by Patrick Elliott, VP of Marketing at Rev.io
The recent surge in demand for cloud communications and remote connectivity has many Managed Service Providers (MSPs) looking at the potential for significant revenue growth. But how do you maximize the profit from all that new business?
This was an important question even before the current environment drove up demand. Many MSPs have begun to bundle unique packages with value-added services and the higher margins that go with them.
So, how can you maximize the profit from all those new products? Here’s a list of the easiest and most attainable paths to even higher margins:
# 1: Gauge Profit Potential
This might sound like Business 101, but it’s harder than it appears in the communications space. And it’s especially true for MSPs focused on voice and network services.
The cost basis for communications services is notoriously complex, depending on where and how carriage is accessed, what services are provided and even the metrics for usage metering. Even if you’re leveraging a turn-key platform, there will be training and ramping costs.
With your costs fully accounted for, make sure you are operating in the green in every part of the equation. Look at adding margin to every logical input. This can often make life easier for sales and offer flexibility they can use to win and close business, while still assuring profitability. With an automated billing platform—these margins can be baked in and not get lost in the translation from the quote to the invoice.
Ultimately, all that needs to be effectively nailed down to set your organization up for financial success.
# 2: Smarten Up Sales
Even if you’ve done everything right so far, you still need to sell something to realize your profit. That means your sales team needs to have enough details about your product portfolio to know which specific product is right for a given customer, how to answer that customer’s questions, and how to configure the offering when the customer is ready to move forward.
Preliminary training and walkthroughs are critical. Nothing is worse from a customer’s point-of-view than calling about an advertised service that the sales representative has never heard of. It’s not much fun for the sales representative either. It’s also vital to have all the details available to the sales representative online to align the product with the customer’s needs and answer the inevitable questions. That goes for any promotional pricing or packages too.
The last piece of sales integration is connecting all this to your CRM. That way, your people can see what a customer already has and upsell or cross-sell in whatever way makes sense. All of this can drive more profit from the revenue side and lower the overall cost of sales.
# 3: Tax Matters
Few categories of business have as many taxes and surcharges as telecommunications. Some are associated with product types, and many are tied to geographies. Some resellers may never have to worry about underlying taxes, but that changes when MSPs begin to bill on their own paper.
If you’re packaging and selling your own product, the level of tax complexity may come as a shock. The good news is that there are comprehensive and well-maintained databases of these tax rates. Better still, they are designed to be integrated into automated billing systems, supplying not just the charges but the detail.
# 4: Put It All Together
The beauty of a subscription business is that—once a customer is onboarded—very profitable incremental revenue can roll in. Most of the costs are frontloaded, so with an efficient onboarding process, the more profit you can move to the bottom line.
In many ways, this is just an extension of the integrations discussed earlier. By connecting all the steps from sales to billing, you cut administrative friction, create a smoother customer experience (which helps sales), assure no cost recovery is overlooked, and avoid incremental costs in the form of remediation.
Sales enablement connected to your CRM, with CPQ capabilities connected to an automated subscription billing platform, all flowing into your accounting program; that’s a great description of a profit engine.
