Managed Service Provider Business Plan
Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their managed service provider companies. We have the experience, resources, and knowledge to help you create a great business plan.
In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a managed service provider business plan step-by-step so you can create your plan today.
What is a Managed Service Provider Business Plan?
A business plan provides a snapshot of your managed service provider business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan for a Managed Service Provider
If you’re looking to start a managed service provider business or grow your existing managed service provider company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your managed service provider business to improve your chances of success. Your managed service provider business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for Managed Service Provider Businesses
With regard to funding, the main sources of funding for a managed service provider business are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for managed service provider companies.
How to Write a Business Plan for a Managed Service Provider Business
If you want to start a managed service provider business or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your managed service provider business plan.
Executive Summary
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your executive summary is to quickly engage the reader. Explain to them the kind of managed service provider business you are running and the status. For example, are you a startup, do you have a managed service provider business that you would like to grow, or are you operating a number of managed service provider businesses?
Next, provide an overview of each of the subsequent sections of your plan.
- Give a brief overview of the managed service provider industry.
- Discuss the type of managed service provider business you are operating.
- Detail your direct competitors. Give an overview of your target customers.
- Provide a snapshot of your marketing strategy. Identify the key members of your team.
- Offer an overview of your financial plan.
Company Overview
In your company overview, you will detail the type of managed service provider business you are operating.
For example, you might specialize in one of the following types of managed service provider businesses:
- Lower-level Managed Service Provider: At this level, the managed service provider will oversee all IT services and provide appropriate support. However, the managed service provider will not be included in planning or business adjustments to service. The client is notified if there are issues or threats to security and will advise to control or make repairs when needed.
- Mid-level Managed Service Provider: The mid-level managed service provider will offer a mix of technology-related services, in addition to IT support and maintenance. Monitoring and securing the client from threats is a paramount feature at this level.
- High-level Managed Service Provider: A high-level managed service provider will offer the comprehensive level of managed IT services, including IT support, communication systems, data analytics, and wireless network support.
In addition to explaining the type of managed service provider business you will operate; the company overview needs to provide background on the business.
Include answers to questions such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include the number of companies under contract, the number of high-level services forecast, reaching X number of clients served, etc.
- Your legal business structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
Industry Analysis
In your industry or market analysis, you need to provide an overview of the managed service provider industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the managed service provider industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.
The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your managed service provider business plan:
- How big is the managed service provider industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential target market for your managed service provider business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
Customer Analysis
The customer analysis section of your managed service provider business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: all industry sectors, including corporations, government agencies, and high-security companies.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of managed service provider business you operate. Clearly, high-security businesses would respond to different marketing promotions than retail corporations, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regard to demographics, including a discussion of the ages, locations, and income levels of the potential customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.
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Competitive Analysis
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other managed service provider businesses.
Indirect competitors are other options that customers may use that aren’t directly competing with your service. This includes software programs, cloud computing services, and applications. You need to mention such competition, as well.
For each direct competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. However, you should be able to find out key things about them, such as
- What types of customers do they serve?
- What type of managed service provider business are they?
- What is their pricing (premium, low, etc.)?
- Do they offer any unique or special values for customers?
- What are their weaknesses?
With regard to the last two questions, think about your answers from the customers’ perspective. And, don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide options for multiple-location services in a single contract?
- Will you offer services that your competition doesn’t?
- Will you provide additional services, such as cloud computing?
- Will you offer better pricing or package services?
Think about ways you will outperform your competition and document them in this section of your plan.
Marketing Plan
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a managed service provider business plan, your marketing strategy should include the following:
Product: In the product section, you should reiterate the type of managed service provider company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide ongoing management of a client’s AWS infrastructure, or work with clients to reduce operational overhead and risk?
Price: Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the services you offer and their prices.
Place: Place refers to the site of your managed service provider company. Document where your company is situated and mention how the site will impact your success. For example, is your managed service provider business located in a standalone building, near a corporate business center, or in a commercial district? Discuss how your site might be the ideal location for your customers.
Promotions: The final part of your managed service provider marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:
- Reach out directly to corporations with service needs
- Engage in email marketing
- Improve the SEO (search engine optimization) on your website for targeted keywords
Operations Plan
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your managed service provider business, including answering calls, planning and providing IT services, billing clients, managing and maintaining equipment and software, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to secure your Xth contract, or when you hope to reach $X in revenue. It could also be when you expect to expand your managed service provider business to a new city.
Management Team
To demonstrate your managed service provider business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally, you and/or your team members have direct experience in operating managed service provider businesses. If so, highlight this experience and expertise. But, also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a service provider business or successfully owning a small IT service business.
Financial Plan
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.
Income Statement
An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you contract with 5 corporations per day, and/or offer service packages for large entities? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets
Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your managed service provider business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement
Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.
When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a managed service provider business:
- Cost of managed service programs, software and computer equipment
- Payroll or salaries paid to staff
- Business insurance
- Taxes
- Other start-up expenses like legal expenses, permits, computer software, and equipment (if you’re a new business).
Appendix
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or a list of contracted clients you serve.
Summary
Writing a business plan for your managed service provider business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the managed service provider industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful managed service provider business.
Finish Your Managed Service Provider Business Plan in 1 Day!
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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!
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