The cheapest, best-converting MSP leads come from referrals: they close at about 90%, compared with roughly 25% for cold marketing campaigns that cost $2,500 to $3,500 per lead. After an active referral system, the channels that work are joint ventures and strategic partners, networking and speaking, events and webinars for your clients' clients, multi-touch outbound prospecting (mail, calls, email and social together), gift-with-appointment offers, paid ads and consistent content. Budget roughly 11% to 12% of topline revenue for sales and marketing; best-in-class MSPs spend north of $27,500 to acquire a client.
Acquiring customers COSTS MONEY.
When I ask most IT business owners, "You DO realize that client acquisition costs money?" they'll laugh a little bit and say, "Of course!"
Then I'll ask them to show me the budget they have for marketing. In practically every case, there is NO SET BUDGET for marketing or sales, with every dollar accounted for. They are just randomly spending money on random acts, and even then, it's not enough.
Technically you could grow a business entirely by word of mouth, but it is the rare company that can survive on referrals alone or achieve the speed of growth most MSPs and IT businesses want.
So here's every channel I'd use, in roughly the order I'd use them, and what each one costs.
What Does An MSP Lead Cost? The Numbers By Channel
| Channel | Cost | Conversion |
|---|---|---|
| Referrals, passive (no system) | $0 | About 90% close rate, but only about 0.5 leads a month |
| Referrals, active campaigns | $500 to $1,000 per lead | About 90% close rate |
| Cold marketing campaigns | $2,500 to $3,500 per lead | About 25% close rate |
| Direct mail sent on its own | Printing and postage | About 0.02% response |
| Direct mail inside a multimedia sequence (calls, email, social) | Printing, postage and rep time | 1% to 2% response from a cold list, more from a warmer one |
| Outbound calls (3 to 5 call series) | Rep time | Reach the decision-maker 6% to 9% of the time; 11% to 15% of those book; about 500 prospects per closed deal at a 35% close rate from first appointments |
| Gift-with-appointment offer to a small, qualified list | Cost of the gift | Appointments with at least 80% of prospects targeted, in one MSP's campaign |
| Organic social media | Free | Less than 1% of your followers see a given post |
| All channels combined (best-in-class) | North of $27,500 per new client | Budget 11% to 12% of topline for sales and marketing |
Here's the full picture for each one.
1. Referrals: The Cheapest Leads You'll Ever Get
What it costs: $0 passive, $500 to $1,000 per lead with active campaigns. About 90% close rate.
Referrals are the highest-converting, lowest-cost lead source you have, and you're leaving it completely to chance.
MSPs typically close 90% of the referrals they receive, yet they don't appreciate how incredible that is. Cold outreach and paid digital ads? You're lucky to close 25% (or much less). The cherry on top? Referrals cost you almost nothing to generate.
So yes, you SHOULD do everything possible to fuel more referrals before spending time and money on other forms of lead generation.
Make it a standing agenda item at every QBR, not a special event. Review what you've done, give them something to feel good about, and ask. The best moment: right after you've delivered a win.
Go deeper: 5 steps to build an MSP referral program
2. Joint Ventures And Strategic Partners
What it costs: mostly your time. One partner can put you in front of many prospects at once.
Referrals and JVs, or strategic partners, are my number one recommended way, particularly the one-to-many lead source that a strategic partnership can offer.
When I was starting out, the strategy that got me the most clients at the least cost was JVs, or strategic partnerships. I was able to get multiple JV partners to let me speak and write for their audience at no cost because I developed my speaking skills, which fed me for the first five years in business.
But even those methods aren't dead easy and require work, a lot of follow-up, strategic thinking and kissing a lot of frogs to find a prince.
Go deeper: how much should an MSP spend on marketing
3. Networking, Trade Shows And Speaking
What it costs: event fees and travel, plus time.
I would really double down on networking, JV partners and public speaking. Those things don't necessarily cost anything.
On a limited budget, I'd invest in attendance at key networking and trade show events, so that I could look not only for customers but also JV partners.
Run the numbers: before you pay for a booth or sponsorship, use the free sponsorship ROI calculator to estimate the leads, appointments, new clients and first-year return you'd need to make it pay.
4. Events And Webinars For Your Clients' Clients
What it costs: the event or webinar itself. The audience arrives pre-endorsed by your client.
Host events where clients bring a peer. The invitation is the referral. You get a room full of prospects who arrived pre-endorsed. A client appreciation dinner, a bourbon tasting or even a hosted golf outing. All of these work. Just be very clear on WHO is invited: CEOs. IT leaders. Practice managers. People want to hang out with their peers.
Run a webinar for your clients' clients. Pick a topic: AI, cybersecurity, business continuity. Create the registration page and the invite emails your clients send to their own customers and manage the entire process for them. You get in front of an audience that has never heard of you but already trusts the person who introduced you.
If you already have a client in a professional building, you have a warm introduction angle to every other business in that location. Canvass the buildings and office parks of your best clients.
5. Outbound Prospecting: Mail, Calls, Email And Social Together
What it costs: $2,500 to $3,500 per lead for cold campaigns, with about a 25% close rate. You'll need roughly 500 prospects per closed deal.
Technically, it's a "plant the farm" prospecting campaign that has direct mail as one component part but is not the entire campaign.
IF you ONLY send direct mail, you'll get a response, but it's going to be a very tiny percentage, like 0.02%, which means you'll need to mail thousands of pieces to get an inbound call.
However, when you combine that direct mail in a multimedia sequence with calls, e-mails and social media, like I've been teaching for YEARS, you can get a 1% to 2% response to a cold list, more if it's warmer, like a list of unconverted leads.
You have to do ALL the steps. The ONE THING you should NEVER skip are the calls.
The list you target, and the relationship you have with it, is one of the most critical ingredients to any marketing campaign. At a minimum, you need to make sure the prospects you're targeting meet your criteria of what a good, qualified prospect is.
Go deeper: 3 reasons your MSP direct mail isn't working and how to build a clean, qualified prospect list
6. Gift-With-Appointment Offers
What it costs: the gift, multiplied by everyone on the list, which is why targeting matters so much.
An MSP client based in San Diego gave away a really nice beach bag of goodies that included a nice tote, beach towel, Ray-Ban sunglasses, a Yeti-type bottle, sunscreen and a few other items as a gift with appointment. They targeted a small and highly qualified list of IT leaders at larger companies in their area, and secured appointments with at least 80% of the people they prospected.
In every campaign, there's almost always a small percentage of non-qualified prospects that shouldn't be on the list, but that number should be SMALL, as in less than 1% to 2% of the entire list.
You still need to "sell" the demo, appointment or purchase. Here's a proven formula: "Give me X minutes, and I guarantee I can Y."
Go deeper: how MSPs book sales appointments without cold calling
7. Paid Ads
What it costs: whatever it returns. Fund it as a performance budget, not a fixed one.
ALL social media platforms and Google are pay-to-play. Real traction on Google, Facebook, LinkedIn and YouTube will require financial investment of paid ads.
If you had a Google Ads account that was delivering you $10,000 in MRR for every $1,000 invested, WHY on EARTH would you cap that? If you're smart, you'd invest as much as possible into that campaign because it was delivering a positive, measurable ROI, no different than if you owned a magic vending machine that spit out $100 bills for every $1 you put in.
The ONLY marketing you're "spending too much money on" is the marketing that's NOT generating a return. But even then, you need to really look carefully at why something is not generating an ROI. Often, it's the way the strategy is being applied, the list, the person making the calls, not the media itself.
8. Content, Social Media And Your Website
What it costs: content help and a quality website. Organic reach on social is under 1%.
In my experience, the free or nearly free, online-only social media approach to marketing an IT services business is a fantasy. It's estimated that less than 1% of all your fans, followers or connections will see your organic free post. Will you get SOME through free posting and organic content? Yes, and you should post at least four to five times a week so your profile doesn't look abandoned.
If I was unable to write or produce good content, I would hire someone to do this for a blog, newsletter and social media so that as I build my list, I'm able to continually engage it with content to stay top of mind, further my authority positioning and help with SEO.
A quality, high-converting website is the hub of all marketing, and the place all leads eventually end up. Don't be too cheap here, and the copy and offers are far more critical than the design, although design needs to facilitate conversion.
Go deeper: 7 things a consultant sees in the first 30 minutes on your website and how to prove your MSP is worth more
Where Should An MSP Start With Lead Generation On A Small Budget?
I always start with marketing and sales initiatives that are the easiest and least expensive, but at some point, you need to start investing money.
When I started my business, I had no budget for marketing at all, so I leaned heavily on warm outreach to old clients, prospects and people I knew, asking for referrals. My first and most critical marketing investment was a CRM and e-mail broadcasting service. Once the money started coming in, I made sure I invested right back into the company's marketing, adding on direct mail, PPC, sponsoring events and hiring salespeople.
Go deeper: marketing your MSP on a small budget, and the full story of how I bootstrapped mine in how much should an MSP spend on marketing
How Much Should You Budget For Lead Generation?
A general "best practice" rule of thumb for MSPs is that they should be spending roughly 11% to 12% of TOPLINE revenue on sales and marketing combined.
The only correct way to determine your marketing budget is to first determine what a client is worth to you, in sales and profits, and from that, calculate what you can and are willing to INVEST to acquire that asset.
Go deeper: how much should an MSP spend on marketing and the backwards math framework for your marketing plan
The Bottom Line
No single channel does it all. Start with the leads that cost the least and close the best, referrals and partners, then add outbound, events and paid media as the money comes in, and point all of it at a clearly defined target market.
NOTHING is "all good." If you really want to win at growth, you need to be willing to put in the work and do the things that are necessary, invest money and time, build a team and do a LOT of things right over a long period of time.
Success in any endeavor is cooked in a Crock-Pot, not a microwave.
If you want help deciding which channels to fund first and building the plan around them, that's the work I do one-on-one as an MSP marketing consultant.
Frequently Asked Questions
What is the best lead source for an MSP?
Referrals and joint venture partners. MSPs close about 90% of the referrals they receive, compared with 25% or less from cold outreach and paid ads, and referrals cost almost nothing to generate. Strategic partners are especially valuable because one partner can introduce you to many prospects at once.
How much does an MSP lead cost?
It depends on the channel. Passive referrals cost nothing, and active referral campaigns run about $500 to $1,000 per lead. Cold marketing campaigns cost about $2,500 to $3,500 per lead. Fully loaded, best-in-class MSPs spend north of $27,500 to acquire a client, counting all sales and marketing costs for the year divided by the number of clients acquired.
Does direct mail still work for MSPs?
Yes, as part of a sequence. Direct mail sent on its own gets about a 0.02% response. The same mail combined with calls, emails and social media in a multimedia sequence gets a 1% to 2% response from a cold list, and more from a warmer list like unconverted leads. The calls are the one step you should never skip.
How many prospects does an MSP need to close one deal from outbound?
About 500. In a three-to-five-call series, you'll reach the decision-maker about 6% to 9% of the time, 11% to 15% of those will book a discovery call, and about 65% of those will be genuinely qualified. At a 35% close rate from first-time appointments, that works out to roughly 500 prospects per closed deal.
Can an MSP get leads from free social media?
Not enough to rely on. Less than 1% of your followers will see a given organic post, and every major platform is pay-to-play. Post four to five times a week so your profile doesn't look abandoned, but real traction on Google, Facebook, LinkedIn and YouTube requires paid ads.
Where should a new MSP start with lead generation?
With the easiest and least expensive channels: warm outreach to past clients, prospects and people you know, asking for referrals, a CRM and email service to build your list, and joint venture partners who'll let you speak or write for their audience. Add direct mail, paid search, events and salespeople as revenue comes in.