Do you have break fix clients that you want to convert to your fully Managed Service package? Are worried about losing clients as you try to shift them over? These are common questions, and it’s worth knowing that some of the big MSPs have a handful of break-fix clients.
Today we’re talking about moving your break-fix clients into your Managed Services model. Converting your clients to your fully Managed model is key to consistent MSP growth.
I’ve worked at several Managed Service Providers in my career, and the most recent was the largest. We were north of 150 clients and still had about 5% that were still break-fix. We eventually forced the issue with the last few, but it’s important to know that you can have a very successful MSP and still have some break-fix clients.
That said, as your company grows you will want to shift your revenue to recurring. It will allow you to better scale your business, but this isn’t a call to drop your break-fix clients.
Why shift clients to fully managed?
Shifting clients to fully managed helps both your MSP and your clients. You obviously benefit from having recurring revenue which is important, but that’s not the only thing. One of the biggest benefits to your MSP is that you can fix things without having to get approval for every hour billed. It also allows you to lean into leverage your tools better. Things like automation, standardization, and simply being more efficient is better because it allows you to leverage your time. It separates you from the work an hour, bill an hour arrangement. Efficiency works for you rather than against you.
Your client feels these benefits as well. You are incentivized to be more proactive with their network. They should see and feel less ongoing issues. Your client can sleep better at night knowing that their IT spend is much more aligned and static. This allows for much easier budgeting on their end.
Perhaps the biggest benefit to them is that they don’t need to try to fix things on their own. This wastes time and money when they make a problem worse. No longer do they need to spend hours searching for an answer. They call you, you fix the issue, and the invoice amount doesn’t change.
How do you price the MSP agreement?
Pricing is key, and thankfully there are a few options. I also have a blog post and video about Agreement Pricing that goes more in-depth. Please check that out for more detail.
- Option 1: Set a base rate and charge per hour on top. This option isn’t quite a full transition to your Managed Service Offering, but it gets the client paying you monthly for your tools and all of that. With this option your client pays you a per workstation fee for your stack (RMM, EDR, SPAM filter, and those tools), and then pays you a per hour fee on top.
- Option 2: Set your core stack + labor pricing. This is basically option 1 with an average amount of labor they have been using with you. Take the last 6-12 months of invoices for labor, generate an average, and then add that number as their labor. This obviously only works with clients that have been break-fix for a little while.
- Option 3: Set and use your full MSP pricing model. As described in my previous ramble about pricing, you simply set their agreement to what you charge your MSP clients. Eventually, you will want to get ALL of your clients on this pricing model, but there might be a transition period for some of your break-fix clients.
Eventually you will want to consolidate your packages down to just a single package. This doesn’t happen right away, but over time, getting rid of legacy packages that require your team to remember that Client A has this legacy package, Client B is on a hybrid package, and Client C is on your full MSP package will cause you heartburn. I’ve seen it and lived it… trust me, avoid this wherever possible.
How to convert break-fix into managed clients?
This is a multi-step process, but at some point you MUST draw a line in the sand and only bring on new MSP clients. That means no more break-fix clients. This isn’t something you must do early on. In fact, I don’t think I’d cut off new clients until my MSP was in that $1M revenue range. Maybe a little earlier or later, but when you’re getting up and running you need that revenue to get over some of the early hurdles.
That said, you can draw this line in the sand anywhere. Just know that once you draw it you shouldn’t go backwards at some point in the future. So, you draw this line and all of your new clients will be on your Managed Service package. What about the existing break-fix clients?
Break-fix clients fit into a couple of camps. Camp 1 trusts you and will likely do what you ask them to do. They probably spend a fair bit of money with you on an ongoing basis. Camp 2 uses you and treats you like the “computer person” and is likely happy that you’re around but doesn’t see you as a key part of their business.
When you propose shifting to a Managed Service package clients in Camp 1 will likely shift without muss or fuss. It’s likely they will ask questions, but they already know and like you so as long as they’re within their IT budget (or what they’re comfortable spending) they’ll probably switch just by you asking.
Camp 2 likely will be a different conversation altogether. You will need to be prepared for the conversations with the benefits and an average spend report so you can show the value to them. Even when you demonstrate that the value is clear they still may not see it. When this happens you have to make the decision to keep them on the break-fix package or to share them with your competition.
Start the conversations with the clients that are likely to convert first, and the work with the clients who aren’t as receptive. It will take some time to get them all moved over, so don’t expect that everything will just move along without a hitch.
What do I do if they won’t convert?
There really are only two choices if you have a client that doesn’t want to convert: Fire them and share them with the competition, or continue with break-fix.
You aren’t required to have everyone on a Managed Service package. Don’t just fire an otherwise good client just because they don’t want to go fully Managed. If the client takes your other advice, doesn’t cause you a ton of heartburn, and is an overall good client I’d suggest you keep them for a bit. Especially if they’re willing to pay for your tools and the base level package as mentioned above.
Don’t just fire an otherwise good client just because they don’t want to go fully Managed.
One of my previous MSPs still had quite a few break-fix clients well into the several million dollar revenue range. We were finally getting to the point of forcing the transition, but it was a multi-year endeavor. Eventually most converted, but we did end up forcing a couple out.
One area to be mindful: Don’t let your break-fix clients negatively impact the service you are providing to your fully managed clients. The last thing you want is to lose an MSP client because you were catering to a break-fix client. Said differently, if a break-fix client is demanding service that moves them to the front of the line because “they’re paying you so much per hour” this is the time where you have an expectation setting conversation. Let them know that you appreciate their business, but your business model is geared towards the clients that pay a monthly fee. Help them as you should, but don’t cater to their whims.
Conclusion
Shifting your clients from a break-fix model to your fully Managed Service model is important for you MSP. It will take some time and deliberate action on your part, but as you mature your business this is a key shift to make.