Are you an MSP grappling with a wave of new, cheap competitors that seem to be driving down fees and making it harder to command the rates you deserve? If so, you’re certainly not alone. The market has become a battleground, and many MSPs are finding it more challenging than ever to maintain their pricing structures. But before you start cutting costs or slashing prices, let me share some critical insights that could change your entire approach.
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For those of you who might not know me, I’m Robin Robins, the founder of Technology Marketing Toolkit. Over the last 22 years, I’ve worked with over 10,000 MSPs, VARs, and IT service shops to help them implement more strategic sales and marketing systems. We’ve spent decades researching, refining, and perfecting marketing and sales programs specifically designed to sell outsourced IT services. And one thing we consistently monitor is the influx of new competitors into the marketplace. Right now, the numbers are staggering.
The Growing Flood Of MSP Startups
According to recent data from Datto, the ratio of new MSPs entering the market to those being acquired or merged is 3 to 1. That means for every MSP that exits through acquisition or merger, three new ones are springing up. Our own CRM data reflects this surge; in just the first six months of this year, we’ve seen 1,473 brand-new MSPs entering the market, seeking sales and marketing help. And trust me, that’s just the tip of the iceberg. There are countless more out there, starting up, and often, they’re offering services at rock-bottom prices.
Why the sudden boom? The MSP industry has been on a roll for the last few years, and many IT professionals are noticing the opportunity. In many cases, IT staff from mid-sized companies, who are seeing their jobs outsourced, are deciding to launch their own MSPs, sometimes with their former employer as their first client. We’re also witnessing a trend toward specialization, particularly in cybersecurity, which is drawing even more players into the field.
The Need For Differentiation Has Never Been Greater
With this surge in competition, especially from low-cost providers, the key challenge is differentiation. Sure, standing out has always been important, but when a prospect is comparing you to someone who’s 20%, 30%, or even 50% cheaper, you must justify your higher rates convincingly.
Here’s the deal: You can’t simply rely on more marketing or a slick sales pitch to overcome price objections. What you need is what we call the CAT factor—Celebrity, Authority, and Trust. Or, as I like to say, the “Meow Mix.” You need to become a mini-celebrity in your market, be seen as an authority, and use trust-based marketing strategies more than ever before.
Strategic Shifts You Must Make Now
Given the current market dynamics, it’s critical to adjust your business strategy to maintain your profit margins and continue growing. Here’s how:
- Double Down On Your CAT Factor: Elevate your profile in your niche market. Being recognized as a leading authority in your area of expertise is more critical now than ever. Trust-based marketing strategies will help you build and maintain strong relationships with your clients, making them less likely to jump ship for a cheaper provider.
- Adjust Your Go-To Market Strategy: The days of easy sales are dwindling. Deals are taking longer to close, and lead flow is slowing. This is not the time to pull back on marketing but to be more strategic. Focus on targeting high-value clients and differentiating your services in ways that resonate with your ideal customers.
- Optimize For Efficiency: With increased competition and economic headwinds, it’s essential to do more with less. This means streamlining operations, improving service delivery, and focusing on customer retention. Growth doesn’t always mean getting more clients; sometimes, it means getting more from the clients you already have.
Stay Ahead Of The Competition
I’ve put together a comprehensive MSP Election Year Forecast Report that digs deeper into these trends and offers actionable strategies to navigate the challenges ahead. This report covers the economic and profitability challenges MSPs are facing, along with three critical changes to your business strategy that you should implement immediately to protect and grow your business.
