It’s us, the metrics folks, coming back to talk to you about sales growth. Why are we talking about this? Because at the end of the day there are two ways to take home more money:
- Take home more of every dollar you bring in or
- Bring in more dollars.
A Survey of 100 MSPs
Even though we spend much of our time focusing on the first item, we know that the second item is also very important. Also, no reason you can’t do both…right?
For today we decided to look at whether market concentration helped MSPs grow sales. Because you can talk about market concentration many ways, let us tell you how we are doing it for this exercise. We looked at 100 MSPs and put them into one of three categories:
Very concentrated: Top vertical market makes up more than 40% of revenue
Very un-concentrated: Top vertical market makes up less than 20% of revenue
In the middle: Top vertical market makes up between 20% and 40% of revenue.
In looking at the numbers, we did not care what market an MSP was focused on, just whether it was focused at all. (that is the subject for another blog post). Also, keep in mind, that the markets are self-identified by the MSP.
The Deadly Middle
We then looked at year over year growth in sales. That said, we found that the very concentrated segment had the highest level of growth 13% year over year. The second highest was…the un-concentrated at 5%. The people in the middle were the lowest at 2% growth.
In a prior blog post, we said that sales growth came from growing sales through existing customers faster than it did from sales from new clients. So, once you are a partner of a client they tend to grow their relationship with you. Well, apparently, once you are in an industry, you can grow your presence in that space faster than you could in a new industry.
What about if you decide not to be so heavily concentrated? The numbers imply that if you just go all out and sell your services to everyone, you do ok. It’s when you can’t decide if you are focused or not that you get into trouble. As with any numerical review there are many moving pieces, so this is just one. Are there certain segments that do better than others? What other factors drive growth? Is revenue growth directly tied to profitability growth? These are all questions we will come back to answer in time.
What Does it All Boil Down To?
This all boils down to relationships that are earned by providing a superior service. You do that and people will talk about it. Do you follow your CSAT scores? Are you monitoring your SLA compliance and ticket counts? If you keep your clients happy they will not only agree to buy more from you, but they may tell their peers about you as well. The numbers provide evidence that a referenceable client base is a tremendous asset.