Why MSPs Should Consider Clients with fewer than 10 Workstations for Greater Success
Many Managed Service Providers (MSPs) set minimum thresholds for clients, often opting to only accept businesses with 10 or more workstations. While this approach might seem like a quick way to ensure higher returns, MSPs that extend their offerings to businesses with fewer workstations, such as those with 4, 6 or 8, can find themselves at a competitive advantage and achieve greater success in the long run. Here’s why:
The Untapped Market Potential of Small Businesses
According to recent statistics, 99.9% of businesses in the United States are classified as small businesses, and a significant portion of these have fewer than 10 employees. In fact, data from the U.S. Small Business Administration reveals that there are approximately 5.4 million small businesses in the United States with fewer than 10 employees. Many of these companies are heavily reliant on technology and require IT support but often find themselves overlooked by larger MSPs due to minimum workstation thresholds.
By accepting businesses with less than 10 workstations, MSPs can tap into this vast, underserved market and develop lasting client relationships with companies that have the potential to grow. These smaller businesses, while having fewer immediate IT needs, still require critical services such as network management, cybersecurity, and cloud support, making them valuable clients in the long term.
Benefits of Serving Smaller Clients
- Loyalty and Retention: Smaller businesses are often more loyal to providers that are willing to cater to their needs when others will not. This loyalty can result in long-term contracts, high client retention, and frequent referrals to other small businesses in their network.
- Less Competition: Many MSPs shy away from smaller businesses because of perceived lower revenue. However, this lack of competition gives MSPs willing to serve them a significant edge. As fewer MSPs compete in this space, it becomes easier to win and retain clients.
- Opportunity for Growth: Small businesses may start with only 6 or 8 workstations, but many of them plan for growth. By establishing a relationship early, MSPs can grow with their clients, expanding services as their needs evolve. As the business adds employees, workstations, and additional IT needs, the MSP that has been providing services from the start becomes the go-to provider.
- Recurring Revenue Model: Small businesses still require essential services like proactive monitoring, cybersecurity, and cloud solutions. These services can be offered through subscription-based pricing models that generate consistent, recurring revenue. While the initial ticket might be smaller, the ongoing revenue stream can be just as steady as that of larger clients.
- Potential for Higher Margins: Smaller businesses tend to have less complex IT environments, which can make managing their systems more efficient. This means less time spent on troubleshooting or maintenance, potentially allowing MSPs to serve these clients at a higher margin compared to larger, more complex businesses.
The Drawback of Restricting Workstation Limits
MSPs that set a minimum requirement of 10 or 20 workstations may think they are maximizing their profitability by focusing on larger businesses. However, this can lead to missed opportunities and increased competition. Here are a few reasons why limiting workstation numbers can be a disadvantage:
- High Client Turnover: Larger companies typically receive more proposals from competing MSPs, leading to higher client turnover. With smaller businesses, the relationships are often more personal and less transactional, leading to long-term contracts.
- Market Saturation: The market for businesses with 20+ workstations is already saturated with competitors. This makes acquiring and retaining these clients much more difficult. In contrast, the SMB sector with fewer workstations remains largely untapped, providing MSPs with a blue ocean of opportunities.
- Missed Growth Potential: Small businesses grow, and as they expand, their IT needs increase. MSPs that turn away clients with fewer than 10 workstations today may miss out on the opportunity to support rapidly growing businesses tomorrow.
The Growing SMB Sector
As the U.S. economy continues to diversify, the number of small businesses with fewer than 10 employees continues to grow. These businesses play a pivotal role in economic development and often require high-quality IT services but are frequently overlooked by larger MSPs. By catering to these businesses, MSPs can differentiate themselves and secure a loyal customer base that provides steady, recurring revenue streams.
Conclusion
The reality is that MSPs who lower their workstation thresholds and offer services to smaller businesses stand to gain far more than those who only cater to larger companies. By addressing the needs of businesses with 6 or 8 workstations, MSPs can tap into a massive, underserved market, build strong client relationships, and grow their own businesses alongside their clients. In a competitive MSP landscape, the key to success may well lie in going small.
Statistics Source:
- U.S. Small Business Administration (SBA)
- U.S. Census Bureau
Embracing the potential of small businesses is not just a smart business strategy; it’s a path to long-term success.
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