You’re ready to hire an account manager for your Managed Service Provider (MSP). You’ve got some decisions to make. What type of Account Manager do I need, when can I afford one, and what do I pay them are probably some of the questions you have. Good thing you’re watching this video because that’s exactly what I’m going to cover in today’s video.
My name is Adam Hannemann and welcome to Ramblings of a Geek. I’ve been in the MSP space for the better part of the past couple decades. I was fortunate enough to wear quite a number of hats in my MSP experience. Account Management is one of those core roles that you must get dialed in to grow your MSP properly.
This is the second of a three video arc about Account Management. Last week’s video covered the normal evolution of the role within your organization. Today we’re talking about who to hire, when to hire, and how you can pay your Account Managers. Next week’s video will cover things like business review meetings, tracking activities, and some of the daily/weekly/monthly things that your might want your Account Managers to do.
Let’s head out on today’s ramble: Who to hire, when to hire, and how to compensate your Account Managers.
Who to hire? Types of AM roles.
Account Managers usually slide into one of a couple roles:
- Traditional Account Manager: Traditional Account Managers are responsible for client service, and moving clients along their roadmap. They may or may not have direct sales goals and/or client retention, but definitely have influence over these components. This is the most common Account Manager type for MSPs.
- Inside Sales Account Manager: These account managers generally skew closer to the traditional side, but probably have sales goals or even a quota for selling projects and hardware to their clients. Their focus is really on making sure their clients are driving revenue into their organization.
- Technical Account Manager: These more technically focused Account Managers play different roles depending on their company. Frequently they do some amount of technical work. This could be doing some or all project work, dealing with escalations, or even acting as the client’s primary technician.The skillset of a TAM is generally aligned with a Sales Engineer and/or Tier 2-3 technical capabilities. I’ve seen several different iterations of this in my time.
- vCIO (Virtual Chief Information Officer): These account managers generally try to be part of their clients’ C-Suite and act more as an advisor to their client companies. The vCIO typically has more business acumen than a traditional account manager. A true vCIO does more than a traditional account manager. They should be providing ongoing strategic conversations and advice above and beyond providing roadmap conversations and traditional business review meetings.
Now, here’s the deal. Some companies call their Account Management staff, no matter their capabilities vCIOs. Some companies call their Account Management staff Technical Account Managers even though they have little technical expertise to lean into.
In other words, one person’s TAM could be the next person’s vCIO and vice versa. It’s unnecessarily confusing if I’m being totally honest. I’m a fan of being clear about the roles within your organization
I have a few thoughts on this side of the topic:
- Thought 1: Make sure that the client experience is #1 when determining the role of your Account Managers, no matter the title. The goal is to help the client move their business forward by using your services and to provide excellent client service.
- Thought 2: Be careful with using vCIO or TAM as your role designation. I believe that to be a TAM you MUST have solid to excellent technical expertise. Truly a Technical Account Manager. Someone who can really drive a technical conversation and get into the weeds on a technical basis. Same thing with a vCIO. Your vCIO must be able to have high level strategic conversations with their clients.
- Thought 3: It’s hard to find TAMs and vCIOs. There are fewer of them in the world, and you will have to pay for that level of expertise. It’s harder to scale your organization if you’re using this specialized version of an account manager. If you’ve grown your business with either or both roles, that’s fantastic. I’m just not sure that you will have a big pool of viable candidates the next time you need to hire one.
- Thought 4: Don’t ask your Account Managers to do inside and outside sales. Those roles are quite different, and depending on how your staff is wired and what the compensation package looks like you may not get the results you are looking for. Asking your Account Management team to also do things like cold call and go on networking meetings and that sort of thing take away from putting clients first. I DO think they should be able to ask their clients for targeted referrals, that’s fine, but much more than that is too much in my opinion.
It’s important to have an idea of who your Account Managers are so you know what you’re expecting from them. If I were doing this over again I’d lean heavily into traditional/inside sales Account Managers and maybe consider having a vCIO for the very large clients. That said, if you are doing the smart thing with your target client profile you probably don’t have too many outliers in client size and complexity.
My overall view on Account Management is that they have a couple of core responsibilities, no matter the title: Keep clients happy, keep client environments up-to-date, and sell projects and keep your project team fed with new projects. If they’re doing those things you’re probably happy with your team.
When to hire?
The logical question becomes, “when should I hire an Account Manager?” There are a couple of components to this question, but in general, it’s just like hiring any other role within your MSP. You want to hire when it makes sense financially AND when that role will make the most positive impact on the workflow of your business.
If you’re hiring your first Account Manager, you’re likely getting too busy as an owner to do all the things. As mentioned in the evolution of the Account Manager Role post you eventually run into the simple fact that you don’t have enough time to properly manage your clients any longer and need some help. So there’s clearly a workload component to this. When you’re smaller, this is probably a gut decision, but as you get bigger and have a couple account managers you will have a pretty good idea about how many accounts or how much revenue your account managers can support effectively. As you near that level it’s time to consider hiring another account manager.
That said, when it comes to the financial components of things I liked to use the rule of 3x when it came to hiring anyone new. The rule of 3x simply says, if you hire this person will they generate 3x what you’re paying them for the company? If yes, hire away (presuming your gross margin and that sort of thing is healthy enough). If no, then it might be time to sharpen the pencil a little bit.
You might wonder, how will your Account Manager generate 3x their salary? Well, if you’re hiring your first account manager there’s a mix of ways that this shows up. First, they’ll likely sell more projects to your clients because they’ll have more time than you to have solid roadmap conversations. Second, bringing them onboard frees you up to do things like increasing your sales efforts. As you ramp up your sales efforts, they help support that additional MRR which helps as well.
Ultimately it becomes a mix of consistently selling projects and hardware replacements to clients, keeping your clients happy and not leaving, and being able to support more MRR as you close more deals.
Paying your Account Managers.
I’ve seen a couple of different methods for compensation for account management in my travels, but the common thread was a mix of base pay plus some sort of bonus pay. Most MSPs generally go for a higher base and a smaller bonus, which is probably appropriate for most companies. That said, I think the bonus component is really important to examine. Especially if your Account Managers are tasked with doing a fair bit of inside sales.
You want to incentivize the important pieces of their roles.
- Do you want more projects sold and closed? Incentivize that.
- Do you want to focus on holding regular business review meetings? Incentivize that.
- Do you want to incentivize keeping clients happy? Incentivize that.
- Do you want to incentivize having a good effective hourly rate? Incentivize that.
I think there’s a great opportunity to have a mix of a few components to their bonus as you can build a bonus package that takes a few different goals into account. The thing to consider here is that it’s likely that your Account Managers will push on the service team a little depending on what their goals are. This can be great, but it could become a problem depending on how attainable the goals are, so make sure that the goals are attainable but not easy.
The key here is to make the bonus sizable enough to move the needle for your Account Management staff. If the bonus is a couple hundred bucks for the quarter, you probably won’t move their behavior much. If it’s a couple grand for the quarter, you might just move the needle. Many MSP business owners don’t want a bonus program with unlimited upside here, especially if the base salary is competitive. Be mindful of the total compensation, but lean into helping drive the behaviors you want to see.
That was a lot to cover in a single post, but I hope you got some benefit from this ramble. Thanks for coming along and I hope to see you on the next one.