How VARs and MSPs can Stay Profitable in their Business

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Reading Time: 4 minutes

In today’s highly competitive scenario, VARs and MSPs are increasingly finding it difficult to make a decent amount of profit in their business. With prices falling on hardware and software, it has become a challenge to resell products at higher margins. Rising costs and shrinking margins have caused some VARs and MSPs to fret. In order to tackle these problems, they need to capitalize on their strengths and revamp their business strategies in order to improve profits.
As a VAR or MSP, you can do the following to improve your business:

Choose the Right Distributor

Choosing the right distributor is the key to ensuring profit to your business. Go for distributors that allow you to negotiate better terms. Bargain and negotiate with distributors to get the best pricing on your products. This will help to reduce your expenses so that you receive more profit in your business. Also, price wars often erupt at various levels in the distribution channel. Hence, if you are connected to many distribution channels, it can actually shrink your profits. So to prevent revenue from declining, establish partnership only with only a few key distributors.

  • Target Vertical Market

Latest report by Gartner Inc, specifies that worldwide vertical market IT is forecast to reach $3.5 trillion in 2017. Healthcare and government verticals are rapidly growing segments of the market. So by offering specific products and services targeted towards vertical market, VARs and MSPs can earn higher profit-margin. For instance, they can wrap their services around healthcare management technology to provide a custom solution for their clients.

Federal, state and local government contracts can also be a lucrative source of revenue for VARs and MSPs. Every year, government spends billions of dollars in IT procurement. According to the government’s Federal Procurement Data System (FPDS), 58 companies received at least $1 billion worth of government contracts in 2016, with the top 100 contractors getting over $262 billion combined. No wonder, earning a government contract provides a good opportunity for VARs and MSPs to grow their business and revenue.

  • Wrap Services Around Set of Offerings

The ‘mobile value added services’ market is worth $655.07 billion by 2020. So it is imperative that VARs and MSPs focus on providing their value added services around the right technology to stay relevant and profitable. Mobile devices are one of the highest selling items on ecommerce sites. Hence tying services around mobile devices will certainly allow VARs and MSPs to earn more money.

A lot of money can also be made by offering a range of additional services around products that are in great demand. This is one of the best strategies adopted by various companies to increase their profit margins. So find out what products sell the best from your distributors and accordingly tie your value added services around them to maximize revenue.

  • Boost Upsell/Cross-sell

Boost Upsell and Cross sell

If VARs and MSPs are serious about increasing revenue from their online business, they need to use some form of upselling and cross-selling. Studies have also show that these selling techniques help to increase average transactional value, which can work wonders to increase profits and grow your business.

In order upsell and cross-sell effectively, make sure you bundle up only the relevant items and offer related products right after checkout. You can also provide upsell/cross-sell options for Quotes as well. In order to simplify the selling process, many VARs use Configure price quote software that identify relevant upselling and cross-selling items while quoting.

  • IT Automation

Here’s how IT automation can improve your profits and accelerate business growth:

  • Reduces Operational Cost

The high cost of IT operations is often responsible for poor revenue growth. So reducing operational cost will certainly have a positive impact on revenue and business profitability. This is a proven strategy to achieve higher margins. No wonder, VARs and MSPs are often advised to reduce expenses to gain better margins. Using the right automation software is the key to cost cutting.

Evaluate your existing business processes and identify areas that can be automated with the right software tools. Automation will allow you to run your business with reduced number of employees, thereby helping to decrease the level of expenditure associated with in-house team. Both VARs and MSPs commonly incorporate a Business management software to automate and streamline their processes. Enterprises of all sizes often use an accounting and invoicing software to reduce staff resources and generate cost savings.

  • Boosts Efficiency

In order to stay profitable and competitive, VARs and MSPs have to make the most efficient use of their resources. Increasing efficiency is a proven strategy to improve your organization’s bottom line. SnapLogic research has revealed that 90% of employees are being burdened with manual repetitive tasks, which could be easily automated. For instance, remote monitoring and management (RMM) tools will allow MSPs to create, organize and automate any IT service that includes preventive maintenance and support tasks.

MSPs should also automate processes like regular disk cleanup, software updates and patches, and frequent backups to increase operational and management efficiency. Application programming interface and scripting tools are also being used to automate processes on a more granular level.

Automation reduces error, frees up resources, while boosting performance and security. VARs and MSPs often use a Sales quoting software to streamline their quote-to-order process and improve margins. Moreover, task automation will reduce the amount of time your team spends managing routine tasks and allow them to focus on activities that matter most.

Automation will also enable MSPs to devote more attention on customer support and satisfaction, key to strengthening relationship that will ensure sustained profitability. This will help to build a more productive, revenue-driven business.

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