Top Five Myths That Cause MSP Startups to Fail


Top Five Myths That Cause MSP Startups to Fail

By Erin Harrison

In today’s uncertain economy, more organizations are shifting business models or are launching new services to take advantage of the cloud computing market and tap into new revenue streams. Managed service providers (MSPs) is a fast-growing segment with many new providers entering the market. But jumping in too fast based on wrong assumptions could result in big mistakes that cost new MSPs a lot of lost dollars – and even a failed business.

There are five myths in particular that fledging MSPs need to be wary of in order to avoid disastrous outcomes. Below are the most common misconceptions MSPs need to be aware of before jumping into the market too quickly.

The first myth harkens back to the old adage from Field of Dreams: “If We Build It, They Will Come” Just because you open a business that is based on the latest and greatest technology does not mean customers are going to just line up at your door. To provide customers with the right services – and to ultimately succeed – means that an MSP must combine its core strengths and capabilities with an understanding of the relevant market with current technology trends.

A second myth is that, if you have the right tools, you don’t have to worry about people. This is another fallacy that many new MSPs assume when starting their business. Customers need more than just the right technology tools from their MSP – they need the expertise of staff, skills and time.  “The people and processes that are put in place for an initial offering are integral to an MSP’s ability to support new services and customers,” according to CA Technologies. “When MSPs take the time and effort to build expert teams and efficient, scalable processes, they’re setting the stage for success – not just with the initial offering, but with the services that will follow.”

Speaking of people, some MSPs believe that just hiring the right people is enough. Starting a business based on this practice will cause any startup to fail – especially MSPs which are in the service and technology business and absolutely must hire the right people with the right skill sets to succeed. The people hired by MSPs needs a specific set of tools and resources to maximize their contribution to the business, whether they are in sales, operations, support, finance or another department.

When MSPs invest in tools and processes, they are able to put those “great people” in the best position to succeed. Ultimately, hiring decisions have to be aligned with infrastructure investments and the processes established have to be aligned with the MSP’s service offerings.

Another fallacy can be boiled down to the attitude that: “The More Options You Have, the More You Can Sell.” While this line of thinking is not unreasonable, just because a business has more services to offer does not necessarily improve their chance at success for landing new business. Instead, CA Technologies advises: “Early-stage MSPs are usually well-served by starting small, establishing success and building on that success to grow new business and deepen account penetration. After establishing this early success, service providers can better understand the value being delivered, which is vital. This requires an understanding of customer pain points and an ability to address those challenges.”

The final myth, “If We Sell It We Can Build It,” ties directly into the first, which is rooted in the idea that building a business because there is a market for it guarantees success. Likewise, any MSP that is too sales-focused in selling a service first and later figuring out how to actually deliver it is a recipe for disaster. When starting a business, MSPs need to collaborate and leverage the perspectives of other individuals and teams within the collective organization when defining the company’s initial service. Beyond sales, it’s critical to also gather input from finance, legal counsel, technical teams, customers and prospects.

In summary, starting any new business involves risk, but by having a clear understanding of the needs of the market, having the right people, skills and services (as well as the right financing to get started) will give any MSP good odds for success in what is becoming a very crowded market.

Edited by Rich Steeves

Executive Editor, Cloud Computing

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