OUR BLOG

LEADERSHIP

Ten Traits Of Organizationally Healthy Professional Service Firms
To Grow Your Professional Service Firm, Prize Culture Over Strategy
TP35: The One Tipping Point Mid-Size Service Firms Must Address To Keep Growing
Seven Reasons Most Mid-Size Service Firms Don’t Grow Very Much
Five Reasons Mid-Size Service Firms Need A New Leadership Operating Model
How Leaders Can Address The Growth Tipping Point For Mid-Sized Service Firms
Five Reasons Professional Service Leaders Should Prize EQ Over IQ
Why Mid-Size Service Firm Leadership Teams Need Collective Objectives To Grow
How To Grow Your Mid-Sized Service Firm: Jealously Protect Your Focused Energy
Why Professional Service Firms Should Consider Circle Of Seven Mentoring Networks
How A Leader’s Energy Field Impacts Team Productivity
Don’t Trade Misery For Money: How Professional Service Firms Can Leverage The Great Resignation
Strong Personality Vs. Strong Person: The Makeup Of A Leadership Council
Custer Or Marshall: Why Mid-Size Service Firms Must Choose Their Leadership Model
To Grow Your Mid-Size Professional Service Firm, Define And Defend Your Values
If You Want To Grow Your Mid-Size Service Firm, Establish A Formal Leadership Council
Want To Grow Your Professional Service Firm? Focus On The One
If You Want To Grow Your Midsize Professional Service Firm, Align Your Leaders
Why Midsize Service Firm Leaders Must Think Like Entrepreneurs To Grow
How To Grow A Mid-Size Professional Service Firm Today
Why It's Important For Great Leaders To Tell Great Stories
How Great Leaders Persuade Using Word-Pictures
How The Say-Do Ratio Influences Trusted Advisor Status And Profits
Why Service Firm Leaders Should Nurture The Entrepreneurial Instincts Of Their Top People

SALES

Five Strategies For Midsize Service Firms To Break Through Revenue Plateaus
How Pro Service Firms Can Fix The ‘Drop Everything — Chase Money’ Problem
Prospect, Originate, Navigate: How To Fill Your Professional Service Pipeline
To Grow Your Mid-Size Professional Service Firm, Think Carefully About Your Promise
How To Sell Professional Services Today – Part 7
How To Sell Professional Services Today – Part 6
How To Sell Professional Services Today – Part 5
How To Sell Professional Services Today – Part 4
How To Sell Professional Services Today – Part 3
How To Sell Professional Services Today – Part 2
How To Sell Professional Services Today – Part 1
How Mid-Size Service Firms Can Acquire Great New Clients On LinkedIn
Five Ways The Consultative Sale Improves Profits
How To Win The Complex Service Sale Consistently
Do You Choose Clients Or Do They Choose You?
How To Market & Sell Professional Services Today
How To Break The Grip Of Rainmaker Culture
How Content Impacts The Service Sale
How To Know When Prospects Are Ready
How To Pull Prospects Into Conversations
Nurture Organic Relationships Online
How To Build Relationships With Jaded Prospects
Do Prospects Want To Buy Or Be Sold?
Close Deals Faster Using Proof Statements
How To Get Mindshare With Busy Decision-Makers
How To Get Great Prospects Leaning In
How Digital Marketing Creates Sales Funnel Velocity
Digital Marketing Perfect For Complex Sales – Part 2
Digital Marketing Is Perfect For The Complex Sale
Your Best New Client Is Looking For You
Why Service Firms Should Focus On Ideal Clients– Part 3
Why Service Firms Should Focus On Ideal Clients– Part 2
Why Service Firms Should Focus On Ideal Clients– Part 1
Do This to Fill Your Sales Funnel
What You Must Do To Acquire New Clients
An Audience Of One
How to Attract New Ideal Clients
Are You A Content Marketer Or A Thought Leader?
Consider The Source: Theorist Or Practitioner
Why Pain Points Are Not Enough

MARKETING

How To Market Managed Services - Part 3
How To Market Managed Services - Part 2
How To Market Managed Services Today – Part 1
Why Service Firms Need A Multichannel Digital Marketing Strategy
Does Your Website Attract Ideal Clients?
Why Service Firms Need The Ultimate Digital Marketing Stack
The Myth Of The Time-Starved Service Buyer
Do You Choose Clients Or Do They Choose You?
How To Market & Sell Professional Services Today
Why You Need A Generous Brand
How Content Impacts The Service Sale
Are You Measuring Your Time Funnel?
How To Get Mindshare With Busy Decision-Makers
How To Get Great Prospects Leaning In
How Digital Marketing Creates Sales Funnel Velocity
Five Digital Marketing KPIs
Do Your Users Experience Content Regret?
Content Registrations Are Not Enough
Is Your Website Open For Business
How To Build A Great Digital Marketing Plan
Digital Marketing Perfect For Complex Sales – Part 2
Digital Marketing Is Perfect For The Complex Sale
The Value Of An Idea Driven Website
Who Benefits From Your Content?
Your Best New Client Is Looking For You
Why Service Firms Should Focus On Ideal Clients– Part 3
Why Service Firms Should Focus On Ideal Clients– Part 2
Why Service Firms Should Focus On Ideal Clients– Part 1
How To Get The Greatest Value From Content Marketing
Why You Should Absolutely Give Away Your Best Ideas
Do This to Fill Your Sales Funnel
What You Must Do To Acquire New Clients
An Audience Of One
How to Attract New Ideal Clients
Are You A Content Marketer Or A Thought Leader?
Consider The Source: Theorist Or Practitioner
Why Pain Points Are Not Enough
How To Nurture Ideal Prospects

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TEN REASONS TO ADOPT MANAGED SERVICES

A BUSINESS CASE FOR MAKING THIS PIVOT

Certain types of service organizations are prone to feast-or-famine cycles, scalability issues and client loyalty challenges.  This might be CPA firms who are overwhelmed in tax season.  It might be technology consulting firms who see a deluge of demand when a major manufacturer revs their products.  This might be management consulting firms who realize tremendous demand when government regulations change.

No matter what type of firm, the challenge remains the same.  At certain times their hands are empty and other times they can’t handle all of the work.  Usually these firms share a common approach: project-based deals have a start, a delivery cycle and a finish.  When the project is done, the team members who served the client are costing you money even though you may not have billable projects for them.

In this article, I want to build the business case for why firms who face these conditions should adopt managed services.  Managed services, unlike project-based services, are usually based on year-round contracts with clients who share a long-term perspective with the service provider.  Here are ten reasons you should adopt managed services.

Ten Reasons To Adopt Managed Services

I want to be clear that managed services are not right for every type of service provider.  For instance, litigation is an inherently project-driven engagement.  It should have a beginning, middle and end.  But I’ve discovered that many service organizations with greater than 50% project work can greatly benefit from managed services.

We’ve helped these types of firms reduce the inherently up-and-down nature of projects into predictable revenue streams.  This gives firm leaders greater peace of mind and the ability to plan for the future.

When I use the term managed services, I mean services that you provide to a client on a regular basis, usually monthly.  Often the billings for managed services are also monthly or quarterly at most.  But the most important part of the arrangement is the long-term client contract, which usually has a term of at least 12 months, if not more.

These types of business relationships typically take longer to form than project-based work.  Managed services also often begin with a small or trial project.  But the effort is worth the payoff.  Here are my top-ten reasons for adopting this model.

  1. Managed Services offer higher perceived-value to clients
  2. Managed Services improve your profits
  3. Managed Services break feast-or-famine cycles
  4. Managed Services greatly enhance client loyalty
  5. Managed Services give you insights into complex problems
  6. Managed Services provide the opportunity to be seen as the de facto expert
  7. Managed Services give you the runway to nurture young talent
  8. Managed Services enhance operational predictability
  9. Managed Services are more scalable than project-based services
  10. Managed Services allow you to take control of your future

Let’s explore these a bit.

KEY TAKE-AWAY:

 

MANAGED SERVICES GIVE FIRM LEADERS GREATER PEACE OF MIND AND THE ABILITY TO PLAN FOR THE FUTURE.

Managed Services Offer Higher Perceived Value To Clients

Many service organizations base pricing on their fixed costs – usually the billable hour.  If this describes your firm, I believe you have a tremendous opportunity to transition away from the billable hour to a value-based model.  In these models, clients pay you to achieve a specific outcome and the number of hours it takes you to achieve that outcome is your concern.  Clients never get a bill for hours worked.

Rob Bernshteyn makes a great case for this in his book Value As A Service.  If you have not yet read this book, I highly recommend it.  Of the value-based models available today, I believe managed services represents the best-of-the-best.  Here’s why.

After comparing the invoice statements and presenting need-for-services from dozens of professional service firms across thousands of engagements, I came to a startling realization.  More than 75% of project-based engagements had a follow-on need that was handled via an additional invoice or set of invoices – and these were not anticipated by the client, even though they were necessary to achieving the desired outcomes.

These invoices eroded client satisfaction and perceived value.  About 80% of the time, that additional need could have, and in my opinion, should have been recognized and forecasted by the service provider.  But that didn’t happen.  Here are some specific examples:

  • A CPA firm handles tax preparation for an entrepreneur who gets beat up on taxes but does not provide the tax consulting services to ensure the entrepreneur doesn’t get beat up again next year.
  • A law firm handles a wrongful termination lawsuit for a corporation but does not provide consulting services and policy oversight to ensure the company does not repeat past mistakes.
  • An IT consulting firm integrates a new server and enterprise software application for a client but does not provide enterprise-wide training and support for the company’s user-base.

Let’s look at how these projects could be handled via managed services to produce better outcomes for the clients.

  • A CPA firm handles tax prep for an entrepreneur who gets beat up on taxes.  The CPA firm puts the entrepreneur on a managed service plan to optimize after-tax income and investments.  The entrepreneur’s tax bill the next year is 73% lower.
  • A law firm successfully resolves a wrongful termination lawsuit for a corporation.  The law firm puts a managed services plan in place to develop policies and procedures and train executives in best-practices.  The corporation’s legal spend on wrongful termination suits drops by 86%.
  • An IT consulting firm integrates a new server and enterprise software application for a client.  They put a managed services plan in place to maintain the application and train current and future users.  The client realizes a 20% increase in worker productivity.

When you compare these scenarios, it’s pretty clear who received value and who received an acceptably executed project.  An entrepreneur can get their taxes done or get their tax bill reduced by 73%.  A law firm can defend a client or keep them out of court in the first place.  An IT firm can integrate new technology or impact productivity by 20%.  Which of these outcomes produce more value for the client?

I have seen it time and time again.  Managed services provide greater impact and better outcomes than project-based services because they address current and future needs and avoid surprise invoices.

Managed Services Improve Your Profits

You should adopt managed services because they improve your profits, often by 20% or more.  I won’t go into specific details here about how to operationalize managed services programs.  But in every client where we’ve seen managed services implemented successfully, profits have improved and by a wide margin compared to project-based services.

One major reasons for this is because managed services usually allow you to bill for services that you would otherwise give away as a value-add.  Project-based services usually have time constraints.  In my experience, clients try to get more work than is prescribed in the agreement, especially as the engagement is drawing to a close.

But with managed services, things tend to even out.  Let me give you a specific example.  Let’s assume you have a managed service agreement with a client that is based on 10 hours a month.  I’m not suggesting that you sold it as a 10-hour per month agreement.  I’m stating that your projections were that it would take your firm 10 hours a month to deliver the service.

If that client absorbs 15 hours month one, 10 hours month two, but only 3 hours month three, you are 2 hours ahead of the game for that quarter.  It took 28 hours to deliver service for that quarter instead of 30.  This pattern is pretty common with managed services.

By comparison, many project-based services go well past projected hours needed, often by as much as 50%.  Why does this happen?  Often, it’s because the client is trying to get the greatest value possible before the service provider disappears.  The client is afraid that they’ll be left high and dry.

A funny thing happens when the client knows the service provider will be around next month and the month after.  They ease up.  They tend to be less demanding.  They say things like – we can address that next month.  They go back to focusing on their job instead of trying to squeeze every last penny out of an engagement about to end.

Managed Services Break Feast-Or-Famine Cycles

Managed services, being month-to-month in nature, usually break feast or famine cycles.  They even out your revenue and give you breathing room to take a long-term view.  That is not to say that project work needs to completely go away.

Most of my clients want to see enough managed services revenue to completely fund their operational expense and produce solid profits.  This puts them in the best position to pick and choose the project-based work that offers the best profits with preferred clients.  This means you don’t have to take ugly deals just to ensure you avoid a bad quarter.  Nice!

Managed Services Cement Client Loyalty

Managed services have built-in client loyalty.  If you negotiate the right kind of deal, that client is agreeing to be with you for at least 12 months, if not longer.  This means you only have to re-negotiate with clients once a year, rather than on every project.  This is the best solution for you and the client because it means you’ll both spend more time on addressing client needs than on haggling over service rates.

Managed Services Give You Insights Into Complex Problems

One of the greatest benefits of managed services for your firm is how it equips you to solve complex problems.  Most of our clients who deploy managed services focus on a given market niche.  This means they are running into the same types of problems over and over again.  This is actually good news.

The more opportunities you have to solve complex problems, the more chances you get to find out what works and what doesn’t work.  By learning what works best, you develop valuable insights that allow you to serve as a trusted advisor to clients who see only problems.

Let me use an analogy here.  Some people look up into a starry sky and see millions of tiny points of light.  Other people look up and see lines between these points of light called constellations.  These people make meaning and create connections out of what is otherwise just an overwhelming star field.

The more opportunities you get to make meaning out of what otherwise looks like chaos, the more insights you develop.  Those insights are valuable and will help you serve existing clients as well as attract future clients.

Managed Services Provide The Opportunity To Be Seen As The De Facto Standard

Another major benefit of managed services is what it does for your firm’s credibility.  Who would you rather hire?  Someone who has never solved a problem you are facing today or someone who has solved that problem hundreds of times and for hundreds of people who are just like you?

We have clients who can make the claim that they have more than 500 clients who have achieved certain specific, and often challenging, goals.  This provides a lot of comfort and peace of mind to decision-makers about to write a check or sign a deal.  When you solve the same problems over and over again, you get the opportunity to be seen as the go-to-provider, the de facto standard.

Managed Services Give You The Runway To Nurture Young Talent

One of the bigger challenges with project-based work is that it seems you’re always trying to decide which projects are safe and appropriate for on-the-rise talent.  Clients only seem to want to pay for experienced talent.  Clients sometimes object to being billed for younger talent because the perception is that they are paying to educate your staff.

Managed services tend to fix this issue.  When a client signs a deal with your firm for service levels, rather than time, how you staff to fulfill those services levels is your concern, not the client’s concern.  In my experience, clients often welcome younger talent because they see them as potential superstars of the future who might be working in their accounts.

Managed Services Enhance Operational Predictability

One of the biggest benefits of managed services is what it does to operational predictability.  It is so much easier to staff for managed services than project-based services.  Human capital costs, from attraction to compensation to retention, are usually the biggest expense for service firms.  If your costs rise and fall erratically based on project-demand going up or down, you have an inherently unpredictable operational model.

But with managed services, you usually know exactly what human resources you need to deliver against service levels.  This means you can see what’s coming down the road and plan accordingly.

Managed Services Are More Scalable Than Project-Based Services

As much as managed services deliver predictability, they also deliver scalability, especially when compared against project-based services.  In my experience, managed services are usually best applied to situations where the need for service is present month-after-month.

It is the month-to-month nature of managed services that allow for the scalability.  If you have 10 clients who all need similar service levels and you’ve figured out how to deliver against these comfortably, then it’s usually pretty easy to add an 11th client.  Or a 12th or 13th or even more.  Client acquisition and on-boarding becomes incremental rather than monumental.

That is not at all the case with most project-based services.  Some project-based engagements can be one tenth the size of the next engagement.  The very up-and-down nature of this model means you never quite know what’s coming.  It is difficult to scale what you cannot anticipate.

Managed Services Allow You To Take Control Of Your Future

This may be the biggest reason of all to adopt managed services.   In my experience, managed services give you visibility, scalability, predictability and higher profits.  The cumulative effect of all of these benefits is peace of mind.  You get to ease into each day knowing that you know what’s coming – in most instances.

This gives you the opportunity to dream about the future and plan for where you want to go.  More than that, a successful managed service firm feels more in-control than many project firms, which seem out of control.  I don’t know about you, but I like feeling in control of my future.

Next Steps

If you’ve enjoyed the ideas I’ve presented in this article, you might find an Action Guide I’ve developed to be even more insightful.  The Action Guide is called 7 Steps To Double Service Firm Revenue and it’s available for free right now on our website.  This resource contains 7 videos and numerous downloadable tools – all for free.

About The Author

Randy Shattuck is a seasoned entrepreneur who works hand-in-hand with senior leaders of mid-size professional service firms to grow revenues, acquire clients, open new markets, increase profits and effectively position their brands.

OUR BLOG

LEADERSHIP

Ten Traits Of Organizationally Healthy Professional Service Firms
To Grow Your Professional Service Firm, Prize Culture Over Strategy
TP35: The One Tipping Point Mid-Size Service Firms Must Address To Keep Growing
Seven Reasons Most Mid-Size Service Firms Don’t Grow Very Much
Five Reasons Mid-Size Service Firms Need A New Leadership Operating Model
How Leaders Can Address The Growth Tipping Point For Mid-Sized Service Firms
Five Reasons Professional Service Leaders Should Prize EQ Over IQ
Why Mid-Size Service Firm Leadership Teams Need Collective Objectives To Grow
How To Grow Your Mid-Sized Service Firm: Jealously Protect Your Focused Energy
Why Professional Service Firms Should Consider Circle Of Seven Mentoring Networks
How A Leader’s Energy Field Impacts Team Productivity
Don’t Trade Misery For Money: How Professional Service Firms Can Leverage The Great Resignation
Strong Personality Vs. Strong Person: The Makeup Of A Leadership Council
Custer Or Marshall: Why Mid-Size Service Firms Must Choose Their Leadership Model
To Grow Your Mid-Size Professional Service Firm, Define And Defend Your Values
If You Want To Grow Your Mid-Size Service Firm, Establish A Formal Leadership Council
Want To Grow Your Professional Service Firm? Focus On The One
If You Want To Grow Your Midsize Professional Service Firm, Align Your Leaders
Why Midsize Service Firm Leaders Must Think Like Entrepreneurs To Grow
How To Grow A Mid-Size Professional Service Firm Today
Why It's Important For Great Leaders To Tell Great Stories
How Great Leaders Persuade Using Word-Pictures
How The Say-Do Ratio Influences Trusted Advisor Status And Profits
Why Service Firm Leaders Should Nurture The Entrepreneurial Instincts Of Their Top People

SALES

Five Strategies For Midsize Service Firms To Break Through Revenue Plateaus
How Pro Service Firms Can Fix The ‘Drop Everything — Chase Money’ Problem
Prospect, Originate, Navigate: How To Fill Your Professional Service Pipeline
To Grow Your Mid-Size Professional Service Firm, Think Carefully About Your Promise
How To Sell Professional Services Today – Part 7
How To Sell Professional Services Today – Part 6
How To Sell Professional Services Today – Part 5
How To Sell Professional Services Today – Part 4
How To Sell Professional Services Today – Part 3
How To Sell Professional Services Today – Part 2
How To Sell Professional Services Today – Part 1
How Mid-Size Service Firms Can Acquire Great New Clients On LinkedIn
Five Ways The Consultative Sale Improves Profits
How To Win The Complex Service Sale Consistently
Do You Choose Clients Or Do They Choose You?
How To Market & Sell Professional Services Today
How To Break The Grip Of Rainmaker Culture
How Content Impacts The Service Sale
How To Know When Prospects Are Ready
How To Pull Prospects Into Conversations
Nurture Organic Relationships Online
How To Build Relationships With Jaded Prospects
Do Prospects Want To Buy Or Be Sold?
Close Deals Faster Using Proof Statements
How To Get Mindshare With Busy Decision-Makers
How To Get Great Prospects Leaning In
How Digital Marketing Creates Sales Funnel Velocity
Digital Marketing Perfect For Complex Sales – Part 2
Digital Marketing Is Perfect For The Complex Sale
Your Best New Client Is Looking For You
Why Service Firms Should Focus On Ideal Clients– Part 3
Why Service Firms Should Focus On Ideal Clients– Part 2
Why Service Firms Should Focus On Ideal Clients– Part 1
Do This to Fill Your Sales Funnel
What You Must Do To Acquire New Clients
An Audience Of One
How to Attract New Ideal Clients
Are You A Content Marketer Or A Thought Leader?
Consider The Source: Theorist Or Practitioner
Why Pain Points Are Not Enough

MARKETING

How To Market Managed Services - Part 3
How To Market Managed Services - Part 2
How To Market Managed Services Today – Part 1
Why Service Firms Need A Multichannel Digital Marketing Strategy
Does Your Website Attract Ideal Clients?
Why Service Firms Need The Ultimate Digital Marketing Stack
The Myth Of The Time-Starved Service Buyer
Do You Choose Clients Or Do They Choose You?
How To Market & Sell Professional Services Today
Why You Need A Generous Brand
How Content Impacts The Service Sale
Are You Measuring Your Time Funnel?
How To Get Mindshare With Busy Decision-Makers
How To Get Great Prospects Leaning In
How Digital Marketing Creates Sales Funnel Velocity
Five Digital Marketing KPIs
Do Your Users Experience Content Regret?
Content Registrations Are Not Enough
Is Your Website Open For Business
How To Build A Great Digital Marketing Plan
Digital Marketing Perfect For Complex Sales – Part 2
Digital Marketing Is Perfect For The Complex Sale
The Value Of An Idea Driven Website
Who Benefits From Your Content?
Your Best New Client Is Looking For You
Why Service Firms Should Focus On Ideal Clients– Part 3
Why Service Firms Should Focus On Ideal Clients– Part 2
Why Service Firms Should Focus On Ideal Clients– Part 1
How To Get The Greatest Value From Content Marketing
Why You Should Absolutely Give Away Your Best Ideas
Do This to Fill Your Sales Funnel
What You Must Do To Acquire New Clients
An Audience Of One
How to Attract New Ideal Clients
Are You A Content Marketer Or A Thought Leader?
Consider The Source: Theorist Or Practitioner
Why Pain Points Are Not Enough
How To Nurture Ideal Prospects