MSP Client Retention: Everything You Need to Know

Year after year, the market for managed IT services continues to tighten. Many competitors saw the opportunity present in the market and did their best to vacuum up available clients. New clients are still out there but are increasingly hard to find. Most often, they are found by poaching them from competitors. That makes customer churn far more painful and challenging than ever in past years. Therefore, managed service providers (MSPs) that want to stay competitive and relevant need a reliable customer retention strategy.

For some MSPs, that can sound like a daunting and confusing task. But here is the secret to building a good customer retention strategy: there is no secret. It is all about fostering high client satisfaction and engagement among customers. When clients are content and engaged, they naturally transform into long-term partners—a precious asset for MSPs.

This article explores some of the most effective things MSPs can do to improve customer retention rates.

Why should MSPs focus on customer retention?

Losing clients is never ideal. But in the past, it was often less painful than it is today. To state the obvious, MSPs are in the customer service business. Each client represents multiple potential recurring revenue streams. Losing any client could have significant financial impacts for several quarters in the future.

However, the significance of client retention and building customer loyalty extends beyond the surface concerns about direct revenue.

Referral potential

Clients committed to a long-term relationship with your MSP are generally pleased with your service. Satisfied clients will often share their positive experiences, driving referrals. Studies have found that these referrals contribute to around 65 percent of new business, highlighting the potential for growth through existing client retention.

Cost-effectiveness

Other research demonstrates that acquiring a new client costs about five times more than retaining an existing one. Retaining current clients for the long term yields a superior return on investment compared to the expenses incurred in marketing, sales, and acquiring new leads.

Increased monthly recurring revenue (MRR)

Loyal clients tend to expand their engagement with your MSP, opting for additional services or larger packages. Their integration into your service ecosystem reduces the likelihood of churn, ensuring a steady and increasing monthly revenue stream.

7 things MSPs can do to boost client retention

So, there are many reasons it is worth MSPs putting the effort into retaining their existing clients. But what are the most effective ways to do that? Busy MSPs do not often have the time and disposable resources to experiment with unproven client retention strategies.

So here are seven proven-effective things we here at Stratos Cloud have found MSPs can do to improve client retention.

1) Start with the data

Better client retention requires first understanding where you stand with your clients today. Start by comprehensively assessing your current retention rates to pinpoint areas needing improvement. Stand out in your industry by embracing a quarterly tracking approach. Here are some key metrics to consider:

Churn Rate

This metric is the rate at which clients drop your services. Lower churn rates indicate a satisfied and stable customer base, which is crucial for long-term company stability.

Churn rate =

(Number of clients at the beginning of the quarter – Number of clients at end of quarter) / Number of clients at beginning of quarter

Monthly Recurring Revenue (MRR)

This figure helps service providers better estimate their available funds going forward, even if they have yet to determine exactly which clients and contracts will remain open. Unlike traditional revenue models, where customer numbers directly translate to revenue, the variability in subscriptions for service providers makes MRR a more suitable indicator.

MRR =

Number of monthly subscribers x average revenue per subscriber

Customer Retention Rate (CRR)

This metric is a litmus test for the effectiveness of your retention strategies.

CRR =

(Number of customers at the end of a quarter – Number of new customers acquired) / Number of customers at the start of the quarter

2) Collect client feedback

As new cloud-based technology has streamlined IT service development, delivery, and support, the direct, personal interactions between MSPs and clients have diminished. While these new service tools enhance the technical efficiency of SP operations, the reduction in face-to-face interactions can make clients view the service as impersonal.

To build lasting relationships, more direct client engagement becomes essential. Understanding clients’ perspectives on your services and pinpointing pain points through direct conversation can offer crucial insights. You are building trust. And this feedback will help your team identify service gaps and strategize improvements for an enhanced customer experience.

3) Develop a client onboarding process

A structured onboarding process signals your commitment to a positive customer experience. Initiate your new client onboarding process by gathering essential customer details. Those will better inform the SLA you need to draft to meet the client’s unique needs within your available capabilities. Allow ample time for the client to familiarize themselves with your procedures and the team members who will cater to their needs.

Post-onboarding, maintain communication with the customer to address any questions or concerns. Clarify the channels available for reaching out in case of post-onboarding issues, ensuring they feel supported and guided beyond the initial onboarding process.

4) Stay up to date on the latest technologies and best practices

To stay relevant to fast-moving clients, MSPs must continually refine their skills and knowledge, keeping pace with the latest trends, emerging technologies, and industry best practices. Regular training for staff and leadership, attending workshops, and investing in new, relevant certifications are crucial to staying ahead. This commitment ensures that MSPs can offer clients the most innovative, efficient, and effective solutions.

5) Invest in developing tailored, flexible, scalable solutions for clients

This may sound simple, but it is profoundly important: MSPs succeed based on their service, not the technology. That is why MSPs must be able to offer personalized solutions that align precisely with their clients’ requirements.

Tailoring services ensure clients receive solutions that fit their MSP business goals, size, and industry-specific challenges. Additionally, building scalable solutions allows for easy adjustments and expansions as the client’s needs evolve.

6) Optimize costs

MSPs need to provide solutions that not only address client needs but also optimize costs. This involves leveraging technologies and strategies that streamline operations, reduce unnecessary expenses, and maximize client return on investment.

7) Have access to trusted partners and industry experts

Establishing and maintaining partnerships with reputable industry experts is invaluable. For example, by partnering with Stratos Cloud Alliance.

Collaborating with other trusted industry groups and professionals allows MSPs to access specialized knowledge, stay updated on industry trends, and gain insights into innovative technologies. These partnerships enable MSPs to extend their service offerings, augment their expertise, and provide clients with comprehensive, top-tier solutions backed by industry expertise.

Partner with Stratos Cloud Alliance if you want to accelerate your clients’ cloud migrations

We are the Microsoft Indirect Provider of the Year with extensive experience in helping organizations move to the cloud. Partnering with us, a proven indirect cloud provider who understands the Microsoft ecosystem end-to-end can help you move your clients to Microsoft services in the cloud more easily and effectively.

Schedule a quick call today to learn how Stratos Cloud Alliance can help you.