Here’s a question I received from the owner of a small MSP about what to spend on marketing:
“As a new MSP, I have a limited marketing budget – $30K for the coming year. In general terms, how should I approach prioritization of that budget to avoid just spending a little on everything?”
What was funny about this question is that he has more money to work with than I did when I started TMT back in 2002, so let me tell you it IS possible to successfully market your MSP and generate leads and new customers even operating on a very tiny budget.
But first, let’s look at some general guidelines based on my 24+ years’ experience in working with MSPs on marketing budgeting and planning.
Mature, best-in-class MSPs spend roughly 10% to 11% of their topline revenue on sales and marketing combined. That includes the salaries and compensation of their sales and marketing team, as well as media, printing, their CRM system and all marketing SaaS apps, such as Canva, LinkedIn and Dripify.
Smaller MSPs that are not generating best-in-class profitability tend to spend 3% to 5% of topline on their IT marketing budget and little to nothing on sales reps, sticking with an owner-led sales approach.
If that’s you, and you cannot spend 11% of topline revenue, you’re down to whatever you can afford and must rely on lead generation campaigns that cost little to nothing, such as referrals, warm outreach and my personal favorite of promotional partnerships (also called JVs or joint ventures).
If I was attempting to grow my MSP on a limited marketing budget, I’d put the majority of the money into two things:
- A high-converting, well-designed website.
- A marketing automation platform (Keap, HubSpot, etc.).
A $30K MSP marketing budget won’t be enough to do the above and hire an agency to run ads and do SEO/GEO – particularly if he’s in a mid-sized market (like Nashville, Tampa, etc.) to large market (like Chicago, Dallas, New York City, etc.).
But know this: spending money on marketing is NOT a guarantee of success, and an MSP marketing budget should NOT be solely based on a percentage of revenue. A marketing campaign or sales initiative that brings in new clients predictively and affordably should be increased, and anything NOT producing should be cut.
Further, it’s not the tools, resources and media that will bring the HVCs (high-value clients) who want to sign a managed services contract – it’s HOW you USE these tools to build a list and implement prospecting campaigns. Proper strategy and good execution matter.
But since you’re asking a tactical question (what your MSP marketing budget should be spent on), below is a list of things you can do that cost nothing or next to nothing to get more managed clients.
- Referrals: If you have a client or clients, use your relationship to get them to introduce you to other clients.
- Warm Outreach: Call and e-mail people you have some connection with, including previous bosses, old work colleagues, friends, leaders of groups you belong to and even friends, to see if they are open to hiring you as their MSP or to get them to refer you to someone who could be a client.
- Networking Events: Most cost nothing or a small fee. You’ll need to attend a lot of events to find the ones that are productive for you. It’s not as simple as saying “Go to Chamber events,” because even the Chamber event attendees and the event’s effectiveness for MSPs vary by area and chapter. You also have to consider your target market and ICP (ideal client profile) when selecting events to attend.
- Canvassing: Canvassing and 5-Around Drop campaigns are extremely inexpensive ways to build your list and start gaining new clients. I would suggest you use the “Get Out Of Computer Trouble Free” card that offers 2 to 3 hours of free IT consulting services to diagnose and deliver a plan (proposal) for resolving an IT problem or project.
- Social Media Outreach: On LinkedIn (but also Facebook), reach out to prospective clients using the same “warm outreach” approach. Be sure you’re posting two to three times a week as well.
- E-mail Drip Marketing: As you build your list and have conversations, add people to a weekly e-mail that drives them to a piece of content that is interesting and useful, be it a video or written blog. Be consistent and make sure you provide REAL value. I recommend checking out Kim Komando as an example to follow. She does daily e-mails because she’s a media company. For you, the minimum is once a week, providing solid advice and useful content to stay top of mind.
The above is a good starting point, and I would suggest investing no less than 2 to 3 hours on prospecting for PROFITABLE clients with the above activities.
Also: it’s super-important to NOT discount to win business because you’ll quickly stack up a bunch of managed clients who suck up your time and aren’t profitable enough to enable you to hire someone (besides yourself) to do the work.
Goal for no less than 45% overall gross margin (services, hardware and software products) on all services sold and you’ll quickly be able to invest more into marketing and sales, making it easier for you to grow.
