From VAR to MSP: 5 Steps to Move You Closer in the Transition

Life for VARS has shifted. The priority for both VARs and MSPs is the holy grail of monthly recurring revenue (MRR). The question on everyone’s collective mind is, how do I structure my business to attract more of this kind of business?

Through our work with both MSPs and VARs we’ve seen a pattern in the way VARs make the transition into MSPs. We’ve put together a full list below, but here are a few insights into the topic of the VAR-to-MSP transition:

• Expect a mix. Many MSPs aren’t 100% MRR-only. VAR engagements still take place be with less frequency. They’re being replaced more and more by monthly recurring engagements with customers.
  
• Set yourself apart. Branding (standing apart from the competition by highlighting what makes your company unique)  has never been more critical.
  
• Focus on specific verticals. It’s all about finding and serving a vertical. Many MSPs choose an industry such as healthcare, manufacturing, finance, or law.

The good thing about this monumental shift is that you’re not alone in undertaking it. Many other MSPs are going through the same process. The ones who give careful attention to rolling out each step are the ones who beat out the competition. Let’s take a look at what it takes to make the move from VAR to MSP.

Stops on the Road to Becoming a Successful MSP

This isn’t an overnight process by any means. Many firms take years before they reach a tipping point and can say the majority of their business is in the MSP space.

To help you build momentum we’ve listed out the top five steps VARs can take to increase monthly recurring revenue for their businesses. Within each stop on the road to becoming an MSP we’ve listed out action steps you can take today to accelerate your efforts in generating more managed services business. 

1. Initiate the Company-Wide Shift from VAR to MSP.  The first stop on the road to more MSP engagements is restructuring internal operations. This includes all levels of    the organization from finance to marketing to HR to the C-Suite. It takes a company-wide embrace of an MSP structure to see results. This includes taking fast action on structural changes that need to be made to accommodate ongoing, monthly relationships with customers.

Today’s Action Step: List one way the shift from VAR to MSP will affect each division in your organization.                                                 

A few examples might include:

Marketing: Create marketing collateral to clearly state the details of your offer.
Finance: Software to give customers access to account details and payment history
Sales: Restructure compensation plan
Operations/HR: Communicate details of initiative to shift from VAR to MSP

2. Product-ize Your Offers. A key component of the shift includes packaging offers to suit the needs of the verticals you’re serving. Clarity in exactly what is is you’re  offering gives your sales team the confidence and motivation to pitch your products. It also helps streamline internal operations when delivering services as you can create a standardized, quality offering for your customers.

Today’s Action Step: Start this process by listing out the top challenges in technology (such as backup and disaster recovery, cybersecurity, compliance, and network management) your ideal vertical is facing.

For instance, if you’ve chosen to focus on the healthcare vertical, electronic health records management and HIPAA compliance remain a top concern. Are there vendors with solutions that make compliance and EHR management easier? Can you white label these solutions and put your own spin on the branding of these solutions? Develop a simple spreadsheet outlining the top concerns in one column and list vendors that address those concerns in the other column. If you see one vendor more than others pop up, it may be a clear indication this is the vendor to work with to best serve your chosen vertical.

3. Adjust Your Compensation Plans. Once you’re clear about what you’re offering, it’s important to work with your sales team to develop compensation that reflects monthly engagements rather than per-project commissions. A few examples we’ve seen include compensation based on annual, monthly, or total contract value.

Today’s Action Step: The best way to begin this process is to simply have a conversation with the people affected by compensation plans, your sales people.

Begin with sales leadership. Share the outline of your strategy to move from VAR to MSP and begin asking questions about compensation plans that will best serve your front line staff.

4. Focus on Automation. For SaaS and MSP, user experience is key as there really is no more “post sale.” A key element of making ongoing customer relationships manageable for your business is to automate some of the repetitive aspects of such engagements. From support to account management, make automation of the user experience a priority and look for ways to include it at every customer touch-point to ensure you contain the costs associated with client management as an MSP. An example: Many MSPs give clients access to an account management system where they can see how many seats the MSP manages and how much they’re paying for those seats.

Today’s Action Step: List out tools that can help you automate the management of monthly recurring engagements such as RMM (remote monitoring and management) and PSA (professional services automation) tools.

These tools give you control and visibility, allowing you to provide a top-level experience for your customers. 

5. Reach Out to Your Ideal Customer – Digitally. Once you have the previous elements in place, it’s time to market your MSP. That includes determining your branding and focusing on the unique voice of your company. Concentrate on what sets your firm apart from others in the industry and play up that uniqueness. This makes digital marketing much easier. Your marketing team will be able to better position your products and services in your internal (battle cards and training) and external (web site, sales sheets, and presentations) marketing materials. 

Today’s Action Step: Begin this process by documenting a profile of your ideal customer.

You can do that by creating a persona report. This report outlines who your customer is, what’s truly important to them, their responsibilities within their organization, and other key elements that influence their decisions.

It’s not an easy process by any means, but by taking the MSP roadmap one step at a time, VARs can successfully increase the amount of MSP engagements. Marketing plays a key role in all five stops on the MSP road map. Be sure to partner with an organization that understands the journey VARs take to becoming MSPs and can guide you along the path to success. Presh Marketing Solutions offers both MSPs and VARs digital marketing solutions to make the transition to MSP less difficult. Let’s discuss ways Presh can help you increase your MSP engagements.