If you cannot define FTA, MQL, SQL, CAC and LTV for your own business, you cannot manage your marketing, because you cannot manage what you cannot measure. Below are the sales and marketing terms that matter in an IT services business, defined plainly. Several of them I created because the standard vocabulary did not describe what MSPs actually needed to track. Your specific benchmarks will differ by market and sales maturity, but the definitions do not.
While I often joke about the LOVE of acronyms and technical terms this industry has, I do realize this is the pot calling the kettle black, since marketers love our acronyms as well.
So here is a Rosetta Stone list of commonly used sales and marketing terms you will hear from me and in other marketing circles. This is a short list given space, so I am including the most commonly used phrases, terms and acronyms.
The reason this matters more than it sounds: the lack of clarity most MSPs have with critical numbers is stunning to me. How can you not know basic sales pipeline metrics? How can you not be sure of your revenue, growth and profitability? These are basic leading and trailing indicators of business health that everyone needs to track and KNOW.
You cannot manage what you cannot measure. Start here.
My MSP-Specific Frameworks And Terms
The A.C.E. Framework (Attract, Convert, Expand)
My acronym for “attract, convert, expand,” representing the nonlinear, three-prong approach I coach clients to implement that delivers exponential returns on sales and marketing investments, both time and money.
Most marketing advice only addresses attract. But if your services are not packaged and priced so that you are profitable, succeeding at lead generation will sink your ship fast. And if you do not have the tools, systems, people and strategy in place for properly handling inbound leads, your sales bucket has a huge hole in it and you will waste your marketing dollars, because you cannot effectively close.
Celebrity, Authority, Trust (C.A.T.)
Stands for “celebrity, authority and trust,” which is what I coach clients to strategically design their marketing and sales efforts to foster. While similar, they are uniquely different, and they deliver an exponentially higher return on marketing when done correctly and consistently.
Educational Direct Response Marketing (E.D.R.)
An acronym I created for “Educational Direct Response” marketing, which is my personal take on direct response marketing.
E.D.R. marketing uses strategically designed content to attract and convert a prospect into a client by educating them on certain advocated positions, on what GOOD is, what to buy, how to buy, and why what you sell is important to buy.
Stands for “first-time appointment” and is the first discovery meeting you have with a qualified prospect.
I coined this term because MSPs were reporting their numbers wrong. When I would ask how many appointments they held this week, month or quarter with qualified prospects, they would give me a huge number. When I questioned it, I learned they were counting the TOTAL number of appointments with every prospect, counting four appointments to close a sale as four, not one prospect.
Given that 99% of IT services sales require multiple meetings, I started asking how many first-time appointments they had gone on that month with new prospects to get the answer I actually needed.
High-Value Client (HVC)
Stands for “high-value client,” another term I created to describe clients who meet a certain set of criteria that makes them worth 10X or more to your business than all others. In a Pareto distribution, the 80/20 rule, they are the top 20% of the top 20% of clients.
While the exact definition of an HVC differs from business to business, they typically are highly profitable, easy to work with, meaning their needs fit exactly within your wheelhouse of services, allow you to do your best work, and are energizing to work with.
MSP Lead And Pipeline Terms
Lead
A prospect that has positively responded to a marketing campaign. That can mean downloading a free resource, talking to you in a trade show booth, registering for a webinar, booking an appointment or calling your office to discuss your services.
People on lists that you purchase are NOT leads until they actually show interest at some level.
Raw Leads
The gross aggregate of all leads you generate from any campaign, minus spam and competitors. This is not a count of your list or the names you are marketing to. They may or may not be qualified at this point, but should be included in this count.
Marketing Qualified Lead (MQL)
The gross aggregate of all leads you generate from any campaign, minus spam and competitors. This is not a count of your list or the names you are marketing to. They may or may not be qualified at this point, but should be included in this count.
Stands for “marketing qualified lead” and is the subset of raw leads that meet your target market criteria.
Count them as qualified even if they are not ready to meet with you yet, or have a need you cannot or do not want to immediately fulfill, such as only wanting break-fix service. If the COMPANY meets the criteria you have for your target market, they count as a qualified lead.
Stands for “sales qualified lead” and is the subset of MQLs that have an immediate need they want to discuss with you.
Here is the difference in practice. If you promote a cybersecurity webinar and get 50 registrations, 50 is your raw lead count. Sorting through them, you might find only 40 were truly qualified, the rest being out of your service area or niche. Of those 40, maybe 5 want to book a meeting. Those 5 are SQLs. The other 35 stay MQLs, because they still meet your criteria but are not ready right now.
Connection Rate
The percentage of people a sales representative actually gets to speak to when prospecting. The typical rate is between 3% and 6% of dials, and between 0.5% and 1% of the total list called.
Sales Development Representative (SDR)
Stands for “sales development representative.” This is a person whose primary job is to call and prospect for new opportunities, setting sales discovery calls or creating interest by offering content such as webinars and reports.
Sometimes they are called BDRs, or business development representatives. I use SDR because in our world, BDR often gets misinterpreted as backup and disaster recovery.
MSP Campaign And Response Terms
Call To Action (CTA)
Stands for “call to action” and is the offer you make in a marketing or sales campaign to entice the prospect to take action. That might be completing a webform to get more information, requesting a dark web scan, registering for an event or making a purchase.
Click-Through Rate (CTR)
Stands for “click-through rate” and is a percentage measurement of the number of people who clicked a link in an e-mail, ad or web page. If you send an e-mail to 100 clients, get a 40% open rate, and four people click the link, you have a 10% CTR.
The percentage of people who complete a specific action, such as registering for a webinar, booking an appointment or making a purchase.
Customer Relationship Management (CRM)
Stands for “customer relationship management” and is software designed to track and manage all communications to prospects and customers on a list. Keap is a CRM with marketing automation capabilities, meaning some activities can be automated, like automatically kicking off a series of follow-up e-mails to a prospect who requests information but does not book an appointment.
Pay-Per-Click (PPC)
Stands for pay-per-click or pay-per-performance and is a way of paying for marketing based on the number of clicks, visitors, leads, appointments or even new clients acquired. Google is the largest PPC advertiser in the world.
MSP Money And Planning Terms
Customer Acquisition Cost (CAC)
Customer acquisition cost. The total amount of money your business spends to acquire a customer.
To calculate it, add up the total you invested on marketing and sales costs, salaries, commission, bonuses and software, then divide that by the number of new clients you secured. Best-in-class MSPs typically spend around $29,500 in full to acquire a new managed client.
Lifetime Value (LTV)
Stands for lifetime value of a client and is the total amount of revenue and profit the typical customer spends with you. Your LTV should be constantly going up the longer you are in business, given the recurring nature of what you sell.
Revenue Acquisition Cost (RAC)
Stands for “revenue acquisition cost” and is the total cost of sales and marketing expenses combined that your company spends to generate one new dollar of revenue, from either new or existing clients.
Whether this metric is best-in-class depends on the gross profit your business can generate, as well as the long-term value of the revenue. High-margin recurring revenue is much better than short-term or low-margin revenue.
Churn Rate
The percentage of customers you churn in a given period. This can be measured monthly or annually. Most MSPs churn less than 10% of their clients annually. Best in class churn less than 5% annually. This can also be represented in dollars churned as well.
Key Performance Indicator (KPI)
Stands for key performance indicator and is a measurable metric used to track and evaluate the performance of a person, method, system or approach against the results. Number of dials, connection rate, conversion rate and show-up rate are all KPIs for a sales appointment setter.
Objectives And Key Results (OKR)
Stands for “objective and key results,” a goal-setting framework coined by Andy Grove, CEO of Intel. He took Peter Drucker’s MBO, management by outcome, and added the idea of key results.
The format is: we will [objective] as measured by [these key results]. For example: we will become a best-in-class MSP as measured by getting to $3.5 million in topline revenue this year, and generating no less than 18% EBITDA.
Quota
The performance measurement of a sales rep. It can be in topline gross dollars, gross margin dollars, number of clients, number of appointments for SDRs, or MRR.
Most MSPs goal their outside sales reps on new MRR, though that is not to say it is the correct metric. However you measure quota, it is important that ALL sales reps have one, along with a minimum they must contribute to keep their job.
What To Do With This
Pick the five numbers that tell you whether your marketing is working and start tracking them weekly. For most MSPs that is raw leads, MQLs, first-time appointments, new clients closed and average MRR per new client.
If you cannot fill those in today, that is your first project, and it costs nothing but attention.
If you want help building the system that produces those numbers, that is the work I do in one-on-one consulting.
Frequently Asked Questions
What is an FTA in MSP sales?
FTA stands for first-time appointment, the first discovery meeting you have with a qualified prospect. I coined the term because MSPs were badly overcounting their pipeline, reporting every meeting with every prospect as a separate appointment. Since 99% of IT services sales require multiple meetings, counting four meetings to close one deal as four appointments makes the numbers meaningless. FTA counts new prospects only.
What is the difference between an MQL and an SQL?
An MQL is a marketing qualified lead, the subset of your raw leads whose company meets your target market criteria, whether or not they are ready to talk. An SQL is a sales qualified lead, the subset of MQLs with an immediate need they want to discuss now. A prospect who fits your ideal client profile but is not ready to meet stays an MQL. They are still valuable, they are just not a sales conversation yet.
How much does it cost an MSP to acquire a new client?
Best-in-class MSPs typically spend around $29,500 in full to acquire a new managed services client. To calculate your own, add all marketing and sales costs including salaries, commission, bonuses and software, then divide by the number of new clients secured in that period. Most MSPs have never run this number, which is why they cannot tell whether their marketing is working.
What is a high-value client?
A high-value client, or HVC, is a client worth 10X or more to your business than all others. In an 80/20 Pareto distribution they are the top 20% of the top 20%. The exact criteria vary by business, but HVCs are typically highly profitable, easy to work with because their needs fit exactly within your services, allow you to do your best work, and are energizing to work with.
What is EDR marketing?
EDR stands for Educational Direct Response, my own take on direct response marketing. It uses strategically designed content to attract and convert prospects by educating them on what good IT looks like, what to buy, how to buy, and why it matters. An educated prospect arrives at the sales conversation already partially sold, which is why this approach outperforms a cold pitch.
What marketing numbers should an MSP track?
At minimum: raw leads, marketing qualified leads, first-time appointments, new clients closed, and average monthly recurring revenue per new client. Track them weekly and by campaign source. Add customer acquisition cost and lifetime value once those five are reliable. Most MSPs cannot report any of them, which makes every marketing decision a guess.
