Hi, I’m Adam the Head of Sales & Partnerships at Pronto Marketing and an SEO expert with 10+ years of experience working in the USA, UK and abroad with Managed Service Providers and B2B firms from startups to enterprise.
Like you, I’ve worked in competitive markets and did all I could to get leads and optimize my marketing budget and ROI. Long story short, it all comes down to numbers. Your MSP marketing strategy and campaigns need to be based on data and I want to help you figure it out for your business.
The MSP industry is unique when it comes to marketing for several reasons, the most important of which is the value of an individual client. You aren’t selling widgets for $5 apiece. You’re selling long term solutions that cost $5,000/month or more.
For this reason, you know how important it is to regularly evaluate and understand your core sales and marketing metrics. With this data, you can make smarter business decisions and invest in long term success.
Think about it this way: If someone needs an IT service provider, they’re probably going to start by doing an online search. And if your MSP doesn’t show up in those search results, they’re going to move on to the next name on the list. It’s as simple as that.
So how can you make sure your MSP business is visible online? Keep reading to find out.
How much are your clients worth?
When you win a new client, they are going to stick with you for a long time. Your proactive team, quick response time, and ability to build long-term relationships mean low turnover rates and high lifetime value for each client you bring on board.
A single client probably sticks with you for years, which means the lifetime value of that client is exceptionally high. To better inform your future marketing decisions, look at your CRM and figure out what that average looks like. Are your clients with you for 3 years? 5 years? 10 years?
In addition to how long they work with you, what is the average monthly revenue for each client? Talk with your finance team and calculate the average monthly revenue for a client. Now that you know the average monthly revenue of your clients and the average time they remain with your company, you can calculate the Customer Lifetime Value.
For example, if your average retainer is $5,000/month and the average customer stays with you for 5 years, the Customer Lifetime Value is $300,000.
And that is an incredible number. Even if your average MRR is a bit lower, $2,000/month/client still means $120,000 in revenue and $36,000 in profit assuming a 30% margin. This number will guide you in your marketing investment.
Closing leads into new customers for your business
Exactly how many leads do you and your sales team need to close one new customer? Assuming an industry-average 20% close rate that means you need 5 new leads to generate $120,000 in revenue, meaning each lead is worth $24,000 in revenue ($7,000 in profit).
And these are industry average numbers. You may have an amazing sales team that closes at better rates or an incredible support team that keeps clients on board for 10 years instead of 5. If that’s the case, your value per lead may be double or more.
Calculating success with your new baseline
Your value per lead provides a clear baseline for your lead generation efforts. Each lead may be worth $7,000 in profit, but how does that compare to your current marketing efforts? If you currently spend $3,000/month running a Google Ads campaign and you’re getting 3 new leads per month from that spend, your cost per lead is $1,000. Assuming a 20% close rate, you’re spending $5,000 to generate one new client. If every client has a lifetime value of $120,000 in revenue and $36,000 in profit, that’s not too shabby.
Your numbers are going to vary, of course. The key is that you know your numbers, so you can make the best decisions for your business. There are many factors that are going to impact what your numbers mean. Competition is variable in different regions, for example. Your market might allow for a $3,000/month marketing spend to generate the lead volume you’re targeting, or you might need to spend $5,000-$10,000/month or more to reach the same goal if your region is more competitive.
But again, if we look at the averages…
If you spend $5,000 to generate one client, you stand to gain $36,000 in profit.
Applying these numbers to all your marketing efforts
I’ve used Google Ads in this example because it’s the easiest marketing channel to measure cost and return on. You can quickly gather data from a campaign and calculate ROI based on the performance of your ads. The logic, however, holds true for all of your marketing efforts.
What we’ve found over the years is that the most effective marketing campaigns are those which include multiple marketing channels. You need to drive relevant traffic to your site, but you also need to engage with your visitors and move them through your sales funnel until they convert.
If you’re ready to get serious about your marketing this year, let’s discuss our MSP Marketing Programs – designed to leverage every available tool for maximum marketing effectiveness.
600% Increase in Lead Conversions with Google Ads for an IT Provider
Reaching your marketing goals and ROI
Nothing we’ve discussed should be too surprising or new for you. You know your business and know your customers better than anyone else. However, marketing is sometimes left as the thing you know you should be doing, but never quite get to. I’m here to tell you that the longer you leave your marketing on the sideline, the more money you’re leaving on the table.
By knowing your numbers, calculating the average value per new client and new lead, and building a marketing program that leverages that data, you can grow your business and your bottom line. If you’d like to discuss your MSP marketing strategy and goals for this year, or if you’d like to see how Pronto can help, let’s jump on a call to discuss!
