Six Tips For Assessing The Financial Strength Of MSP Customers

See how MSPs can assess a potential customers financial health and watch for trouble

Six Tips For Assessing The Financial Strength Of MSP Customers

Industry experts frequently emphasize the importance of staying in your lanes. In other words, they don’t believe organizations should deviate too far from their business models and core competencies since leaders can lose focus on the big picture. Investments in unconventional products and services reduce working capital and can pull key resources from more profitable activities.

MSPs, however, due to the complex and consultative nature of their business relationships, can benefit from bending that rule a bit. Organizational leaders frequently ask their outsourced IT partners to fill unique roles or need to wear different hats to help them uncover new revenue opportunities or resolve specific customer-related issues. Those responsibilities become part of your business-enablement role.

One area MSPs might not feel as comfortable is discussing the financial strength of their clients’ operations. While you may run a credit check on a prospective customer or secure a depot before finalizing service agreements, how much do you know about that company’s ability to pay its long-term obligations?

That one point can be the difference between “good clients” and “bad clients.” The neediest customers are often the companies that fail to pay their bills on time and complain about the little things that no other sane business owner would care about. That causes MSPs to spend more time hand-holding them through every change and continually asking for overdue payments. In the end, those accounts become a distraction and reduce your company’s profitability.

Read the tea leaves

MSPs can use fiscal cues and information to learn more about their clients, and better serve them as well. In addition to asking the pertinent credit questions, watch for warning signs such as:

#1 Questioning your rates. While the cost issue could be a negotiating tactic, it may be an indication that the company is in a less than stellar financial position. Consider this a red flag that the prospect may not be able to pay for your services in a timely fashion. Thoroughly check references and credit information and have an honest discussion about their comfort with your rates and payment policies.

#2 Firing previous MSPs. Is your firm a replacement for a provider they didn’t pay? The topic previous or current IT support companies should be addressed early in the sales discussion, so you have time to uncover any potential issues before signing any long-term contracts. Look for liens against the prospect company and its owners. If you have a relationship with a former tech provider and can get objective feedback, ask about their experience. They may (or may not) share insight on the company, its leaders, and any potential red flags. Yes, a previously dismissed provider’s opinions may be tainted, but that information may validate other financial warning signs.

#3 A Disinterested or Disengaged Prospect. Have you ever talked with a business owner who is willing to sign on for your services with little or no interest in the sales and potential onboarding processes? That lack of engagement and enthusiasm could be a personality quirk (hey, we’re all human) or yet another warning sign of financial issues. The company may have lost its previous MSP due to payment issues or need exceptional support to meet changing business or compliance requirements – and the owner might be worried about how to pay for it. People in those situations tend to shy away from discussions on service and implementation details (yet another red flag).

#4 Aiming low (and falling). Like the “questioning your rates” red flag, if a prospect wants you to trim the services you’ve proposed or asks for a “base entry package,” they might not have a healthy cash flow. No one faults business owners for being frugal with their money. However, taken with the points mentioned above, it might be another warning sign for you and your sales team.

#5 Disorganization. They say smart people are often those with the least organizational skills. Unfortunately, businesses without reliable processes and financial best practices in place tend to be slow payers. Are their desks and offices kept neat and organized? Do decision makers keep their appointments and come prepared for your meetings? Look around their facilities and take note of how well things run, as it can be an indicator of their payment practices.

#6 Shutting off autopay. For existing customers, disabling autopay can mean several things. You could consider the action as a consulting opportunity; a time to carefully explore the situation and potentially offer them suggestions for improving their financial situation. For a new prospect, it is worth digging to understand what their concerns are. MSPs are not bankers ̶ though some do end up lending out a lot of cash in the form of outstanding A/R balances ̶, but most companies do look to you for solutions. Autopay concerns could be a cry for help.

Proceed with caution

MSPs may not want to discuss finances in-depth with prospects. However, an open dialog from the start, if done with diplomacy and sensitivity, may head off difficult conversations down the road. That type of communication is invaluable and will help your firm forge tighter business relationships.

For example, a client disabling the autopay option on their payment portal might be a mistake made while updating credit card or banking information. That action does give MSPs a reason to check in.

Start with a non-accusatory question such as “it appears that your autopay subscription was deactivated. What can do to help your team restore that service?” Think strategically. A non-accusatory “it seems like” question disarms their defenses and gets to the root of the problem quickly.

Mistakes happen. The management team might not know about the deactivation, so asking the right question can be informative without accusing them of short-changing your payment plan. If they are aware of the situation, you’ve opened the discussion in a very positive way and earn the right to dig deeper into the reasons behind that action.

When clients purposely deactivate autopay, resolving the “why” may take time and some creativity. Owners can be (understandably) quite protective of their financial situation. Ask questions such as “will you feel comfortable reinstating autopay next week?” to get them thinking about cash flow and how soon they’ll be able to re-engage.

If the answer is no, discuss what benchmarks they need to hit before opting back onto autopay. Be sure to put that account on a watch list and check in at least weekly. If they make no payments and that client’s past due status moves outside of your comfort zone, don’t keep losing money.

MSPs are not financial advisors

Don’t confuse technical support with financial advice. MSPs should use caution when offering monetary suggestions to their clients. Even if your recommendations are spot on, if their company financial situation fails to improve, some (if not all) of the blame could fall on your company.

The best suggestion? Share business best practices from industry-related sources or recommend respected financial counselors or other professionals experienced in dealing with their specific problems.

In this case, stay in your lane. Listen and provide support without making guarantees or promises for things you have no control over and may not be able to fix.

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