that underpins all payments run through ConnectBooster.
The rate businesses are experiences data breaches is growing. The Equifax Data breach was a massive scandal and severely damaged the brand’s image and cost them big.
It’s important as a business to make sure you’re trying to follow best practices; especially when you’re working on your business’s security. One of the biggest oversights you can make is how you handle payments.
There are lots of buzzwords businesses like to use to market their products and services. Words like“streamline” is one that gets thrown around quite a bit without adding substance to the conversation. But when it comes to talking about streamlining your cash flow, that isn’t just fluff. We take it seriously.
When we encourage MSPs to streamline their cash flow, we’re not using it as a trendy catchphrase. Our intent is to stress the importance of automating all your business processes so you get paid as much as possible.
In an ideal world, customers would always pay every bill on time, and your business wouldn’t have to do anything to make that happen. But we all know that’s not the way it actually works.
For most service businesses, collecting payment for the work they perform can be a tedious and painfully slow process. It often requires a lot of manual effort and tediously long waits, with many opportunities for human error. All of those work against streamlining your cash flow.
So how do you actually simplify those processes? In many cases, all it takes is a few small changes to your operations.
Why do so many MSPs undervalue their services and let their work go unpaid?
In an industry where hard work, expensive equipment, and a high skill set is a requirement, most IT service providers do not give themselves enough credit. Their labor often goes unrewarded thanks to their chronic late paying clients.
One of the biggest reasons is IT providers do not treat their business as a utility and tend to let payments slide. If someone doesn’t pay their internet bill, services get shut off, but MSPs frequently go ninety days or more, waiting for a client to pay for the thousands of dollars owed for equipment and support.
Providers offer high-impact services with the associated costs. That may be people, software, hardware, rent, or other expenses – just like any other business.
The truth is MSPs should consistently receive money in a timely fashion for the services they provide. That expectation has been set in other industries that are just as business-critical, so why shouldn’t channel partners fall in line?
They can, and should. The first step is changing the way your business sets expectations in the sales process. Getting the payment conversation out of the way up front will improve the process and ensure IT companies have a much more reliable cash flow.
As your business sets out to achieve your goals for 2018 you probably plan to grow, maybe by 10%. Now as you’re plotting out what it takes to reach that goal, the first step should be confirming if you’ve collected your finances from last year.
One of the most significant roadblocks to growth is finances; poor cash flow and a lack of assets are bad news when trying to solicit loans from banks to invest in your company.
Start the year off right with a strong focus on your business’ financial situation.
Transform how your team collects payments. That’s an excellent way to ensure you can meet your business growth targets in 2018.
Like any small business owner, our partners want to set realistic financial targets when they implement new technologies, especially those that affect their bottom line. Proper expectations are a crucial component of any good business plan so, of course, most MSPs want to know how long it will take to perform various tasks, including getting their clients to use autopay.
The simple answer requires a good understanding of their existing customers. New clients are easy ‒they should use autopay from day one. As our partner, Kelly Siegel, CEO of National Technology Management suggests, “from the very beginning salespeople need to tell prospects ‘we are a checkless company.’ Ninety-nine percent of the time they will be fine with that.”
Many of our partners simply add an autopay requirement to their prospects’ proposals and begin discussing payment provisions during the sales process. Relatively few will ever push back if they value your services and understand the safety and convenience automated payments bring to their business.
Life is all about connections. From the friends who encourage and help along the way to teachers and co-workers who make introductions and offer referrals; those are the invaluable contacts that make us stronger.
The same philosophy applies to business technologies. Nothing in the managed services space exists in a vacuum. MSPs rely on their tools to gather and distribute data related to networks, devices, and applications. When performance is optimal with everything looking clear on the management console, life is good for everyone. If those lights shift to yellow or red, tech firms get busy.
Integrations make that possible. Without those connections between remote monitoring and PSA tools, the life of an MSP would be much more complicated. Communication of network and device issues would slow, and some steps in ticket creation and resolution might require manual intervention. Those inefficiencies cost time and money.
What good would a BDR (backup and disaster recovery) solution be if it took ten or fifteen minutes to notify an MSP when a client’s system failed? Or resulted in a similar communication delay with security applications? The damage to the customer’s business and the provider’s reputation could be substantial.
****This blog piece is from one of ConnectBooster’s newest contributors, Paul Nebb. Learn more about Paul below.***
My team wasn’t new to payment processing when I took a peer’s advice three years ago and switched to ConnectBooster. We had a program that would charge clients’ credit cards at the appropriate time, with an extension that imported information back into our QuickBooks system.
And it worked okay ̶ that is until our customers needed to make changes. And, as every MSP knows, there are always changes. The biggest problem we encountered was when a client added a new employee and needed to increase licenses or user logins for cloud services. For example, if a customer had five Office 365 seats and wanted us to bump them up to six, we would have to go back to the website of our payment processor and update the contract twice.
The first was to input a proration period and the second was to adjust all the months going forward. We rarely had the time or determination to make those changes fast enough and would end up losing money. Those manual steps may not seem like they would require a significant effort, but busy MSPs often have higher priorities when those types of change requests come in.
Service comes first. It was easier to take those small financial hits than to keep our clients waiting. But those lost dollars add up over time.
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Collections or Managed Services Business? Spend More Time Driving Revenue, Not Chasing Past Due Invoices
Well-run organizations rarely have cash flow problems. They develop goods and services that others want, build solid margins in their pricing models, and execute on their commitments. Most importantly, they create effective payment policies and processes to strengthen finances and provide room for future growth.
A note at the bottom of each invoice stating that all money is due within the next 30-days is simply not enough. Nor is that occasional email reminder that a customer’s payment is past due by a week ‒ or maybe a month.
Those are the passive, outdated collections methods that MSPs can’t afford to rely on if they wish to grow profitably.