Start-up Funding | |
Start-up Expenses to Fund | $575,000 |
Start-up Assets to Fund | $425,000 |
Total Funding Required | $1,000,000 |
Assets | |
Non-cash Assets from Start-up | $200,000 |
Cash Requirements from Start-up | $225,000 |
Additional Cash Raised | $0 |
Cash Balance on Starting Date | $225,000 |
Total Assets | $425,000 |
Liabilities and Capital | |
Liabilities | |
Current Borrowing | $1,000,000 |
Long-term Liabilities | $0 |
Accounts Payable (Outstanding Bills) | $0 |
Other Current Liabilities (interest-free) | $0 |
Total Liabilities | $1,000,000 |
Capital | |
Planned Investment | |
Investor 1 | $0 |
Investor 2 | $0 |
Other | $0 |
Additional Investment Requirement | $0 |
Total Planned Investment | $0 |
Loss at Start-up (Start-up Expenses) | ($575,000) |
Total Capital | ($575,000) |
Total Capital and Liabilities | $425,000 |
Total Funding | $1,000,000 |
We have two locations, one in Kahului, Maui and the other in Hilo, Hawai’i. The two offices are presently being leased by Servco Pacific, Inc., and we will rent from them on a month-to-month basis until we are able to relocate to more suitable facilities. On Kauai, we have a sub-contractor agreement with Kauai Office Equipment to handle installations and service.
IMH will acquire an existing operation whose primary business has been the sale and service of business appliances (copiers, facsimiles, printers, etc.) and has operated as a part of the office equipment industry. We will build from this base to transform the business into a value-added provider of the emerging services and technologies of the new Information Industry. Following the lead of Canon, USA and other manufacturers which we represent, we will approach the marketplace from a total systems solutions viewpoint.
This new paradigm will begin with an analysis of the client’s existing and planned business processes, and will provide total workflow solutions utilizing multifunctional imaging platforms and information distribution systems. These systems will be backed by professional and reliable technical service and proactive customer service. By forming strategic alliances with local Information Industry Value-Added Resellers, we will be able to offer turnkey Local Area Network (LAN) systems and the ability to retrofit existing LAN and peer-to-peer systems.
Copies of our product and sales literature are attached as appendices. Of course, one of our first tasks will be to change the message of our literature to make sure we are selling the company, rather than the product.
IMH will market and sell brand name business information distribution systems and hardware, technical service and support for these products, and the consumable supplies used by these systems. We will be a single-source provider for business information and imaging products and services.
After researching our various manufacturer’s offerings and evaluating our core competencies, we will focus our marketing and sales efforts around the digital products offered by Canon USA and eCopy, Inc. We will supplement this product line with Lexmark and Hewlett Packard printer products. As we continue to transition the company into the digital marketplace, we will form alliances with additional IT manufacturers and suppliers who can round out our product and services line.
Hardware product offerings will include:
Software offerings will include:
Service Products include:
Professional Services include:
The only way we can hope to differentiate well is to define the vision of the company to be an information technology ally to our clients. We will not be able to compete in any effective way with the large mainland-based office equipment companies by selling boxes or products as appliances. We need to offer a real alliance to our local customers.
Unfortunately, we cannot sell the products at a higher price just because we offer services; the market has shown that it will not support that concept. We have to also sell the service and consumable supplies and charge for them separately. This monthly recurring revenue is the foundation of our financial stability.
New technology has changed almost everything about the traditional office equipment (copier) industry, and for all practical purposes it no longer exists. The new Information Industry has emerged because of the technology of convergence. The primary driver of convergence of different forms of information is technological change, specifically the rapid diffusion of digital technology into an ever-wider array of information businesses. Beyond digitization, dramatic changes in computing and telecommunications industries (mainly in faster microprocessors and increasing bandwidth) are also driving convergence.
IMH will make convergence the theme of its vision, planning, and marketing strategies. We will move into the new Information Industry’s technology with the aim of bringing the most efficient workflow solutions to our clients while providing value-added customer support and service, and earning a reasonable profit in the process.
Our strategy hinges on providing unparalleled service and support, which is critical to setting us apart from the competition. We need to differentiate on service and support in order to become true partners with our clients. Our service offers will include:
Beginning at start up, we will explore and research new information technologies for inclusion in our product offerings. The products which we choose will be in line with our vision to transition the company from being an appliance seller, to being a provider of total information management solutions. These convergent information products will include:
We have an established relationship with our manufacturers and suppliers, and will be able to take advantage of all discounts and promotions in order to keep our margins at roughly 49% throughout the operation. We will also implement and employ “just-in-time” inventory strategies for hardware, supplies, and service parts orders to further strengthen our margins.
As we continue to grow the business, we will evaluate other IT industry manufacturers and product lines to strengthen our offerings with a view primarily to quality and margin advantages.
IMH will focus on local markets, including small offices and home offices (1-9 employees), medium to large businesses (10-99 employees), corporate Hawai’i (multiple locations or 100+ employees), and local government offices.
Our market segmentation scheme is fairly straightforward, and focuses on all Neighbor Island businesses. The information contained in our customer analysis table is taken directly from the 2000 US Census and government directories, and clearly shows that our largest market potential is the small office and home office (SOHO) segment. This segment is largely overlooked by most of our competitors because of its “low end” buying habits, and a reluctance to compete with the major retail chain box movers. We will target the SOHO market segment with value-added and affordable business solutions customized to its unique needs, and offer the same quality of service and support as are afforded the larger businesses.
The next largest market segment is medium to large businesses, and is the arena where we now focus most of our sales efforts. We will continue to target this segment, but with a different approach than our predecessors. The strategy used by former management has been to bring in selected products, and then attempt to find a buyer. This resulted in inventory overstock, and obsolescence. We will work with the medium to large businesses to determine their needs, and design customized solutions before ordering the required systems (JIT inventory strategy). This segment will remain an extremely important part of our marketing mix, and contains a large portion of our current clients. A majority of our systems upgrade opportunities and repeat business will come from this market segment initially.
Although the Corporate Hawai’i market segment is the smallest in numbers, it has the potential to provide a significant share of our revenues and growth (the 80/20 rule). We have a scattering of current clients in the Corporate Hawai’i segment, but we need to do a better job of penetrating this lucrative end of the market. We will accomplish this by offering professional services to include workflow and network design, MIS support, and other value-added support benefits such as “uptime guarantees.” We will develop long-term relationships within this segment, and earn their business.
The local government market segment is unique in that we act primarily as a “middle man” for our manufacturers due to GSA price schedules and other national government-only programs. This segment is fiercely competitive, very price-focused, and buying decisions are often influenced by “who you know,” as well as price. We are fortunate in that we have long-established relationships within the County and State government agencies, and have many loyal clients in this segment. We will increase our share of this market segment by offering the same value-added service and support benefits that we bring to our commercial clients.
Market Analysis | |||||||
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |||
Potential Customers | Growth | CAGR | |||||
SOHO | 4% | 6,800 | 7,072 | 7,355 | 7,649 | 7,955 | 4.00% |
Medium/Large Business | 4% | 2,100 | 2,184 | 2,271 | 2,362 | 2,456 | 3.99% |
Corporate Hawaii | 3% | 140 | 144 | 148 | 152 | 157 | 2.91% |
Government Offices | 2% | 1,225 | 1,243 | 1,262 | 1,281 | 1,300 | 1.50% |
Total | 3.69% | 10,265 | 10,643 | 11,036 | 11,444 | 11,868 | 3.69% |
Developing a market strategy is a departure from the way the company has been managed in the past. We will change the paradigm of being a product- and price-focused sales organization, to that of becoming a customer- and market-focused organization, with all departments sharing responsibility for customer satisfaction. We will accomplish this paradigm shift through the implementation of a balanced scorecard philosophy of management, with special attention to employee learning and growth.
As mentioned previously our market segmentation strategy is straightforward, and addresses all components of the Neighbor Island business community. Planning and implementing specific strategies for each of the four identified segments will be an on-going process, and we will consult with marketing specialists, and our manufacturers, to further refine these efforts as we develop our marketing plan.
That is the primary reason that IMH has chosen Canon USA as its preferred manufacturer. Canon has led the way in the industry with it’s digital technology innovations, and its ability to bring both the product and the concept to the marketplace. We will follow Canon’s lead and bring this efficient, productivity-enhancing technology to Neighbor Island businesses.
As computer prices continue to fall, unit sales increase. The published market research on sales of personal computers is astounding, as the United States market alone is absorbing more than 30 million units per year, and sales are growing at more than 20 percent per year. We could quote Dataquest, Infocorp, IDC, or others; it doesn’t matter, they all agree on high growth of CPU sales.
This rapid growth rate holds true for productivity systems which connect to the computers being sold. The stand-alone analog systems and appliances which abound in the business marketplace today, will be replaced by connected digital convergence systems in the coming months and years. IMH will position itself to be a value-added provider of this rapidly emerging technology for new businesses, while continuing to maintain and upgrade our current analog customer base.
All businesses have in common a need to be continuously productive, and they rely on their service providers and vendors to sustain their productivity. Effectively filling this need requires that the vendor bring to the table sound planning, quality products, reliable service, and a true partnership and support relationship.
Specific business needs include the ability to gather, compile, analyze, and distribute information in various media formats. This is where IMH’s strengths will be most beneficial to our clients, both big and small. Anyone can sell the “box” at an attractive price, but only a true value-added provider can offer the peace-of-mind that comes from a customer-focused approach to the relationship.
Primarily due to geographic isolation and smaller populations, the Neighbor Island business community has an additional common need of being able to rely on other locally-based vendors and suppliers for quick, reliable, customer service and support. Having to call someone on Oahu, or the mainland, to place a service call, or to order supplies, or get an answer to a simple billing question, is both an irritant and a hindrance to most Neighbor Island-based businesses. Our primary goal is to fill this need by bringing true pro-active, and total, customer service to the Neighbor Island business community, and to gain their confidence and loyalty. This will become one of our underlying strengths.
IMH is a part of the Information Industry, and specializes in providing information management systems and technology for business processes. We envision that a converged information industry operating within the context of an advanced information infrastructure will be a huge boost for U.S. businesses. Several Washington think tanks estimate that it could spur more than $300 billion annually in new sales and increase worker productivity by 20 to 40 percent.
At the present time, an estimated two-thirds of all American jobs are information related, and that number will increase as the shift from manufacturing to service industries continues. The convergence of information industries will continue because the technological and business imperatives are compelling. If one company does not see the possibilities, another will.
Business decision makers and finance managers understand the concept and value of service and support, and are much more likely to pay for it when the offering is clearly stated.
There is no doubt that we compete more against the box pushers than against other service providers. We need to effectively compete against the idea that businesses should buy information platforms as plug-in appliances that don’t need ongoing service, support, and training.
Our research and experience has indicated that our target market segments think about price, but would buy based on quality service if the offering were properly presented. They think about price because that is what is traditionally presented to them first. We have very good indications that many would rather pay 10-20% more for a relationship with a long-term vendor providing back-up and quality service and support. They end up in the box-pusher channels because they are not aware of the alternatives.
Availability is also very important. The business decision makers tend to want immediate, local solutions to problems.
Medium to large business segment buyers are accustomed to buying from vendors who visit their offices. They expect the copy machine vendors, office products vendors, and office furniture vendors, as well as the local graphic artists, freelance writers, or whomever, to visit their office to make their sales.
Unfortunately our SOHO target segment buyers may not expect to buy from us. Many of them turn immediately to the retail superstores (office equipment, office supplies, and electronics), the Web, and mail order to look for the best price, without realizing that there is a better option for them for only a little bit more. We will overcome this hurdle through innovative service offerings, and targeted marketing.
In our higher-end targeted segments (medium to large businesses, corporate Hawai’i, and government offices), the primary competitors are Xerox and Lanier. The secondary “low end” competitors on the Neighbor Islands are Maui Office Machines and Business Equipment on Maui, and Electronics Hawai’i and Stationers on the Big Island. Our overall competitive strategy in these segments will be Canon’s superior technology, and superior value-added service and support.
In our SOHO target segment, the primary competitors are the superstores: Office Max, Office Depot, Sears, and to some extent Costco, Hopaco, and the Web. While these outlets can offer lower prices, they offer no (or very little) aftermarket service or support. That is our competitive advantage in this segment, and will differentiate us from these “box movers.”
The traditional office equipment (copier) industry has been dominated by only a few major manufacturers: Xerox, Canon, Oce, and Ricoh (and its OEM products – Lanier, Savin, and Gestetner); and then come the low-end players: Sharp, Toshiba, and Minolta. With the exception of Xerox, which maintains its own sales force, the other manufacturers distribute and sell mainly through authorized dealers.
The rapidly emerging Information Industry’s digital convergence products will most likely be dominated by the same participants as described above. While Xerox has been a past leader in the manufacture and sales of analog products, Canon has emerged as both an innovator, and the leader, in the new Information Industry with their ImageRunner digital products and Image Platform information distribution systems. Canon is also (and has been for many years) the front runner in color repro-graphic systems, and holds the most patents of any manufacturer in the industry.
We must differentiate ourselves from the box pushers. We need to establish our business offering as a clear and viable alternative for our target markets, to the price oriented sales pitch to which they are accustomed.
The industry’s cheese has been moved. In order to shift to a more contemporary paradigm, our marketing and sales efforts will need:
Our competitive edge is our positioning as a strategic ally with our clients, who are clients more than customers. By building a business based on long-standing relationships with satisfied clients, we simultaneously build defenses against competition. The longer the relationship stands, the more we help our clients understand what we offer them and why they should both stay with IMH, and refer us to other businesses. In close-knit communities like the Neighbor Islands, reputation is extremely important, and word-of-mouth advertising is invaluable.
Our main strategy will be placing emphasis on service and support, and our main tactics are networking expertise, systems training, and implementing a customer relationship management system (CRM) from e-automate. Our specific programs for networking include mailers and internal training. Specific programs for end user training include direct mail promotion, and on-site customer programs. Implementing the CRM software and training will be coordinated with the e-automate Corporation.
Our second strategy is emphasizing relationships. The tactics are marketing the company (instead of the products), more regular contacts with the customer, and increasing sales per customer. Programs for marketing the company include new sales literature, and direct mail. Programs for more regular contacts include call-backs after installation, direct mail, and sales management. Programs for increasing sales per customer include upgrade mailings and sales training.
IMH offers its clients peace-of-mind by being a vendor who acts as a strategic ally, and delivers quality products backed by premium service and support, at a premium price.
We will sell the company and its ability to act as an ally. We will sell IMH, and the reputation of the industry-leading manufacturers it represents.
We will sell our service and support. The hardware is like the razor, and the support, service, software, and training, are the razor blades. We need to serve our customers with total solutions, and not just product features. The products are a means to arriving at end solutions.
The Yearly Total Sales chart summarizes our conservative sales forecast. We expect sales to increase from $3.1 million in the first year to more than $4 million in the third year of this plan.
The important elements of the sales forecast are shown in the following Chart, and Table 5.4.1. Non-hardware sales increase to almost $2 million total in the third year, or 47% of total sales.
Sales Forecast | |||
Year 1 | Year 2 | Year 3 | |
Sales | |||
Hardware – Image Platforms | $1,092,956 | $1,256,899 | $1,445,434 |
Hardware – Printers | $69,615 | $80,057 | $92,066 |
Hardware – Facsimiles | $142,711 | $164,117 | $188,735 |
Hardware – Misc (TW, Shrd) | $45,250 | $52,037 | $59,843 |
Professional Services | $29,808 | $34,279 | $39,420 |
Government (Comp) | $87,019 | $100,072 | $115,082 |
Supplies (Toner/Paper) | $501,228 | $576,412 | $662,874 |
Service – Agreements/Repairs | $946,764 | $1,088,779 | $1,252,095 |
Equipment Rentals | $243,653 | $280,200 | $322,230 |
Other | $31,327 | $36,026 | $41,430 |
Total Sales | $3,190,329 | $3,668,878 | $4,219,209 |
Direct Cost of Sales | Year 1 | Year 2 | Year 3 |
Hardware – Image Platforms | $677,632 | $772,501 | $880,651 |
Hardware – Printers | $45,250 | $51,585 | $58,807 |
Hardware – Facsimiles | $88,481 | $100,868 | $114,989 |
Hardware – Misc (TW, Shrd) | $31,675 | $36,109 | $41,165 |
Professional Services | $14,904 | $16,990 | $19,369 |
Government (Comp) | $30,457 | $34,720 | $39,581 |
Supplies (Toner/Paper) | $225,553 | $257,130 | $293,128 |
Service – Agreements/Repairs | $378,706 | $431,724 | $492,166 |
Equipment Rentals | $134,009 | $152,770 | $174,158 |
Other | $7,832 | $8,928 | $10,178 |
Subtotal Direct Cost of Sales | $1,634,497 | $1,863,326 | $2,124,192 |
The following table lists important program milestones, with dates and managers in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation. The most important programs are the sales and marketing programs listed in detail in the previous topics.
Milestones | |||||
Milestone | Start Date | End Date | Budget | Manager | Department |
SIOT (NI) Valuation | 5/1/2001 | 5/31/2001 | $0 | BH | Admin |
Complete Business Plan | 5/14/2001 | 6/22/2001 | $200 | BH | Admin |
Submit Letter of Intent | 6/1/2001 | 6/15/2001 | $0 | BH | Admin |
Choose New Company Name | 6/15/2001 | 7/31/2001 | $0 | All | All |
Secure Startup Funding | 6/15/2001 | 7/31/2001 | $0 | BH/All | All |
Retain Attorney/CPA | 6/15/2001 | 7/31/2001 | $10,000 | BH | Marketing |
Negotiate Purchase Agreement | 6/18/2001 | 8/15/2001 | $0 | BH/All | Admin |
Set Up ESOT/ESOP | 6/30/2001 | 8/31/2001 | $12,500 | BH/LW | All |
Set Up New Corporation | 6/30/2001 | 8/31/2001 | $12,500 | BH/LW | All |
Solicit Board Members | 6/30/2001 | 8/31/2001 | $0 | BH | All |
HR Roll-Over Plan (SPI to IMH) | 7/1/2001 | 8/31/2001 | $0 | BH/LW | Admin |
Purchase e-Automate Software | 8/1/2001 | 8/31/2001 | $20,000 | BH/LW | Admin |
A/P & A/R into e-Automate | 8/1/2001 | 8/31/2001 | $0 | LW | Admin |
Business Licenses/Permits | 8/1/2001 | 8/31/2001 | $500 | BH/LW | Admin |
Customers into e-Automate | 8/1/2001 | 8/31/2001 | $0 | JM/BK | Sales |
Inventory into e-Automate | 8/1/2001 | 8/31/2001 | $0 | LW/JA/EO | Service |
Letter To Vendors/Customers | 8/1/2001 | 8/31/2001 | $0 | LW | Admin |
New Stationary/Brochures | 8/1/2001 | 8/31/2001 | $2,500 | LW | Admin |
Obtain Insurance | 8/1/2001 | 8/31/2001 | $25,000 | BH/LW | Admin |
Switch Utilities To IMH | 8/1/2001 | 8/31/2001 | $1,000 | LW | Admin |
Web Site Development | 8/1/2001 | 8/31/2001 | $10,000 | BH | Admin |
Complete Marketing Plan | 8/1/2001 | 8/31/2001 | $2,500 | All | Sales |
IMH Operations – Day 1 | 9/3/2001 | 9/3/2001 | $0 | All | All |
Bd. of Dir. Mtg. (First) | 9/4/2001 | 9/7/2001 | $1,000 | All | All |
All Company – Kick Off Mtg. | 9/4/2001 | 9/7/2001 | $750 | All | All |
Sales Strategies & Programs | 9/4/2001 | 9/30/2001 | $2,500 | JM | Sales |
Marketing Strategy & Programs | 9/4/2001 | 9/30/2001 | $3,500 | BK | Sales |
First Quarter BP Review | 12/10/2001 | 12/14/2001 | $0 | All | All |
Headcount Review | 12/10/2001 | 12/14/2001 | $0 | BH/EO/JA | Sales/Svc |
Bd. of Dir. Mtg. (Qtrly) | 12/10/2001 | 12/14/2001 | $1,000 | All | All |
Cost IT Training Sources | 3/4/2002 | 3/8/2002 | $0 | BH/EO/JA/BK | Sales/Svc |
Second Quarter BP/MP Review | 3/4/2002 | 3/8/2002 | $0 | All | All |
Enroll Team in IT Training | 3/18/2002 | 3/29/2002 | $2,500 | All | All |
Third Quarter BP/MP Review | 6/3/2002 | 6/7/2002 | $0 | All | All |
Bd. of Dir. Mtg. (Qtrly) | 6/3/2002 | 6/7/2002 | $1,000 | All | All |
Fourth Quarter BP/MP Review | 9/2/2002 | 9/5/2002 | $0 | All | All |
Bd. of Dir. Mtg. (Qtrly) | 9/2/2002 | 9/5/2002 | $1,000 | All | All |
New 3-Year BP Due | 9/2/2002 | 9/13/2002 | $0 | All | All |
New 3-Year Mktg. Plan Due | 9/2/2002 | 9/13/2002 | $0 | All | All |
Name me | 9/16/2002 | 9/30/2002 | $1,000 | All | All |
Totals | $110,950 |
The marketing strategy is the core of our main strategy:
Specific sales programs will be included in our new Marketing Plan, and will be included in this Business Plan as they are finalized. In general however, our sales programs will be centered around conducting workflow and information distribution analyses, direct mail, and placing an emphasis on the benefits which IMH and its manufacturers will be able to offer its clients through “total care” service and support.
For businesses who want to be sure their information distribution systems are always working reliably, IMH is a vendor and trusted strategic ally who makes certain their systems work, their people are trained, and their down time is minimal. Unlike the product/price oriented vendors, it knows the customer and goes to their site when needed, and offers proactive support, service, training, and installation.
We must charge appropriately for the high-end, high-quality service and support we offer. Our revenue structure has to match our cost structure, so the salaries we pay to assure good service and support must be balanced by the revenue we charge.
We cannot build the service and support revenue into the price of products. The market can’t bear the higher prices and the buyer feels ill-used when they see a similar product priced lower with the competition. Despite the logic behind this, the market doesn’t support this concept.
We will employ the following general promotional strategies for the various market segments:
IMH is first and foremost a direct sales organization, meaning that we must present our services and products directly to the majority of our customers and clients. Having said that, for our planned penetration into the SOHO market, we will need to establish a presence as a Value-Added Reseller (VAR) for certain low-end product lines which don’t carry the margins necessary to sustain the costs of direct sales. We will plan our new locations accordingly.
As we work to complete this Business Plan, we are simultaneously working on our Marketing Plan. As you can see from the milestones table, we anticipate completion of our detailed Marketing Plan by 9/30/01, or one month from start-up. Because we are acquiring an on-going business, the shift to our vision of customer- and market-focused strategies will not happen overnight. We must plan this shift carefully, and implement it judiciously, so as not to disrupt our immediate operations. We have budgeted for, and will utilize, marketing advisors and consultants (including our manufacturers) in the design of our Marketing Plan.
Our alliances with our manufacturers, and especially Canon USA, will be the most pivotal to our success. We will remain a Canon Authorized Dealer, and continue to enjoy all of the benefits of this long-standing relationship.
We will form alliances with other locally-based VARs and computer network providers to enable us to provide complete turnkey packages for our clients. These relationships will be included in our Marketing Plan.
Our management philosophy is simple and is an integral part of our values: doing right things right, the first time (Kina’ole).
IMH will be an employee-owned company and we all share the same vision of providing our clients (who in many cases are friends and neighbors) with the very best in customer service – period. We will encourage personal growth, creativity, and enable individual empowerment to achieve this goal. We will manage the business by setting achievable Balanced Scorecard goals, measuring them, and making mid-stream adjustments as necessary.
Our team includes 15 employees initially, and is organizationally flat. The departmental divisions are sales and marketing, service, and administration. Operational managers include:
The total head count moving over from Servco at the time of the acquisition will be 13. We are adding two former employees at startup to round out our team, for a total startup head count of 15.
There are an additional six positions shown as “vacant” in the Personnel plan. During each quarterly business plan review, we will assess the need to fund these positions to sustain our growth, and more evenly distribute the workload.
Personnel Plan | |||
Year 1 | Year 2 | Year 3 | |
Production Personnel | |||
None planned | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Subtotal | $0 | $0 | $0 |
Sales and Marketing Personnel | |||
Alan Fukuyama – Sales (Maui) | $38,250 | $40,545 | $42,978 |
Brian Kurlansky – Sales (Kona) | $38,250 | $40,545 | $42,978 |
Jay Moore – Sales (Maui) | $38,250 | $40,545 | $42,978 |
Wilbert Shimabukuro – Sales (Hilo) | $38,250 | $40,545 | $42,978 |
Vacant – Aftermarket Sales (Maui) | $0 | $0 | $0 |
Vacant – Aftermarket Sales (Hilo) | $0 | $0 | $0 |
Subtotal | $153,000 | $162,180 | $171,911 |
General and Administrative Personnel | |||
Bill Harding – General Manager | $57,600 | $61,056 | $64,719 |
Laurie Watson – Admin Manager | $45,600 | $48,336 | $51,236 |
Vacant – Office Manager (Hilo) | $31,200 | $33,072 | $35,056 |
Vacant – Whse & Delivery (Maui) | $0 | $0 | $0 |
Vacant – Whse & Delivery (Hilo) | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Subtotal | $134,400 | $142,464 | $151,012 |
Other Personnel | |||
Earle Oshiro – Systems Manager (Hilo) | $49,800 | $52,788 | $55,955 |
Joe Alfonsi – Systems Manager (Maui) | $49,800 | $52,788 | $55,955 |
Wane Ogawa – Syst Engineer (Hilo) | $39,600 | $41,976 | $44,495 |
Francis Takahashi – Syst Engineer (Hilo) | $39,600 | $41,976 | $44,495 |
Baron Ganeko – Syst Engineer (Kona) | $39,600 | $41,976 | $44,495 |
Abe Braceros – Sr. Syst Engineer (Maui) | $41,100 | $43,566 | $46,180 |
Arlo Villanueva – Syst Tech (Maui) | $28,800 | $30,528 | $32,360 |
Caroline Nacua – Syst Tech (Maui) | $28,800 | $30,528 | $32,360 |
Vacant – Syst Tech (Kona) | $0 | $0 | $0 |
Vacant – Syst Tech (Maui) | $0 | $0 | $0 |
Subtotal | $317,100 | $336,126 | $356,294 |
Total People | 15 | 15 | 15 |
Total Payroll | $604,500 | $640,770 | $679,216 |
Bill Harding, president and general manager: XX years old, and has lived on Maui for 43 years. Joined SIOT in 1998 as Maui branch manager, and became general manager for Neighbor Island operations six months later. Prior management experience includes: BTA market manager of the Neighbor Islands for VoiceStream Wireless, Neighbor Island area sales manager for Central Security Systems, and radar project manager for Telcom International in Nigeria, West Africa. Bill has attended numerous management and sales training courses and seminars throughout his career.
Laurie Watson, secretary/treasurer and administrative manager: XX years old, and local Maui resident. Has been at the same location through three different owners prior to Servco’s acquisition of The Office Place in 1995, for a total of 15 years of local office equipment industry experience. Laurie has extensive knowledge of service procedures and dispatching, A/R and A/P procedures, inventory control and tracking, as well as an intimate knowledge of our customer base. Her experience and knowledge will be invaluable in recovering our customer base, and in growing the business.
Anne Tioganco, office manager (Hilo): XX years old, and local Hilo resident. Anne has also been with the company through all of the acquisitions, and has XX years experience in the office equipment industry. She will assist Laurie by handling the administrative and customer service tasks for our Hilo branch, and will be instrumental in our Big Island customer recovery efforts.
Earle Oshiro, systems manager (Big Island): XX years old, and local Hilo resident. Like Laurie and Anne above, Earle has been with the company through four different owners, and has XX years of local office equipment service management experience. Earle has also completed Canon’s “train the trainer” course, and will be a great asset in the on-going training and development of our systems engineers and technicians.
Joseph Alfonsi, systems manager (Maui): XX years old, and local Maui resident. Joe joined the Maui branch of SIOT in 1999 as field service manager, after transferring from the SIOT Honolulu branch. He has XX years of local office equipment industry service experience, and is familiar with both Canon and Ricoh products. Joe is an asset to the Maui team, and has outstanding customer service skills.
We believe we have a good team for covering the main points of the business plan. Key members have the experience and knowledge to manage and grow the business, and are highly motivated by the employee-owner concept.
The obvious management gap is a plan to fill the general manager’s position at some point in the future, before the current GM reaches retirement age. As an employee-owned company, the preferred strategy will be to promote from within, and fill vacancies as they occur. As the company grows, we will seek out additional talent in all operational areas.
Although we are treating the business as a start-up company, the financial plan is solidly based on past performance. We have taken actual SIOT P&L income and expenses from the past three years, and eliminated corporate overhead expenses such as warehouse and administrative costs, inventory penalties, and corporate nominal interest. We then projected income based on actual past performance, and factored back in the revenue base that was relocated to Honolulu over the past two years (mainly service and supplies).
We approached the financial planning from a conservative standpoint, and based those numbers on achievable gross margins. Also, our actual interest and tax rates will most likely be lower than the assumed rates due to our being structured as an employee-owned corporation (ESOT).
The financial plan depends on important assumptions, most of which are shown in Table 7.1. As mentioned previously, we assumed interest and tax rates based on a “worst case” scenario, and these will be adjusted once we have finalized the initial funding and establish the ESOT. We have also assumed our personnel burden at 30% of payroll in order to allow for above-average benefits for our employees. As we shop around for benefits vendors, this assumption will be subject to revision as well.
Other key business assumptions are:
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 14.00% | 14.00% | 14.00% |
Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
Tax Rate | 37.33% | 38.00% | 37.33% |
Other | 0 | 0 | 0 |
As shown in the Benchmarks chart below, our key financial indicators are:
For our break-even analysis, we assume running costs which include our full payroll, rent, and utilities, and an estimation of other running costs. Payroll alone, at present, is about $65,500 per month (including benefits and taxes).
We will monitor gross margins very closely, and maintain them at a midrange percentage by taking advantage of all promotions and discounts offered by our manufacturers. Canon USA has tentatively agreed to offer us “end column” pricing as a new dealer incentive.
The chart shows what we need to sell per month to break even, according to these assumptions. This is about 78% of our projected sales for our first year, and is well below what we have achieved annually over the past three years under more adverse operating conditions.
Break-even Analysis | |
Monthly Revenue Break-even | $209,018 |
Assumptions: | |
Average Percent Variable Cost | 51% |
Estimated Monthly Fixed Cost | $101,932 |
Our Pro Forma Profit and Loss statement was constructed from a conservative point-of-view, and is based in large part on past performance. By strengthening our service position, and rebuilding our customer relationships, we will widen our customer base and increase sales.
Month-to-month assumptions for profit and loss are included in the appendix.
Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $3,190,329 | $3,668,878 | $4,219,209 |
Direct Cost of Sales | $1,634,497 | $1,863,326 | $2,124,192 |
Production Payroll | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $1,634,497 | $1,863,326 | $2,124,192 |
Gross Margin | $1,555,832 | $1,805,552 | $2,095,017 |
Gross Margin % | 48.77% | 49.21% | 49.65% |
Operating Expenses | |||
Sales and Marketing Expenses | |||
Sales and Marketing Payroll | $153,000 | $162,180 | $171,911 |
Advertising/Promotion | $10,500 | $11,130 | $11,798 |
Commissions | $159,516 | $169,087 | $179,233 |
Travel – Sales | $22,500 | $23,850 | $25,281 |
Learning & Growth – Sales | $6,150 | $6,519 | $6,910 |
Entertainment | $5,400 | $5,724 | $6,067 |
Total Sales and Marketing Expenses | $357,066 | $378,490 | $401,200 |
Sales and Marketing % | 11.19% | 10.32% | 9.51% |
General and Administrative Expenses | |||
General and Administrative Payroll | $134,400 | $142,464 | $151,012 |
Sales and Marketing and Other Expenses | $0 | $0 | $0 |
Depreciation | $0 | $0 | $0 |
Depreciation | $0 | $0 | $0 |
Utilities | $9,000 | $9,540 | $10,112 |
Telephone & ISP | $34,200 | $36,252 | $38,427 |
Office Supplies | $4,200 | $4,452 | $4,719 |
Insurance | $16,800 | $17,808 | $18,876 |
Bank Charges | $6,000 | $6,360 | $6,742 |
Postage | $10,020 | $10,621 | $11,258 |
Taxes & Licenses | $10,200 | $10,812 | $11,461 |
Bonuses | $0 | $0 | $0 |
Learning & Growth – Admin | $3,150 | $3,339 | $3,539 |
Accounting | $6,000 | $6,360 | $6,742 |
Rent | $72,000 | $72,000 | $72,000 |
Payroll Taxes | $181,350 | $192,231 | $203,765 |
Other General and Administrative Expenses | $0 | $0 | $0 |
Total General and Administrative Expenses | $487,320 | $512,239 | $538,654 |
General and Administrative % | 15.27% | 13.96% | 12.77% |
Other Expenses: | |||
Other Payroll | $317,100 | $336,126 | $356,294 |
Consultants | $0 | $0 | $0 |
Learning & Growth – Service | $9,200 | $9,752 | $10,337 |
Travel – Service | $22,500 | $23,850 | $25,281 |
Freight & Cartage | $30,000 | $31,800 | $33,708 |
Total Other Expenses | $378,800 | $401,528 | $425,620 |
Other % | 11.87% | 10.94% | 10.09% |
Total Operating Expenses | $1,223,186 | $1,292,258 | $1,365,473 |
Profit Before Interest and Taxes | $332,645 | $513,294 | $729,544 |
EBITDA | $332,645 | $513,294 | $729,544 |
Interest Expense | $140,000 | $127,050 | $99,750 |
Taxes Incurred | $72,797 | $146,773 | $235,123 |
Net Profit | $119,848 | $239,471 | $394,671 |
Net Profit/Sales | 3.76% | 6.53% | 9.35% |
Because we are treating the new company as a start-up, the cash flow for FY2002 is somewhat exaggerated by the instant influx of new capital. Subsequent years however show a healthy growth in cash flow, mainly due to the short 60-month repayment of the start-up loan and increased sales.
Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $2,073,714 | $2,384,771 | $2,742,486 |
Cash from Receivables | $906,354 | $1,252,568 | $1,440,453 |
Subtotal Cash from Operations | $2,980,067 | $3,637,339 | $4,182,939 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
New Current Borrowing | $0 | $0 | $0 |
New Other Liabilities (interest-free) | $0 | $0 | $0 |
New Long-term Liabilities | $0 | $0 | $0 |
Sales of Other Current Assets | $0 | $0 | $0 |
Sales of Long-term Assets | $0 | $0 | $0 |
New Investment Received | $30,000 | $0 | $0 |
Subtotal Cash Received | $3,010,067 | $3,637,339 | $4,182,939 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $604,500 | $640,770 | $679,216 |
Bill Payments | $2,210,315 | $2,809,360 | $3,143,202 |
Subtotal Spent on Operations | $2,814,815 | $3,450,130 | $3,822,418 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $0 | $185,000 | $205,000 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $2,814,815 | $3,635,130 | $4,027,418 |
Net Cash Flow | $195,252 | $2,209 | $155,521 |
Cash Balance | $420,252 | $422,461 | $577,982 |
The Projected Balance Sheet is quite solid. We do not project any trouble meeting our debt obligations as long as we achieve our specific objectives.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $420,252 | $422,461 | $577,982 |
Accounts Receivable | $210,261 | $241,801 | $278,071 |
Inventory | $172,142 | $196,241 | $223,715 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $802,655 | $860,503 | $1,079,768 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $802,655 | $860,503 | $1,079,768 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $227,807 | $231,184 | $260,778 |
Current Borrowing | $1,000,000 | $815,000 | $610,000 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $1,227,807 | $1,046,184 | $870,778 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $1,227,807 | $1,046,184 | $870,778 |
Paid-in Capital | $30,000 | $30,000 | $30,000 |
Retained Earnings | ($575,000) | ($455,152) | ($215,681) |
Earnings | $119,848 | $239,471 | $394,671 |
Total Capital | ($425,152) | ($185,681) | $208,990 |
Total Liabilities and Capital | $802,655 | $860,503 | $1,079,768 |
Net Worth | ($425,152) | ($185,681) | $208,990 |
The following table shows our main business ratios, and is compared to national averages. Our SIC industry class is currently: Office equipment, nec – 5044.99.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 15.00% | 15.00% | 1.50% |
Percent of Total Assets | ||||
Accounts Receivable | 26.20% | 28.10% | 25.75% | 30.97% |
Inventory | 21.45% | 22.81% | 20.72% | 38.08% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 16.04% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 85.09% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 14.91% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 152.97% | 121.58% | 80.64% | 44.30% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 8.46% |
Total Liabilities | 152.97% | 121.58% | 80.64% | 52.76% |
Net Worth | -52.97% | -21.58% | 19.36% | 47.24% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 48.77% | 49.21% | 49.65% | 26.76% |
Selling, General & Administrative Expenses | 45.02% | 42.69% | 40.40% | 15.95% |
Advertising Expenses | 0.33% | 0.30% | 0.28% | 0.95% |
Profit Before Interest and Taxes | 10.43% | 13.99% | 17.29% | 2.55% |
Main Ratios | ||||
Current | 0.65 | 0.82 | 1.24 | 1.80 |
Quick | 0.51 | 0.63 | 0.98 | 0.87 |
Total Debt to Total Assets | 152.97% | 121.58% | 80.64% | 6.22% |
Pre-tax Return on Net Worth | -45.31% | -208.01% | 301.35% | 55.95% |
Pre-tax Return on Assets | 24.00% | 44.89% | 58.33% | 14.11% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 3.76% | 6.53% | 9.35% | n.a |
Return on Equity | 0.00% | 0.00% | 188.85% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 5.31 | 5.31 | 5.31 | n.a |
Collection Days | 57 | 64 | 64 | n.a |
Inventory Turnover | 10.91 | 10.12 | 10.12 | n.a |
Accounts Payable Turnover | 10.70 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 30 | 28 | n.a |
Total Asset Turnover | 3.97 | 4.26 | 3.91 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.00 | 0.00 | 4.17 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | ($425,152) | ($185,681) | $208,990 | n.a |
Interest Coverage | 2.38 | 4.04 | 7.31 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.25 | 0.23 | 0.26 | n.a |
Current Debt/Total Assets | 153% | 122% | 81% | n.a |
Acid Test | 0.34 | 0.40 | 0.66 | n.a |
Sales/Net Worth | 0.00 | 0.00 | 20.19 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
Sales Forecast | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Sales | |||||||||||||
Hardware – Image Platforms | 0% | $78,500 | $78,500 | $78,500 | $86,350 | $86,350 | $86,350 | $94,985 | $94,985 | $94,985 | $104,484 | $104,484 | $104,484 |
Hardware – Printers | 0% | $5,000 | $5,000 | $5,000 | $5,500 | $5,500 | $5,500 | $6,050 | $6,050 | $6,050 | $6,655 | $6,655 | $6,655 |
Hardware – Facsimiles | 0% | $10,250 | $10,250 | $10,250 | $11,275 | $11,275 | $11,275 | $12,403 | $12,403 | $12,403 | $13,643 | $13,643 | $13,643 |
Hardware – Misc (TW, Shrd) | 0% | $3,250 | $3,250 | $3,250 | $3,575 | $3,575 | $3,575 | $3,933 | $3,933 | $3,933 | $4,326 | $4,326 | $4,326 |
Professional Services | 0% | $0 | $0 | $2,500 | $2,750 | $2,750 | $2,750 | $3,025 | $3,025 | $3,025 | $3,328 | $3,328 | $3,328 |
Government (Comp) | 0% | $6,250 | $6,250 | $6,250 | $6,875 | $6,875 | $6,875 | $7,563 | $7,563 | $7,563 | $8,319 | $8,319 | $8,319 |
Supplies (Toner/Paper) | 0% | $36,000 | $36,000 | $36,000 | $39,600 | $39,600 | $39,600 | $43,560 | $43,560 | $43,560 | $47,916 | $47,916 | $47,916 |
Service – Agreements/Repairs | 0% | $68,000 | $68,000 | $68,000 | $74,800 | $74,800 | $74,800 | $82,280 | $82,280 | $82,280 | $90,508 | $90,508 | $90,508 |
Equipment Rentals | 0% | $17,500 | $17,500 | $17,500 | $19,250 | $19,250 | $19,250 | $21,175 | $21,175 | $21,175 | $23,293 | $23,293 | $23,293 |
Other | 0% | $2,250 | $2,250 | $2,250 | $2,475 | $2,475 | $2,475 | $2,723 | $2,723 | $2,723 | $2,995 | $2,995 | $2,995 |
Total Sales | $227,000 | $227,000 | $229,500 | $252,450 | $252,450 | $252,450 | $277,695 | $277,695 | $277,695 | $305,465 | $305,465 | $305,465 | |
Direct Cost of Sales | Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
Hardware – Image Platforms | $48,670 | $48,670 | $48,670 | $53,537 | $53,537 | $53,537 | $58,891 | $58,891 | $58,891 | $64,780 | $64,780 | $64,780 | |
Hardware – Printers | $3,250 | $3,250 | $3,250 | $3,575 | $3,575 | $3,575 | $3,933 | $3,933 | $3,933 | $4,326 | $4,326 | $4,326 | |
Hardware – Facsimiles | $6,355 | $6,355 | $6,355 | $6,991 | $6,991 | $6,991 | $7,690 | $7,690 | $7,690 | $8,459 | $8,459 | $8,459 | |
Hardware – Misc (TW, Shrd) | $2,275 | $2,275 | $2,275 | $2,503 | $2,503 | $2,503 | $2,753 | $2,753 | $2,753 | $3,028 | $3,028 | $3,028 | |
Professional Services | $0 | $0 | $1,250 | $1,375 | $1,375 | $1,375 | $1,513 | $1,513 | $1,513 | $1,664 | $1,664 | $1,664 | |
Government (Comp) | $2,188 | $2,188 | $2,188 | $2,406 | $2,406 | $2,406 | $2,647 | $2,647 | $2,647 | $2,912 | $2,912 | $2,912 | |
Supplies (Toner/Paper) | $16,200 | $16,200 | $16,200 | $17,820 | $17,820 | $17,820 | $19,602 | $19,602 | $19,602 | $21,562 | $21,562 | $21,562 | |
Service – Agreements/Repairs | $27,200 | $27,200 | $27,200 | $29,920 | $29,920 | $29,920 | $32,912 | $32,912 | $32,912 | $36,203 | $36,203 | $36,203 | |
Equipment Rentals | $9,625 | $9,625 | $9,625 | $10,588 | $10,588 | $10,588 | $11,646 | $11,646 | $11,646 | $12,811 | $12,811 | $12,811 | |
Other | $563 | $563 | $563 | $619 | $619 | $619 | $681 | $681 | $681 | $749 | $749 | $749 | |
Subtotal Direct Cost of Sales | $116,325 | $116,325 | $117,575 | $129,333 | $129,333 | $129,333 | $142,266 | $142,266 | $142,266 | $156,492 | $156,492 | $156,492 |
Personnel Plan | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Production Personnel | |||||||||||||
None planned | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Other | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Sales and Marketing Personnel | |||||||||||||
Alan Fukuyama – Sales (Maui) | $3,000 | $3,000 | $3,000 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | |
Brian Kurlansky – Sales (Kona) | $3,000 | $3,000 | $3,000 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | |
Jay Moore – Sales (Maui) | $3,000 | $3,000 | $3,000 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | |
Wilbert Shimabukuro – Sales (Hilo) | $3,000 | $3,000 | $3,000 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | $3,250 | |
Vacant – Aftermarket Sales (Maui) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Vacant – Aftermarket Sales (Hilo) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal | $12,000 | $12,000 | $12,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | |
General and Administrative Personnel | |||||||||||||
Bill Harding – General Manager | $4,500 | $4,500 | $4,500 | $4,900 | $4,900 | $4,900 | $4,900 | $4,900 | $4,900 | $4,900 | $4,900 | $4,900 | |
Laurie Watson – Admin Manager | $3,650 | $3,650 | $3,650 | $3,850 | $3,850 | $3,850 | $3,850 | $3,850 | $3,850 | $3,850 | $3,850 | $3,850 | |
Vacant – Office Manager (Hilo) | $2,450 | $2,450 | $2,450 | $2,650 | $2,650 | $2,650 | $2,650 | $2,650 | $2,650 | $2,650 | $2,650 | $2,650 | |
Vacant – Whse & Delivery (Maui) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Vacant – Whse & Delivery (Hilo) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Other | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal | $10,600 | $10,600 | $10,600 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | |
Other Personnel | |||||||||||||
Earle Oshiro – Systems Manager (Hilo) | $4,000 | $4,000 | $4,000 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | |
Joe Alfonsi – Systems Manager (Maui) | $4,000 | $4,000 | $4,000 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | $4,200 | |
Wane Ogawa – Syst Engineer (Hilo) | $3,150 | $3,150 | $3,150 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | |
Francis Takahashi – Syst Engineer (Hilo) | $3,150 | $3,150 | $3,150 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | |
Baron Ganeko – Syst Engineer (Kona) | $3,150 | $3,150 | $3,150 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | $3,350 | |
Abe Braceros – Sr. Syst Engineer (Maui) | $3,200 | $3,200 | $3,200 | $3,500 | $3,500 | $3,500 | $3,500 | $3,500 | $3,500 | $3,500 | $3,500 | $3,500 | |
Arlo Villanueva – Syst Tech (Maui) | $2,250 | $2,250 | $2,250 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | |
Caroline Nacua – Syst Tech (Maui) | $2,250 | $2,250 | $2,250 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | $2,450 | |
Vacant – Syst Tech (Kona) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Vacant – Syst Tech (Maui) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal | $25,150 | $25,150 | $25,150 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | |
Total People | 15 | 15 | 15 | 15 | 15 | 15 | 15 | 15 | 15 | 15 | 15 | 15 | |
Total Payroll | $47,750 | $47,750 | $47,750 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 |
General Assumptions | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Plan Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |
Current Interest Rate | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | 14.00% | |
Long-term Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | |
Tax Rate | 30.00% | 38.00% | 38.00% | 38.00% | 38.00% | 38.00% | 38.00% | 38.00% | 38.00% | 38.00% | 38.00% | 38.00% | |
Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Pro Forma Profit and Loss | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Sales | $227,000 | $227,000 | $229,500 | $252,450 | $252,450 | $252,450 | $277,695 | $277,695 | $277,695 | $305,465 | $305,465 | $305,465 | |
Direct Cost of Sales | $116,325 | $116,325 | $117,575 | $129,333 | $129,333 | $129,333 | $142,266 | $142,266 | $142,266 | $156,492 | $156,492 | $156,492 | |
Production Payroll | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Other | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Total Cost of Sales | $116,325 | $116,325 | $117,575 | $129,333 | $129,333 | $129,333 | $142,266 | $142,266 | $142,266 | $156,492 | $156,492 | $156,492 | |
Gross Margin | $110,675 | $110,675 | $111,925 | $123,118 | $123,118 | $123,118 | $135,429 | $135,429 | $135,429 | $148,972 | $148,972 | $148,972 | |
Gross Margin % | 48.76% | 48.76% | 48.77% | 48.77% | 48.77% | 48.77% | 48.77% | 48.77% | 48.77% | 48.77% | 48.77% | 48.77% | |
Operating Expenses | |||||||||||||
Sales and Marketing Expenses | |||||||||||||
Sales and Marketing Payroll | $12,000 | $12,000 | $12,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | $13,000 | |
Advertising/Promotion | $500 | $500 | $500 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | |
Commissions | $11,350 | $11,350 | $11,475 | $12,623 | $12,623 | $12,623 | $13,885 | $13,885 | $13,885 | $15,273 | $15,273 | $15,273 | |
Travel – Sales | $1,500 | $1,500 | $1,500 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | |
Learning & Growth – Sales | $0 | $0 | $0 | $400 | $400 | $400 | $400 | $400 | $400 | $1,250 | $1,250 | $1,250 | |
Entertainment | $450 | $450 | $450 | $450 | $450 | $450 | $450 | $450 | $450 | $450 | $450 | $450 | |
Total Sales and Marketing Expenses | $25,800 | $25,800 | $25,925 | $29,473 | $29,473 | $29,473 | $30,735 | $30,735 | $30,735 | $32,973 | $32,973 | $32,973 | |
Sales and Marketing % | 11.37% | 11.37% | 11.30% | 11.67% | 11.67% | 11.67% | 11.07% | 11.07% | 11.07% | 10.79% | 10.79% | 10.79% | |
General and Administrative Expenses | |||||||||||||
General and Administrative Payroll | $10,600 | $10,600 | $10,600 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | $11,400 | |
Sales and Marketing and Other Expenses | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Depreciation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Depreciation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Utilities | $750 | $750 | $750 | $750 | $750 | $750 | $750 | $750 | $750 | $750 | $750 | $750 | |
Telephone & ISP | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | $2,850 | |
Office Supplies | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | |
Insurance | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | $1,400 | |
Bank Charges | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | |
Postage | $835 | $835 | $835 | $835 | $835 | $835 | $835 | $835 | $835 | $835 | $835 | $835 | |
Taxes & Licenses | $850 | $850 | $850 | $850 | $850 | $850 | $850 | $850 | $850 | $850 | $850 | $850 | |
Bonuses | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Learning & Growth – Admin | $0 | $0 | $0 | $150 | $150 | $150 | $150 | $150 | $150 | $750 | $750 | $750 | |
Accounting | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | $500 | |
Rent | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | $6,000 | |
Payroll Taxes | 30% | $14,325 | $14,325 | $14,325 | $15,375 | $15,375 | $15,375 | $15,375 | $15,375 | $15,375 | $15,375 | $15,375 | $15,375 |
Other General and Administrative Expenses | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Total General and Administrative Expenses | $38,960 | $38,960 | $38,960 | $40,960 | $40,960 | $40,960 | $40,960 | $40,960 | $40,960 | $41,560 | $41,560 | $41,560 | |
General and Administrative % | 17.16% | 17.16% | 16.98% | 16.22% | 16.22% | 16.22% | 14.75% | 14.75% | 14.75% | 13.61% | 13.61% | 13.61% | |
Other Expenses: | |||||||||||||
Other Payroll | $25,150 | $25,150 | $25,150 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | $26,850 | |
Consultants | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Learning & Growth – Service | $0 | $0 | $0 | $850 | $850 | $850 | $650 | $650 | $850 | $1,500 | $1,500 | $1,500 | |
Travel – Service | $1,500 | $1,500 | $1,500 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | |
Freight & Cartage | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | $2,500 | |
Total Other Expenses | $29,150 | $29,150 | $29,150 | $32,200 | $32,200 | $32,200 | $32,000 | $32,000 | $32,200 | $32,850 | $32,850 | $32,850 | |
Other % | 12.84% | 12.84% | 12.70% | 12.76% | 12.76% | 12.76% | 11.52% | 11.52% | 11.60% | 10.75% | 10.75% | 10.75% | |
Total Operating Expenses | $93,910 | $93,910 | $94,035 | $102,633 | $102,633 | $102,633 | $103,695 | $103,695 | $103,895 | $107,383 | $107,383 | $107,383 | |
Profit Before Interest and Taxes | $16,765 | $16,765 | $17,890 | $20,485 | $20,485 | $20,485 | $31,735 | $31,735 | $31,535 | $41,589 | $41,589 | $41,589 | |
EBITDA | $16,765 | $16,765 | $17,890 | $20,485 | $20,485 | $20,485 | $31,735 | $31,735 | $31,535 | $41,589 | $41,589 | $41,589 | |
Interest Expense | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | $11,667 | |
Taxes Incurred | $1,530 | $1,937 | $2,365 | $3,351 | $3,351 | $3,351 | $7,626 | $7,626 | $7,550 | $11,370 | $11,370 | $11,370 | |
Net Profit | $3,569 | $3,161 | $3,858 | $5,467 | $5,467 | $5,467 | $12,442 | $12,442 | $12,318 | $18,552 | $18,552 | $18,552 | |
Net Profit/Sales | 1.57% | 1.39% | 1.68% | 2.17% | 2.17% | 2.17% | 4.48% | 4.48% | 4.44% | 6.07% | 6.07% | 6.07% |
Pro Forma Cash Flow | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Cash Received | |||||||||||||
Cash from Operations | |||||||||||||
Cash Sales | $147,550 | $147,550 | $149,175 | $164,093 | $164,093 | $164,093 | $180,502 | $180,502 | $180,502 | $198,552 | $198,552 | $198,552 | |
Cash from Receivables | $0 | $2,648 | $79,450 | $79,479 | $80,593 | $88,358 | $88,358 | $88,652 | $97,193 | $97,193 | $97,517 | $106,913 | |
Subtotal Cash from Operations | $147,550 | $150,198 | $228,625 | $243,572 | $244,685 | $252,450 | $268,859 | $269,154 | $277,695 | $295,745 | $296,069 | $305,465 | |
Additional Cash Received | |||||||||||||
Sales Tax, VAT, HST/GST Received | 0.00% | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
New Current Borrowing | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
New Other Liabilities (interest-free) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
New Long-term Liabilities | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Sales of Other Current Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Sales of Long-term Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
New Investment Received | $30,000 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal Cash Received | $177,550 | $150,198 | $228,625 | $243,572 | $244,685 | $252,450 | $268,859 | $269,154 | $277,695 | $295,745 | $296,069 | $305,465 | |
Expenditures | Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
Expenditures from Operations | |||||||||||||
Cash Spending | $47,750 | $47,750 | $47,750 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | $51,250 | |
Bill Payments | $3,455 | $106,054 | $176,195 | $180,247 | $208,235 | $195,733 | $196,816 | $227,755 | $214,007 | $215,366 | $250,790 | $235,663 | |
Subtotal Spent on Operations | $51,205 | $153,804 | $223,945 | $231,497 | $259,485 | $246,983 | $248,066 | $279,005 | $265,257 | $266,616 | $302,040 | $286,913 | |
Additional Cash Spent | |||||||||||||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Principal Repayment of Current Borrowing | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Other Liabilities Principal Repayment | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Long-term Liabilities Principal Repayment | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Purchase Other Current Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Purchase Long-term Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Dividends | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal Cash Spent | $51,205 | $153,804 | $223,945 | $231,497 | $259,485 | $246,983 | $248,066 | $279,005 | $265,257 | $266,616 | $302,040 | $286,913 | |
Net Cash Flow | $126,345 | ($3,605) | $4,680 | $12,075 | ($14,800) | $5,467 | $20,793 | ($9,852) | $12,438 | $29,129 | ($5,971) | $18,552 | |
Cash Balance | $351,345 | $347,740 | $352,420 | $364,495 | $349,696 | $355,163 | $375,956 | $366,105 | $378,543 | $407,672 | $401,700 | $420,252 |
Pro Forma Balance Sheet | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Assets | Starting Balances | ||||||||||||
Current Assets | |||||||||||||
Cash | $225,000 | $351,345 | $347,740 | $352,420 | $364,495 | $349,696 | $355,163 | $375,956 | $366,105 | $378,543 | $407,672 | $401,700 | $420,252 |
Accounts Receivable | $0 | $79,450 | $156,252 | $157,127 | $166,005 | $173,770 | $173,770 | $182,606 | $191,147 | $191,147 | $200,866 | $210,261 | $210,261 |
Inventory | $200,000 | $127,958 | $127,958 | $129,333 | $142,266 | $142,266 | $142,266 | $156,492 | $156,492 | $156,492 | $172,142 | $172,142 | $172,142 |
Other Current Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Total Current Assets | $425,000 | $558,753 | $631,949 | $638,879 | $672,766 | $665,731 | $671,199 | $715,054 | $713,744 | $726,182 | $780,679 | $784,103 | $802,655 |
Long-term Assets | |||||||||||||
Long-term Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Total Assets | $425,000 | $558,753 | $631,949 | $638,879 | $672,766 | $665,731 | $671,199 | $715,054 | $713,744 | $726,182 | $780,679 | $784,103 | $802,655 |
Liabilities and Capital | Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
Current Liabilities | |||||||||||||
Accounts Payable | $0 | $100,184 | $170,219 | $173,291 | $201,710 | $189,208 | $189,208 | $220,622 | $206,870 | $206,989 | $242,935 | $227,807 | $227,807 |
Current Borrowing | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 | $1,000,000 |
Other Current Liabilities | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Subtotal Current Liabilities | $1,000,000 | $1,100,184 | $1,170,219 | $1,173,291 | $1,201,710 | $1,189,208 | $1,189,208 | $1,220,622 | $1,206,870 | $1,206,989 | $1,242,935 | $1,227,807 | $1,227,807 |
Long-term Liabilities | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Total Liabilities | $1,000,000 | $1,100,184 | $1,170,219 | $1,173,291 | $1,201,710 | $1,189,208 | $1,189,208 | $1,220,622 | $1,206,870 | $1,206,989 | $1,242,935 | $1,227,807 | $1,227,807 |
Paid-in Capital | $0 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 |
Retained Earnings | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) | ($575,000) |
Earnings | $0 | $3,569 | $6,730 | $10,588 | $16,056 | $21,523 | $26,990 | $39,432 | $51,874 | $64,193 | $82,744 | $101,296 | $119,848 |
Total Capital | ($575,000) | ($541,431) | ($538,270) | ($534,412) | ($528,944) | ($523,477) | ($518,010) | ($505,568) | ($493,126) | ($480,807) | ($462,256) | ($443,704) | ($425,152) |
Total Liabilities and Capital | $425,000 | $558,753 | $631,949 | $638,879 | $672,766 | $665,731 | $671,199 | $715,054 | $713,744 | $726,182 | $780,679 | $784,103 | $802,655 |
Net Worth | ($575,000) | ($541,431) | ($538,270) | ($534,412) | ($528,944) | ($523,477) | ($518,010) | ($505,568) | ($493,126) | ($480,807) | ($462,256) | ($443,704) | ($425,152) |
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Are you considering starting your own managed IT services business? With the rapid growth of technology and the increasing reliance on IT systems, there has never been a better time to enter the industry. In fact, the managed IT services market in the US is projected to reach $282 billion by 2023, growing at a CAGR of 9.3% . To help you get started on the right foot, we have compiled a nine-step checklist on how to write a business plan for managed IT services. Let's dive in!
By following this nine-step checklist, you will be well on your way to writing a comprehensive business plan for your managed IT services business. Remember, careful planning and preparation are key to building a successful and profitable venture in this rapidly growing industry.
When starting a business in managed IT services, it is crucial to first identify your target market and client base . This step sets the foundation for your entire business plan and ensures that you are focusing your efforts on the right audience.
Begin by researching the IT needs and pain points of various industries or sectors. Consider which industries are more likely to require managed IT services and which ones can benefit the most from outsourcing their IT needs. By understanding the specific challenges faced by different industries, you can tailor your services to meet their unique requirements.
Once you have identified your target market and client base, you can proceed to the next steps of your business plan, confident in knowing that your services are tailored to meet the specific needs of your chosen audience.
| Managed IT Services Financial Model Get Template |
In order to create a successful business plan for managed IT services, conducting thorough market research and analyzing the competitive landscape is essential. This step will provide invaluable insights into the current market trends, customer preferences, and the strategies adopted by competitors.
Start by gathering data on the target market, including demographics, industry trends, and the specific needs of potential clients. This will help in identifying the unique selling points and services that can differentiate your business from others in the market.
Analyze the competitive landscape by identifying existing competitors in the managed IT services industry. Take note of their strengths, weaknesses, pricing models, and the range of services they offer. This information will help in understanding the market dynamics and identifying opportunities for differentiation.
By conducting comprehensive market research and analyzing the competitive landscape, you will be equipped with the necessary information to make informed decisions about your target market, services, and positioning. This will ultimately help you develop a strong business plan tailored to the needs and demands of the market.
Defining the scope of services to be offered is a critical step in writing a business plan for managed IT services. It is important to determine exactly what services your company will provide to clients and what you will specialize in. This will help you differentiate yourself from competitors and establish your unique value proposition.
Start by identifying the specific IT services you are skilled in and the ones that align with your target market's needs. Consider whether you will offer services such as network management, cloud solutions, cybersecurity, data backup and recovery, or software implementation. Clearly outline each of these services to ensure that there is no ambiguity in what you will provide.
Once you have defined the core IT services you will offer, it is essential to clearly articulate the boundaries of each service. This means identifying what is included and what is not included in each service package. For example, will your network management service include troubleshooting and maintenance, or only monitoring and reporting?
Determining the boundaries of each service will help manage client expectations and ensure that both parties are clear on what is being delivered. Additionally, it can assist in creating standardized service packages that can easily be communicated and priced to clients.
Finally, consider any additional value-added services you can offer alongside your core offerings. This could include providing 24/7 customer support, regular performance audits, or customized IT consulting. These additional services can help you differentiate your business and provide added value to your clients.
By defining the scope of services to be offered, you establish a solid foundation for your business plan and set the direction for your managed IT services company. This clarity will not only guide your operations but also enable you to effectively market and sell your services to potential clients.
When starting a managed IT services business, it is important to determine the most suitable business structure and understand the legal requirements involved. This step will ensure that your business is compliant with the necessary regulations and set up in a way that aligns with your goals and objectives.
First, decide on the business structure that best suits your needs. This could be a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each structure has its own advantages and disadvantages, so carefully consider factors such as liability protection, taxation, and management flexibility when making your decision.
Next, familiarize yourself with the legal requirements for setting up a managed IT services business in your jurisdiction. This may include registering your business with the appropriate government agencies, obtaining necessary licenses or permits, and meeting any specific industry regulations.
Research the legal and compliance obligations related to data protection, privacy laws, and cybersecurity. Depending on the type of client data you handle and the services you offer, there may be additional requirements and regulations you need to adhere to.
Lastly, consider obtaining the necessary insurance coverage to protect your business and clients. Insurance policies such as professional liability insurance and cybersecurity insurance can help mitigate potential risks and provide added peace of mind.
By taking the time to determine the appropriate business structure and understand the legal requirements, you are setting a strong foundation for your managed IT services business. This will help ensure that your business operates smoothly, remains compliant, and can confidently serve your clients.
When starting a managed IT services business, it is crucial to create a detailed financial projection to ensure the financial sustainability and growth of your business. A financial projection is a forecast of your expected income, expenses, and cash flow for a certain period of time, typically the first three to five years.
Creating a detailed financial projection involves several key steps:
Creating a detailed financial projection requires careful analysis and planning. It provides you with valuable insights into the financial health and potential of your managed IT services business, allowing you to make informed decisions and strategies for success.
Developing a strong marketing and sales strategy is crucial for the success of your managed IT services business. It will help you attract potential clients and differentiate yourself from competitors. Here are key steps to outline your marketing and sales strategy:
When developing a pricing model for your managed IT services, it is important to consider various factors that will impact your costs and profitability. Here are some key steps to help you develop an effective pricing model for your business:
Developing a pricing model for your managed IT services requires careful consideration of costs, market research, and your unique value proposition. By taking these steps and considering the tips provided, you can create a pricing strategy that ensures profitability while meeting the needs and expectations of your clients.
When it comes to running a successful managed IT services business, developing strategic partnerships and collaborations can be a game-changer. By partnering with other businesses or organizations in the IT industry, you can expand your service offerings, access new markets, and enhance the value you provide to your clients. Here are some important considerations when identifying potential partnerships or collaborations:
By identifying the right partnerships or collaborations, you can leverage the expertise and resources of others to enhance your managed IT services business. These partnerships can help you offer a more comprehensive suite of services, access new markets, and strengthen your position in the industry.
Once the target market, services, and financial projections have been established, it is crucial to create a comprehensive operational plan that outlines the day-to-day functions and processes of the managed IT services business. This plan serves as a roadmap for how the business will operate and ensures that all aspects are taken into consideration.
1. Define the organizational structure: Determine the roles and responsibilities of each team member, including management, technical support, sales, and administration. Clearly outline reporting lines and establish a hierarchy to ensure efficient communication and decision-making.
2. Establish standard operating procedures (SOPs): Develop SOPs for various operational tasks such as client onboarding, project management, help desk support, and maintenance activities. These SOPs provide a step-by-step guide for employees, ensuring consistency and efficiency in service delivery.
3. Implement robust project management: Use project management tools and methodologies to streamline project workflows and ensure timely completion of tasks. Assign project managers who will oversee project execution, monitor progress, and communicate with clients to keep them informed.
4. Create a training and development program: Invest in the continuous training and development of employees to keep them updated on the latest technologies, industry trends, and best practices. This will enable them to deliver high-quality services and stay competitive in the market.
5. Develop a backup and disaster recovery plan: Identify potential risks and establish protocols for mitigating failures or disruptions in service. Regularly backup client data and implement a disaster recovery plan to minimize downtime and ensure business continuity.
By creating a comprehensive operational plan, managed IT services providers can establish a strong foundation for their business. This plan will ensure that all operational aspects are well-defined and aligned with the overall business goals, enabling smooth execution of services and ultimately, client satisfaction and success.
In conclusion, writing a business plan for managed IT services is a crucial step towards ensuring success in this competitive industry. By following the nine steps outlined in this checklist, you can effectively identify your target market, analyze the competition, define your services, determine the necessary legal requirements, create a financial projection, outline your marketing and sales strategy, develop a pricing model, identify potential partnerships, and create an operational plan.
With a well-crafted business plan, you can position your managed IT services business for growth and profitability. This project-based approach, popular in the US, allows for flexibility, collaboration, and clear deliverables. By providing measurable results, you can foster trust and build long-term relationships with clients. By following this checklist, you are one step closer to achieving your business goals in the managed IT services industry.
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Some MSPs will tell you that you should not waste even a minute of your time creating a business plan while your business is only a project. Other, more mature managed IT providers will tell you that, unless you have to secure funding from a partner or investor, an MSP business plan is - you guessed it - a waste of time.
The simple truth is that a business plan is an instrument. In this article we will define the core purposes of an MSP business plan and explain when it might be helpful for a start-up or already-established managed IT provider.
A business plan is a written document containing a detailed overview of the future or existing business, including mission, strategic and operational goals, marketing analysis, financial estimations, and technical considerations. Its purpose is to prove that the idea behind the business is well thought out and that the business will be profitable.
Further reading How to Build a Successful MSP Business
As noted above, the details and the depth of an MSP business plan depend on its aim and the people involved. There can be several different purposes of business planning:
Don't forget, however, that a business plan can be changed during the lifetime of your MSP. It should not be carved in stone; if the nature of your market or your goals change, change your plans accordingly. Below, you will find the basic points that should be included in any MSP business plan. Bear in mind that we do not discuss financial estimation and analysis, due to the specifics and the complexity of the topic.
An executive summary is a short description which overviews the main points of the business you are about to start, including overview of the nature of the business, customer description, challenges you are about to solve , services you will offer , team profile, and sources of funding.
The business description contains the most general idea and objectives of your business. It should include he mission statement and the vision of the company, strategic goals, core business objectives, and key tracking metrics.
The business description is one of the most underestimated parts of an MSP business plan. Many managed IT providers tend to think that it contains nothing else but general words that mean nothing. However, this part can be a starting point for a strong corporate culture, which, as we know, can be one of the greatest competitive advantages of them all.
Ultimately, this part of an MSP business plan will show you, your partners or investors that your idea is viable. It should contain as many details as possible about the market you are about to enter, including:
Introduction.
In today’s technology-driven world, businesses rely heavily on efficient IT systems to operate smoothly. Managed service providers (MSPs) play a crucial role in assisting organizations by offering proactive IT management, support, and strategic guidance. However, building a successful MSP business model requires careful business planning, a solid business model, and the ability to navigate the dynamic landscape of the MSP industry.
According to a recent survey, the global managed services market size was valued at USD 267.3 billion in 2022 and is expected to grow at a compound annual growth rate of 13.6% from 2023 to 2030. In this article, we will delve into various aspects of developing a thriving MSP business, including the MSP business model, pricing strategies, targeting the managed services market, and establishing productive vendor partnerships in the managed services space. We’ll also investigate how Parallels RAS can contribute to your successful MSP business, and how you can become a partner today .
The MSP business model revolves around providing comprehensive IT services to clients, which are typically invoiced on a monthly subscription basis for a specified duration, typically through contracts spanning 1, 2, or 3 years. By combining multiple services into a monthly fee structure, MSPs provide clients with a comprehensive IT solution that caters to their needs. This model offers cost predictability, scalability, and the ability to offload IT infrastructure management to the MSP.
MSPs can establish long-term relationships with recurring revenue streams. Instead of relying on a break-fix approach, building an MSP business plan to focus on proactive remote monitoring, maintenance, and management of clients’ IT infrastructure is key. MSPs offer a range of services, including data backup and recovery, cybersecurity, remote management, hosted desktops and applications, cloud-based solutions, and help desk support. MSP clients benefit from access to robust IT services while focusing on their core business objectives.
When reconsidering building an MSP business model, there are several key performance indicators (KPIs) and objectives that can help gauge the success of your MSP. Meeting or exceeding service level agreements (SLAs), receiving positive customer feedback, and maintaining a low customer churn rate help to build customer satisfaction and loyalty, which are crucial for long-term success.
Profitability and cost management are also key considerations for an MSP, monitoring metrics such as monthly recurring revenue (MRR) growth, new client acquisition rate, and controlling operational expenses enable you to maintain a healthy financial position to ensure growth and success of your MSP business.
Parallels RAS offers MSPs a cost-effective solution by incorporating built-in security, multi-factor authentication, high availability load balancing, and streamlined management.
Identifying and targeting managed services customers is a critical aspect of building a successful MSP business. By understanding the specific needs, pain points, budget constraints, the local MSP market, and IT requirements of potential clients, MSPs can shape their services and pricing to deliver maximum value across all target markets.
SMBs often have limited IT resources and expertise, making them prime candidates for outsourced managed IT services. MSPs can tailor their offerings to address the pain points commonly faced by SMBs, such as data security, network stability, and scalability.
Mid to large enterprises typically have complex IT infrastructures, multiple locations, and a high demand for specialized services. MSPs targeting this market segment should emphasize their ability to handle large-scale projects, offer 24/7 support, and provide customized solutions. Addressing the needs of large enterprises, such as data governance, compliance, and business continuity, enables MSPs to develop comprehensive service offerings and pricing models that meet their needs.
Certain industries, such as healthcare, finance, or legal, have distinct IT requirements and compliance regulations. MSPs can specialize in serving these industries by understanding their unique requirements and tailoring their services accordingly. For example, healthcare organizations may require HIPAA compliance and data security expertise, while financial institutions may need robust cybersecurity solutions. By developing industry-specific knowledge and demonstrating compliance expertise, MSPs can position themselves as trusted partners within these sectors.
Determining appropriate pricing strategies and MSP business plan is crucial for MSP profitability. Common pricing models include tiered pricing, per-device pricing, and per-user pricing. Each model has its own advantages and considerations, and MSPs must assess factors like service scope, client requirements, and market competition, as well as associated costs when setting prices. Flexible pricing options, such as bundling services, can provide value to clients while maximizing revenue for MSPs.
Tiered pricing : This model involves offering different service levels or tiers, each with a specific set of features and price points. Clients can choose the tier that aligns with their needs and budget. Tiered pricing enables MSPs to cater to a range of clients, provide flexibility, and upsell additional services as clients’ needs evolve and scale.
Per-device pricing : With this model, MSPs charge a fixed fee for each managed device (e.g., servers, workstations, network devices) within a client’s infrastructure. Per-device pricing offers transparency and predictability for clients and enables MSPs to scale prices based on the number of devices under management.
Per-user pricing : This model involves charging a fee for each user or employee within a client’s organization who requires IT support and services. Per-user pricing accommodates organizations with varying user counts and provides a straightforward pricing structure.
Conducting regular cost reviews are essential to ensure competitiveness and profitability in the dynamic MSP industry. Changes in vendor pricing, such as increased license and cloud storage costs, can impact MSPs’ profit margin. Managing these changes means managed service providers can adapt their business strategy and guarantee a sustainable pricing model.
MSPs create a service portfolio by combining various technologies and manufacturers to offer a comprehensive and integrated suite of managed services to their customers. MSPs need to understand their customers’ specific needs and pain points. This involves conducting a thorough assessment of their IT infrastructure and processes, identifying areas for improvement, and understanding their business goals. By gaining insights into customer requirements, MSPs can design a service portfolio that addresses their unique challenges.
For example, an MSP might partner with cloud service providers, backup solution providers, virtualization platform providers, and cybersecurity vendors. The goal is to curate a set of technologies that work seamlessly together to meet customer requirements.
The key lies in packaging these services together as a cohesive managed services business model and offering them within a single monthly billed service. By aligning services with specific industries or compliance requirements, MSPs can position themselves as trusted experts and drive growth.
Vendor partnerships are vital for MSPs to deliver high-quality services to their clients effectively. Collaborating with reputable technology vendors provides access to innovative tools, software, and expertise, enabling MSPs to enhance their service offerings. These partnerships also facilitate efficient issue resolution, product training, and marketing support.
Building productive vendor partnerships requires a strategic approach. Collaborating with vendors who offer reliable products with a full feature set, comprehensive support, and attractive pricing helps MSPs deliver exceptional value to clients. Effective vendor management involves regular communication, staying informed about new technologies, and providing feedback for product improvement. Building strong relationships with vendors can lead to exclusive benefits including co-marketing opportunities, technical training, and enhanced customer relationships.
By implementing a robust, well-defined sales and marketing strategy, MSPs can effectively target their desired markets, differentiate their services, establish competitive pricing models, and leverage vendor partnerships to enhance their sales and marketing efforts. MSPs can pursue growth strategies such as customer acquisition, expanding service portfolios, entering new markets, and nurturing client relationships.
A well-executed sales and marketing strategy combined with a strong business value proposition and supported by effective vendor partnerships can help to fuel MSP growth and build a successful MSP business model. Collaborating with vendors is essential for MSPs to access sales training, marketing resources, and technical support. Vendors can offer training programs to enhance the sales skills of MSPs’ teams and provide marketing collateral, co-marketing opportunities, and lead generation to support marketing plans.
Customer service and satisfaction are paramount within managed services. MSPs not only provide technical support but also become strategic partners in managing their customers’ important data, systems, and infrastructure.
Responsiveness and high service levels are essential in providing proactive support, managing critical customer data, and maintaining customer trust. By delivering exceptional customer service, MSPs can not only meet customer expectations but enhance customer satisfaction, build long-term relationships, and establish a positive brand image in a competitive market.
By embracing the MSP business model, understanding different pricing strategies, targeting the right market segment, and establishing productive vendor partnerships, MSPs can build a successful business plan to position themselves for growth and profitability. Parallels RAS (Remote Application Server) is a comprehensive virtual application and desktop delivery solution that can be leveraged by MSPs to deliver virtual applications and desktops to organizations as part of a managed service solution. The seamless integration of Parallels RAS enables MSPs to provide a combined managed IT solution, encompassing virtualization, cloud services, data protection, and cybersecurity. And this enables MSPs to effectively manage and support integrated technologies, providing a comprehensive solution that meets their customers’ evolving IT needs.
Learn more about how to become a Parallels RAS Partner.
If you are running a managed service provider, it is possible that a good amount of your customers come from referrals. These can be a great source of business, especially for those that are just starting up. However, as your company grows, it is important to expand your business without relying too much on referrals while ensuring that you have adequate resources. This is where the MSP business plan enters the picture. Creating a comprehensive MSP business plan can help work your way towards business expansion.
An MSP business plan is a high-level document that defines your strategy, long-term goals, success metrics, pricing, and potential profitability. Having a business plan will help you predict the events that could threaten your business posture. Understanding the cost of IT services will allow you to come up with the perfect budget and maximize ROI for your business.
Now what are the necessary elements when building your MSP business plan?
Mission statement
You need to create a mission statement for your MSP business plan . It should specify the reasons why you do what you do. For example, what value can you offer to customers? Here are some examples where you could take inspiration from:
After coming up with your mission, share it with your team so everyone will be able to live by these values.
MSP Executive Summary
This tells the “why” of your business. Start by determining what market needs does your MSP address. Identifying this is critical because your business’ executive summary must exhibit your goals about the main drivers of your business.
After doing a thorough analysis of your current business and financial situation, you can add your MSP executive model into your business plan . The things that should be included in your executive summary are the overview of the nature of the business, customer description, challenges your MSP try to solve, as well as the services you offer.
An MSP executive summary can save you resources by identifying a defined scope of services and target market. This could help explain to your team what projects and goals should be prioritized.
MSPs are a localized type of companies. In order for you to succeed, you should be able to build a solid client base. Performing a local market analysis will require you to collect information about competitors in your market area, within 10-30 miles of your operations location. Make a research about various pricing strategies, offerings, and the unique services they offer to customers. Know about the demographics of their customers – are they small businesses, healthcare, legal, or manufacturing? Business planning can be seamless once you identify these key market analysis questions.
MSP Operating Plan
Your MSP operating plan will determine how you will perform the work. What people, processes, and technology will you utilize to provide high-quality services? If you are already running an MSP, identify the areas that need to improve.
In addition, you should also consider your own inventory. What products do you need to run your business? Will you require on premise hardware or on demand software? Another question to ask is the location of your MSP.
MSP Financial Planning
When considering your financial plans, you should compute your profit margins and examine your potential revenue sources. Having a strong sense of your financial situation can help move your business forward.
While a break/fix model may have worked for your MSP in the past years, you should consider transitioning clients to a per-user or per-service approach if necessary. Your financial plan should revolve around Key Performance Indicators (KPIs) and business goals. The KPIs should include:
After setting the strategies for your MSP business plan, make sure that they are compliant with the SMART framework. SMART is an acronym that stands for the following elements: Specific, Measurable, Achievable, Relevant, and Time-based. You want to have a clear vision for the future of your company, as well as the goals and objectives for each project that are carefully planned, clear, and trackable.
GET STARTED
Planning can help you achieve the goals you have set for your MSP company.
When organizing your MSP business plan, you should think about your customers, your team, the potential market for your services, and your sources of income.
If you are looking to improve customer experience as part of your business planning, you may use MSP tools provided by ITarian. We offer a centralized platform to reduce operational costs and improve quality of service.
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Written by Dave Lavinsky
Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their IT companies.
If you’re unfamiliar with creating an IT business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. 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 an IT business plan step-by-step so you can create your plan today.
Download our Ultimate Business Plan Template here >
A business plan provides a snapshot of your IT 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.
If you’re looking to start an IT business or grow your existing IT company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your IT business to improve your chances of success. Your IT business plan is a living document that should be updated annually as your company grows and changes.
With regards to funding, the main sources of funding for an IT 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 IT companies.
How to write a business plan for an it services business.
If you want to start an IT 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 IT business plan.
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 IT business you are running and the status. For example, are you a startup, do you have an IT business that you would like to grow, or are you operating a chain of IT businesses?
Next, provide an overview of each of the subsequent sections of your plan.
In your company overview, you will detail the type of IT business you are operating.
For example, you might specialize in one of the following types of IT businesses:
In addition to explaining the type of IT business you will operate, the company overview needs to provide background on the business.
Include answers to questions such as:
In your industry or market analysis, you need to provide an overview of the IT industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the IT 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 IT business plan:
The customer analysis section of your IT business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: individuals, schools, families, and corporations.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of IT business you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, 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.
Don’t you wish there was a faster, easier way to finish your business plan?
With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other IT businesses.
Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of IT consultants, in-house IT support, or do-it-yourself IT tutorials. You need to mention such competition as well.
For each such 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. But you should be able to find out key things about them such as
With regards 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:
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For an IT business plan, your marketing strategy should include the following:
Product : In the product section, you should reiterate the type of IT company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide cloud computing, data center management, or network setup services?
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 products and/or services you offer and their prices.
Place : Place refers to the site of your IT company. Document where your company is situated and mention how the site will impact your success. For example, is your IT business located in a busy retail district, a business district, a standalone office, or purely online? Discuss how your site might be the ideal location for your customers.
Promotions : The final part of your IT 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:
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 IT business, including answering calls, meeting with new clients, billing and collecting payments from clients, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth client, or when you hope to reach $X in revenue. It could also be when you expect to expand your IT business to a new city.
To demonstrate your IT 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 managing IT 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 an IT business or successfully running a small IT consulting service.
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.
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 charge your clients an hourly rate of $250 per hour, and will you work 5 hours per day? 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 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 IT 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.
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 an IT business:
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 your IT credentials.
Writing a business plan for your IT business is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert on IT business planning. You will understand the IT industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful IT business.
Don’t you wish there was a faster, easier way to finish your IT business plan?
Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success. Click here to see how Growthink’s business plan services can give you a winning business plan.
Written by Dave Lavinsky
You’ve come to the right place to create your Managed Service Provider business plan.
We have helped over 1,000 entrepreneurs and business owners create business plans and many have used them to start or grow their Managed Service Provider businesses.
Below is a template to help you create each section of your Managed Service Provider business plan.
Business overview.
Guardian Managed Solutions is a startup managed service provider located in Boston, Massachusetts. The company is founded by Pax Houghton, who has experience in comprehensive IT solutions, along with the expertise of business acumen and team management. Pax Houghton has determined he can confidently start and effectively grow Guardian Managed Solutions company to be relevant to the IT industry and highly-profitable. He believes his experience of strategic growth, marketing skills, financial capabilities, and wide and deep knowledge of IT solutions and practices will provide everything needed for long-term growth and profitability.
Guardian Managed Solutions will provide a comprehensive array of services for a wide variety of clients. Guardian Managed Solutions will be the one-stop solution for all IT needs, providing services and products to each client while supporting the strategic goals of the company. Guardian Managed Solutions will be the ultimate choice in Boston for clients to ensure that every need of the customer is fully and completely met.
The following are the services that Guardian Managed Solutions will provide:
Guardian Managed Solutions will target all businesses who require IT support and infrastructure. Guardian Management Solutions will also target companies that need design and installation of IT structures. Guardian Management Solutions will target clients who require large service contract packages and high-level IT protection behaviors for their infrastructure.
Guardian Managed Solutions will be owned and operated by Vijay Sinek. He recruited his former associate, Jay Hawkins, from their former place of employment to be the Director of Operations for Guardian Managed Solutions.
Vijay Sinek graduated from Cambridge University, U.K. with a bachelor’s degree in technology solution-finding. He earned a full scholarship to attend Cambridge University and completed his degree within three years of enrollment. Vijay is a Upcoming Entrepreneur, as highlighted in the Young Entrepreneur magazine and has been elected to the Young Americans to Watch roll.
Vijay Sinek has been a professional in the IT solutions sector for over ten years. As such, he has extensive knowledge of current and new systems that are being introduced into large and small businesses across the globe. Former clients have already committed to follow Vijay to his new enterprise and are eagerly awaiting the opening of the company.
Jay Hawkins, a former associate in Vijay’s prior business, will be the managing director in Guardian Managed Solutions and will oversee staff positions that work directly with IT systems. He graduated from Brown University with a bachelor’s degree in International Business.
Tabby Townsend is the office manager for Guardian Managed Solutions. She has been a professional office manager for over ten years and has worked with Vijay in his prior position. Her call to the industry began when she experienced a security breach on her own computer twenty years ago.
Guardian Managed Solutions will be able to achieve success by offering the following competitive advantages:
Guardian Managed Solutions is seeking $200,000 in debt financing to launch Guardian Managed Solutions. The funding will be dedicated toward securing the office space and purchasing office equipment and supplies. Funding will also be dedicated toward three months of overhead costs to include payroll of the staff, rent, and marketing costs for the print ads and marketing costs. The breakout of the funding is below:
The following graph outlines the financial projections for Guardian Managed Solutions.
Who is guardian managed solutions.
Guardian Managed Solutions is a newly established, full-service IT solutions provider in Boston, Massachusetts. Guardian Managed Solutions will be the most reliable, cost-effective, and efficient choice for all businesses in Boston and the surrounding communities. Guardian Managed Solutions will provide a comprehensive menu of IT solutions and services for any company to utilize. Their full-service approach includes a comprehensive set of IT support.
Guardian Managed Solutions will be able to manage multiple large, medium and small companies. The team of professionals are highly qualified and experienced in IT services and the attention and care required to build effective systems. Guardian Managed Solutions removes all headaches and issues of the IT sector and ensures all issues are taken care of expeditiously while delivering the best customer service.
Guardian Managed Solutions is owned and operated by Vijay Sinek, a former graduate of Cambridge University, U.K. Vijay has been experienced in the IT solutions sector for over ten years and has extensive knowledge of current and new systems. His expertise includes large and small systems for a wide variety of businesses. He has gained the trust and commitment of several businesses to contract with the new company when it opens based on his past expertise and commitment to managed services at the highest level.
Since incorporation, Guardian Managed Solutions has achieved the following milestones:
The following will be the services Guardian Managed Solutions will provide:
The managed service provider industry is expected to grow over the next five years to over $394 billion.
The growth will be driven by the economic demand that is becoming more and more reliant on IT infrastructure to keep their operations up and running. The growth will also be fueled by software and technology-driven instrumentation that will offer components to service not yet known in the industry. The growth may be driven by larger and higher demand, depending on the efficacy of current systems and the need for change within a decade.
Costs will likely be reduced as systems become more affordable and accessible. IT systems will be a standard feature in small businesses by the end of 2025 and will require little upkeep; this will lower the costs and apply better solutions across the board. Costs will also likely be reduced by a steady stream of young solution providers eager to capitalize on the IT industry by introducing new concepts and commercialization methods.
Demographic profile of target market.
Guardian Managed Solutions will target clients in Boston, Massachusetts. Guardian Managed Solutions will target all businesses who require IT support and infrastructure. Guardian Management Solutions will also target companies that need design and installation of IT structures. Guardian Management Solutions will target clients who require large service contract packages and high-level IT protection behaviors for their infrastructure.
Total | Percent | |
---|---|---|
Total population | 1,680,988 | 100% |
Male | 838,675 | 49.9% |
Female | 842,313 | 50.1% |
20 to 24 years | 114,872 | 6.8% |
25 to 34 years | 273,588 | 16.3% |
35 to 44 years | 235,946 | 14.0% |
45 to 54 years | 210,256 | 12.5% |
55 to 59 years | 105,057 | 6.2% |
60 to 64 years | 87,484 | 5.2% |
65 to 74 years | 116,878 | 7.0% |
75 to 84 years | 52,524 | 3.1% |
Guardian Managed Solutions will primarily target the following customer profiles:
Direct and indirect competitors.
Guardian Managed Solutions will face competition from other companies with similar business profiles. A description of each competitor company is below.
Started by Terri Tracson, Tech Solutions & Service is focused on small enterprises with complex IT needs. This might include a medical device company heavily invested in 3D printing, a security company hosting high-net worth individual securities, or a middle-range growth company requiring specific sets of IT solutions for military-grade needs.
Terri Tracson, a graduate of University of California, Los Angeles, started Tech Solutions & Service after being employed in the industry for ten years. She found that this industry had gaps in service and gaps in solutions to provide the absolute best IT possible. With that, she built an extensive list of clients and opened her own business. Tech Solutions & Service has one focus: providing secure and cost-effective technology solutions that enable all businesses to focus on their core business objectives.
Essential Tech Design was founded in 2022 by Jess and Troy Halston. The two brothers attended Brown University and determined at the same time that the degree they sought was in IT system design. After graduation, the brothers set up Essential Tech Design in silent partnership with their father, Jackson Halston. The focus for Essential Tech Design is one of detailed and customized technology design for businesses with little to no housing space for complex systems. Essential Tech Design offers full package solutions that include complex housing for security systems and small systems for organizations that require specific industrial designs and security protocols alongside.
Healthcare IT Solutions was started in 2020 by Norton Small, a graduate of Boston University in Massachusetts. He holds a master’s degree in IT service and solutions and his company, Healthcare IT Solutions, is designed to meet the needs of clinicians and hospital staff throughout the US. The company owns proprietary IT systems that address every privacy and practical need within healthcare systems and offers a full setup and service package for new clients who buy into long-term contracts.
Healthcare IT Solutions has built systems for over one hundred companies and is known for the creativity of complex solutions found within healthcare management systems. The owner, Norton Small, is known for his interest in cutting edge technology for tomorrow’s IT solutions and invests heavily in startups and other ventures that support new technology and off-the-grid testing processes.
Guardian Managed Solutions will be able to offer the following advantages over their competition:
Brand & value proposition.
Guardian Managed Solutions will offer the unique value proposition to its clientele:
The promotions strategy for Guardian Managed Solutions is as follows:
Word of Mouth/Referrals
Guardian Managed Solutions has built up an extensive list of contacts over the years by providing exceptional service and expertise to former clients. The contacts and clients will follow the company to their new destination to help spread the word of Guardian Managed Solutions.
Professional Associations and Networking
Vijay Sinek will attend all networking associations and trade events within industry sectors. He will also work toward becoming an officer or leading member of each group to grow the recognition of the company he owns.
Website/SEO Marketing
Guardian Managed Solutions will fully utilize their website and engage in SEO marketing to targeted client groups. The website will be well organized, informative, and list all the services that Guardian Managed Solutions provides. The website will also list their contact information and list their past and present IT solutions. The website will engage in SEO marketing tactics so that anytime someone types in the Google or Bing search engine “IT solutions company” or “IT solutions near me,” Guardian Managed Solutions will be listed at the top of the search results.
The pricing of Guardian Managed Solutions will be moderate and on par with competitors so customers feel they receive excellent value when purchasing their services.
The following will be the operations plan for Guardian Managed Solutions. Operation Functions:
Guardian Managed Solutions will have the following milestones completed in the next six months.
Key revenue & costs.
The revenue drivers for Guardian Managed Solutions are the fees they will charge to clients for their services.
The cost drivers will be the overhead costs required in order to staff Guardian Managed Solutions. The expenses will be the payroll cost, rent, utilities, office supplies, and marketing materials.
Key assumptions.
The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.
Income statement.
FY 1 | FY 2 | FY 3 | FY 4 | FY 5 | ||
---|---|---|---|---|---|---|
Revenues | ||||||
Total Revenues | $360,000 | $793,728 | $875,006 | $964,606 | $1,063,382 | |
Expenses & Costs | ||||||
Cost of goods sold | $64,800 | $142,871 | $157,501 | $173,629 | $191,409 | |
Lease | $50,000 | $51,250 | $52,531 | $53,845 | $55,191 | |
Marketing | $10,000 | $8,000 | $8,000 | $8,000 | $8,000 | |
Salaries | $157,015 | $214,030 | $235,968 | $247,766 | $260,155 | |
Initial expenditure | $10,000 | $0 | $0 | $0 | $0 | |
Total Expenses & Costs | $291,815 | $416,151 | $454,000 | $483,240 | $514,754 | |
EBITDA | $68,185 | $377,577 | $421,005 | $481,366 | $548,628 | |
Depreciation | $27,160 | $27,160 | $27,160 | $27,160 | $27,160 | |
EBIT | $41,025 | $350,417 | $393,845 | $454,206 | $521,468 | |
Interest | $23,462 | $20,529 | $17,596 | $14,664 | $11,731 | |
PRETAX INCOME | $17,563 | $329,888 | $376,249 | $439,543 | $509,737 | |
Net Operating Loss | $0 | $0 | $0 | $0 | $0 | |
Use of Net Operating Loss | $0 | $0 | $0 | $0 | $0 | |
Taxable Income | $17,563 | $329,888 | $376,249 | $439,543 | $509,737 | |
Income Tax Expense | $6,147 | $115,461 | $131,687 | $153,840 | $178,408 | |
NET INCOME | $11,416 | $214,427 | $244,562 | $285,703 | $331,329 |
FY 1 | FY 2 | FY 3 | FY 4 | FY 5 | ||
---|---|---|---|---|---|---|
ASSETS | ||||||
Cash | $154,257 | $348,760 | $573,195 | $838,550 | $1,149,286 | |
Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
Inventory | $30,000 | $33,072 | $36,459 | $40,192 | $44,308 | |
Total Current Assets | $184,257 | $381,832 | $609,654 | $878,742 | $1,193,594 | |
Fixed assets | $180,950 | $180,950 | $180,950 | $180,950 | $180,950 | |
Depreciation | $27,160 | $54,320 | $81,480 | $108,640 | $135,800 | |
Net fixed assets | $153,790 | $126,630 | $99,470 | $72,310 | $45,150 | |
TOTAL ASSETS | $338,047 | $508,462 | $709,124 | $951,052 | $1,238,744 | |
LIABILITIES & EQUITY | ||||||
Debt | $315,831 | $270,713 | $225,594 | $180,475 | $135,356 | |
Accounts payable | $10,800 | $11,906 | $13,125 | $14,469 | $15,951 | |
Total Liability | $326,631 | $282,618 | $238,719 | $194,944 | $151,307 | |
Share Capital | $0 | $0 | $0 | $0 | $0 | |
Retained earnings | $11,416 | $225,843 | $470,405 | $756,108 | $1,087,437 | |
Total Equity | $11,416 | $225,843 | $470,405 | $756,108 | $1,087,437 | |
TOTAL LIABILITIES & EQUITY | $338,047 | $508,462 | $709,124 | $951,052 | $1,238,744 |
FY 1 | FY 2 | FY 3 | FY 4 | FY 5 | ||
---|---|---|---|---|---|---|
CASH FLOW FROM OPERATIONS | ||||||
Net Income (Loss) | $11,416 | $214,427 | $244,562 | $285,703 | $331,329 | |
Change in working capital | ($19,200) | ($1,966) | ($2,167) | ($2,389) | ($2,634) | |
Depreciation | $27,160 | $27,160 | $27,160 | $27,160 | $27,160 | |
Net Cash Flow from Operations | $19,376 | $239,621 | $269,554 | $310,473 | $355,855 | |
CASH FLOW FROM INVESTMENTS | ||||||
Investment | ($180,950) | $0 | $0 | $0 | $0 | |
Net Cash Flow from Investments | ($180,950) | $0 | $0 | $0 | $0 | |
CASH FLOW FROM FINANCING | ||||||
Cash from equity | $0 | $0 | $0 | $0 | $0 | |
Cash from debt | $315,831 | ($45,119) | ($45,119) | ($45,119) | ($45,119) | |
Net Cash Flow from Financing | $315,831 | ($45,119) | ($45,119) | ($45,119) | ($45,119) | |
Net Cash Flow | $154,257 | $194,502 | $224,436 | $265,355 | $310,736 | |
Cash at Beginning of Period | $0 | $154,257 | $348,760 | $573,195 | $838,550 | |
Cash at End of Period | $154,257 | $348,760 | $573,195 | $838,550 | $1,149,286 |
What is a managed service provider business plan.
A managed service provider business plan is a plan to start and/or grow your managed service provider business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections. You can easily complete your Managed Service Provider business plan using our Managed Service Provider Business Plan Template here .
There are a number of different kinds of managed service provider businesses, some examples include: Lower-level Managed Service Provider, Mid-level Managed Service Provider, and High-level Managed Service Provider.
Managed Service Provider businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.
Starting a managed service provider business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster. 1. Develop A Managed Service Provider Business Plan - The first step in starting a business is to create a detailed managed service provider business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast. 2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your managed service provider business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your managed service provider business is in compliance with local laws. 3. Register Your Managed Service Provider Business - Once you have chosen a legal structure, the next step is to register your managed service provider business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 4. Identify Financing Options - It’s likely that you’ll need some capital to start your managed service provider business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 7. Acquire Necessary Managed Service Provider Equipment & Supplies - In order to start your managed service provider business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your managed service provider business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.
Without a complete business plan, an enterprise is likely to fail, and managed service providers are no exception. A business plan is an essential item for any MSP that wants growth and profits.
Initially, your IT company might have gained its first clients from referrals or business acquaintances, but by itself, this is an unreliable channel. Growth requires a business plan.
In spite of the importance of a business plan, there are many service providers in the market that operate without one. In this article, we’re going to review how to create an effective MSP business plan that will help you move your business ahead.
First, you should describe your current business situation, what you have now, and how you’ve managed to get to this point. You should provide:
Next, you should gather and summarize information about the other companies currently in your market that offers similar services to similar customers.
Try to find out as much information about your competitors as you can: what they offer, where they advertise, the resources of their capital and other key metrics.
If you still don’t have a mission statement, you absolutely need to create one for your IT services business plan. Your mission statement is the core of your business, and the reason why you do what you do. Of course, the first thing that you may think of is money. But let’s look a bit farther outside of your office. What value can you offer to the world?
Here are some good examples of what a strong MSP strives to do:
Once you establish your mission, share it with your team to make sure that everyone has the same mindset and shares the same values.
To create an effective mission statement, you need to have a clear understanding of where you would like your business to be in one, five and even 10 years.
What would you like your key metrics to be over time? How many clients do you plan to work with, and how much revenue do you want to receive on a monthly basis?
The following are the metrics that can be measured and expressed with the help of precise numbers:
This portion of your MSP business plan should contain a step-by-step guide describing how you plan to reach your goals.
List exactly what should be done on a daily basis, and what functions your employees need to fulfill. What should be done to set up your office? How will you scale your operations to correspond with your future growth? What kind of skills should your workers have?
Review every aspect of your business and list all current operations and any projected future needs that align with your business plan.
As we’ve already stated above, you can’t rely solely on referrals. You should always have a solid marketing plan to attract new customers. Write down the sources that you’re going to use for advertising: your blog, CPC (cost-per-click) or CPM (cost-per-media) platforms to drive traffic to your website, or traditional media such as print and TV/radio advertising. Learn what b2b lead generation tactics you might want to use .
Calculate your advertising budget and how much you expect to pay per lead.
Finally, you should calculate and write down your sales metrics.
How many leads per salesperson do you expect to get per month? How many salespeople do you need in total? How much will each one be compensated per month? How are you going to compensate them for their efforts?
A solid business plan is an advantage for any managed service provider. Knowing what to expect in the near future and beyond can eliminate several headaches for a business owner.
When you know how to compose a business plan, you set up a strategic roadmap for your IT company and have something to show to potential investors. As soon as you implement the plan into your business processes, you will notice the benefits and how much easier your business processes become.
Alexander Negrash is director of marketing at CloudBerry Lab . Read more CloudBerry Lab blogs here .
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From the dawn of the computer age in the mid-20th century to today's digital-first economy, information technology has grown from a niche market to an integral component of global commerce. As IT systems become more complex, so too are the demands placed on businesses to manage them.
Managed service providers (MSPs) are essential to the ever-evolving digital landscape, providing a wide range of services to help organizations maintain, secure, and optimize their networks. For would-be entrepreneurs, starting an MSP can be a great way to leverage knowledge and experience in the IT field to create a successful business.
But while the potential rewards of starting and running an MSP business can be great, getting up and running can take time, dedication, and a thorough understanding of the associated costs and risks. This article will cover the key steps to start an MSP, from honing a skill set and defining a niche to protecting your business.
Many believe that starting an MSP business requires a given provider to offer all-encompassing IT services. But in reality, your skillset and focus will determine the success of your business. With this in mind, identifying an area of expertise, like cloud computing or cybersecurity, is a crucial first step to plotting your company's future success.
In the 1980s, the late Professor Theodore Levitt of Harvard Business School argued that a business's most significant opportunities for growth might not come from broadening its customer base, but rather from narrowing it. By focusing on a particular set of competencies, MSPs can provide their clients with specialized expertise and service tailored to their needs.
In the same vein, MSPs should also be thinking about what an ideal customer would be for them. Defining a target customer profile ensures that you are providing the best possible services for that group, versus trying to be a generalist.
The IT industry encompasses a wide range of services and solutions, so when it comes to establishing an MSP business, distinguishing between those you can offer and those you can't is critical. Identifying the area of expertise and niche of your MSP business will help ensure that you deliver quality services and solutions that meet your customers' needs.
Some key areas to consider:
In the early stages, defining the scope of your operations can be challenging, and it's vital to remain open-minded about the possibility of broadening or narrowing your services offering in the future. For example, are you looking to provide broader IT support, like server and system administration, or deep expertise in a specific area?
Should you provide general help-desk support or specialize in specific fields like cybersecurity? This may be the difference between building an MSP vs. MSSP (managed security service provider). Whether you focus narrowly or broadly, make sure you understand the customer needs in your chosen niche and that you have the resources to provide the best service possible.
In some cases, what services you provide may be impacted by the needs of your customer base. To see why so many businesses need managed services support, check out our eBook, Are managed services the right move for your business?
While providing IT services is the core purpose of any MSP business, entrepreneurs must also understand the financial side of their operation. Before opening for business, understanding profit vs. loss and value vs. cost when offering services and solutions is essential for long-term success.
Most people today have a basic understanding of how to perform a cost-benefit analysis , but many young startups need to take the time to analyze their pricing models thoroughly. How much is each service or solution worth to your customers? How much does it cost to provide them with that service or solution? Is there a better way to structure your pricing model?
These are the questions you must ask yourself when understanding costs and profits. Doing so will help you set prices that will make it possible for you to profit while also ensuring that your customers are getting value for their money.
IT is one of the most rapidly evolving sectors of the global economy. As such, keeping track of industry data will provide crucial insight into how best to structure your enterprise for success. Whether you're considering starting an MSP business or looking to optimize your current operation, read our report, The SMB Opportunity for MSPs: 2021-2026 to gain further insight into the market and uncover strategies for success.
Understanding the theory and fundamentals of growing a business is one thing, but putting it into practice can be challenging. To ensure that you're offering competitive prices while safeguarding your profits, you'll need to develop a pricing strategy that works for your business.
Creating a pricing strategy starts with assessing the market. Researching your competition and understanding their services and prices will help you to position your offerings accordingly. For example, will the MSP model best suit your business, or will structuring your services as a value-added reseller (VAR) be more beneficial? When it comes to MSP vs. VAR , both are viable options, but you want to see what fits your niche in the industry.
Once you understand the nuances of your chosen market, honing in on your target customers will help you develop the best pricing strategy for your business. Are you targeting smaller companies or larger organizations? What services and solutions will they need, and what kind of prices will they be willing to pay? Combining your understanding of the market with your target customer's needs will help you to develop a pricing strategy that allows you to maximize profits while also providing your customers with fair prices.
Starting a business is exciting, but unforeseen costs can quickly derail your progress. Expecting the unexpected and planning for unforeseen expenditures can be the difference between success and failure. While the cost of hardware and software solutions is easy to foresee and plan for, other costs like marketing, travel expenses, and employee training can be more difficult to anticipate.
Think through the services you plan to offer, and make sure to factor in any additional costs associated with them. For example, suppose you are offering managed IT services. In that case, your business will need to factor in the price of hiring and training employees and any additional costs associated with maintaining your customer's systems.
If you're offering remote backup services, you'll need to consider the costs associated with storing your customers' data in secure offsite locations and the costs associated with managing the backups.
Understanding the total cost of providing a service or solution to your customers will help you to create a pricing model that is both competitive and profitable. Automating specific processes and partnering with established vendors allow you to keep costs down while maintaining and potentially improving the quality of your services.
ConnectWise offers tailored software solutions for MSPs that can help to streamline and automate many of the administrative tasks associated with running your business. Our manageable and reliable MSP platform provides a comprehensive suite of tools for planning, executing, and automating operations, freeing up resources and allowing you to focus on what matters most - delivering quality services to your customers.
As an MSP, you'll be responsible for managing mission-critical systems for your customers. As such, you'll need to ensure that you have adequate protection in place for your business and your clients' sensitive data.
Data protection starts with developing policies and procedures to ensure the security of customer data at all times. You'll need to create a data protection policy, document best practices for handling customer data, and define roles and responsibilities so that your team knows what is expected of them.
In addition, investing in robust cybersecurity solutions like firewalls and antivirus software can help to detect cybersecurity threats . Maintaining regular backups of customer data can facilitate faster recovery in a disaster, and investing in insurance policies can help provide additional protection in the event of a breach.
Protection also means legal support for your business as well. Establishing a strong managed services agreement will help set expectations with your clients in terms of your working relationship.
To offer quality services, your team must have the right skills and experience. Training can ensure that employees have the necessary knowledge to provide high-level services.
Find out what certifications and qualifications are recommended for your services and create a training plan outlining the steps needed to achieve those goals. A business is only as strong as its team, so developing your personnel is crucial to scaling your business.
To dive deep into how these pieces come together, download our eBook, How to Successfully Grow and Scale Your Business , today.
Creating detailed documentation of services and processes is critical to running an MSP business. A well-documented system enables your team to refer back to instructions quickly and reduces the risk of mistakes. This also helps to free up resources so that employees can focus on providing quality services.
When creating documentation, make sure to:
Clearly defined and documented processes help ensure your team can efficiently and accurately manage customer systems.
Building relationships with customers, peers, and vendors will help to foster a sense of community and create opportunities for collaboration. Utilizing customer feedback to identify market trends can help you stay ahead of the competition, while keeping up to date with industry trends can help you stay on top of new services and technologies.
Creating relationships with peers helps promote a sense of community and engagement in the industry, while partnering with established vendors helps you to keep costs down. Engage your partners in conversations to share industry insights and develop strategies for success.
In today's world, networking is essential for growing and scaling your business, and investing time in building relationships can significantly impact your enterprise's continued success.
The good news here is that there are already several existing communities for new and veteran MSPs to come together and share knowledge. ConnectWise’s IT Nation is the foremost global community of peers, thought leaders, and experts in the industry.
In managed services, reliability and consistency trump glamor and flash. Managed service providers must deliver reliable and consistent services, so feel free to be boring.
As you begin your journey, developing a solid business model that emphasizes reliability and consistent service delivery should precede flashy marketing and gimmicks. A solid foundation built on reliable and consistent service delivery will help ensure your business's long-term success.
The goal of any managed service provider should be to become a trusted partner, not just a vendor. By offering value-added services, such as proactive maintenance and customer education, you can differentiate yourself from other providers and become a trusted partner in the eyes of your clients.
With the current economic headwinds, it’s easy to fall into the mindset that this is a bad time to start an MSP, or any business for that matter. Not necessarily. Compared to other industries out there, the outlook looks brighter for new MSPs that are able to demonstrate value to their clients.
The main reason for this is that MSPs, by nature, help small businesses with automation and efficiency. These are two factors that are essential for businesses right now, so that makes a lot of opportunity for a new MSP. Worldwide IT spending is actually expected to increase 2.3% in 2023, so be ready to take advantage.
Starting an MSP business is a big step, and while it can be overwhelming, providing world-class service at the forefront of the IT industry is incredibly rewarding. Whether you're just starting or looking to scale an existing business, you need both a comprehensive strategy and the right tools. ConnectWise’s Business Management suite can help ensure your MSP business is positioned for success and efficiency for years to come. Contact us and our team of experts to help you get started.
The cost of starting an MSP business will depend on several factors, including the size and scope of the business, the services you will offer, and the tools needed for operations. Managed service providers typically require investments in software , hardware, and personnel training, as well as infrastructure costs such as office space and internet access.
Managed service providers should consider investing in professional liability insurance, which provides coverage for claims arising from negligence or errors and omissions. Another item to invest in is cyber liability insurance, which covers recovering from a cyber attack or data breach.
Managed service providers can offer a variety of benefits to their clients, including cost savings, increased efficiency, and improved security. By outsourcing IT needs, businesses can free up resources to focus on core business activities and reduce operational costs. MSPs can also provide businesses with comprehensive IT support services, such as proactive maintenance, remote monitoring, patch management, and data backup and recovery.
Starting an MSP business is no small task, but with the right tools and a solid plan, you can set yourself up for success. Determine the size and scope of your business, develop a comprehensive strategy that outlines services, pricing models, and marketing plans, and invest in the necessary hardware and software to get started.
Network, network, network. Building relationships with potential clients and developing a referral base is critical to getting your name out there and acquiring new customers. Investing time in industry events, webinars, and marketing activities can help you reach more people and grow your business.
A successful MSP business is built on quality service, reliable customer support, and up-to-date technology. Invest in training and certifications to stay ahead of the curve, develop strong partnerships with vendors, and keep an open line of communication with customers.
Managed service providers are generally very profitable. With a growing demand for IT services, an MSP business can provide a steady income from customer contracts and consulting fees. Investing in the right tools, building relationships with clients, and offering value-added services can help ensure that your MSP business is thriving.
The average size of an MSP varies, but most are small businesses with fewer than 50 employees. Many larger organizations have multiple locations and hundreds of employees, while smaller companies may have just one office and a few staff members. The size of your MSP will largely depend on your customer base and the services you offer.
A road map to building a profitable MSP practice
ServiceDesk Plus MSP Resources What is a Managed Service Provider (MSP)?
Today’s managed service providers (MSPs) are not just helping organizations with the day-to-day functioning of their IT infrastructure but also assisting them in keeping up with the latest tools, trends, and industry best practices. For instance, MSPs not only deal with small issues like printer malfunctions and password resets but also help in securing data from breaches that could harm an organization financially and impact its image among customers.
Managed services is no longer a new concept. It is estimated that over 75 percent of Fortune 1000 companies outsource all or at least some part of their IT infrastructure to an MSP or value-added reseller (VAR).
Having said that, the managed services industry is still developing. A lot of MSPs are struggling to retain their clients, and a lot of VARs and system integrators (SIs) are still skeptical about becoming an MSP.
This guide is designed to steer you in the right direction when it comes to making decisions about IT services and managed services. Whether you're just starting up, have been in business for a while but are still struggling to grow, or want to take your MSP business to the next level, this guide will help you achieve your goals.
In this guide, we’ll discuss how to build the right kind of offers for your clients, the basics of client onboarding, the issues that MSPs face, best practices, and a lot more to help you successfully grow your MSP business.
IT has taken the driver’s seat in most businesses, and the level of focus it takes to manage IT infrastructure sometimes ends up swaying an organization from focusing on their business goals. This is where the concept of a managed services provider (MSP) comes into the picture. They handle the management of technologies along with core IT maintenance functions, such as break/fix and patching.
An MSP is a company that provides managed services to organizations, which usually involves remotely handling their entire IT infrastructure or a part of it as mentioned in the service-level agreement (SLA) between the two parties. Pricing models for MSPs may be tier-based, à la carte, value-based, etc. The subscription-based pricing model makes it easier for organizations that want expert services, the latest tools, and to only pay for the resources they use. Services such as 24x7 monitoring, issue resolution, network security, and IT asset management all come under the scope of MSPs.
Unlike traditional IT service providers, MSPs tend to take 360° responsibility for the services that are outsourced to them instead of just providing on-demand services. They act as IT consultants and provide expert advice when their clients need to make strategic IT decisions. More and more organizations are opting for MSPs in order to reduce their IT risks and be ready for any future technological disruptions .
When it comes to outsourcing, there are two types of service providers:
Break-fix service providers
Break-fix service providers are fine for organizations that do not need heavy IT assistance, but those that do will end up paying a lot more than what MSPs charge for the same services if they go with a break-fix service provider.
Managed services are proving to be a boon to all organizations, especially for small and medium-sized businesses (SMBs). By 2018, about 39 percent of SMBs used managed services in some capacity while the entire MSP market stood at $180.5 billion. This number has only increased, standing at $223 billion in 2020.
Break-fix service providers deal with every issue as a separate case, and charges for on-site visits are their major source of revenue. Therefore, some break-fix service providers may take longer to fix an issue to drive up the number of on-site visits. On top of that, there are a few other issues with such service providers, such as:
The benefits of MSPs over traditional/break-fix service providers
Trained, expert IT professionals
Eliminates the need to get any accreditation
No build time involved
Stays up-to-date with the latest technology
Implements industry best practices
Managed services are proving to be a boon to all organizations, especially for small and medium-sized businesses (SMBs). By 2018, about 39 percent of SMBs used managed services in some capacity while the entire MSP market stood at $180.5 billion . This number has only increased, standing at $223 billion in 2020. SMBs and large enterprises consider MSPs their trusted partners, as they have been interacting with them for all of their IT needs day in and day out.
The most successful MSPs:
An MSP’s job is to ensure that their client’s business is functioning smoothly 24x7. To accomplish this, an MSP will perform routine hardware maintenance tasks to avoid downtime and outages, provide continuous help desk and remote IT support, automate security patches and software updates, and even help with IT consulting.
MSPs also provide expert advice whenever required, as they come with industry experience in putting the right tech in the right areas.
MSPs know that a client's data security is a top priority, as an MSP’s entire business depends on clients trusting them with their IT infrastructure and personal data. Any breach in security could potentially damage their client's image and subsequently their own. This is why MSPs go above and beyond to protect their clients’ data with fully managed and layered network security in order to avoid cybersecurity threats, preserve business continuity, and avoid any type of data loss. Apart from that, MSPs also play a huge role in data backup and disaster recovery.
Service delivery being the most important capability, MSPs design networks and data centers that will be resilient in the face of IT infrastructure problems. MSPs’ data centers are much more robust than a standard enterprise IT service provider’s , ensuring that even if there’s trouble in the MSP’s main offices, the flow of services will not stop. This acts as an added layer of security for an MSP’s clients.
An MSP’s main objective is to prevent problems and maintain business continuity. To meet that goal, MSPs find, implement, and manage a solution that fits their client's business needs.
They help their clients with budgeting (understanding current expenditure in order to cut costs and allocate resources accordingly), planning (understanding long-term and short-term needs to find technology solutions that scale with their business), and implementing the latest solutions.
In order to scale, every business needs to innovate. And on that path, organizations may need to perform certain time-consuming, stressful, and resource-intensive activities, such as migrating to the cloud or switching to different software.
An MSP can be a boon to an organization for such activities. They help organizations save precious time and resources by taking up IT projects (whether large or small), spending less money by implementing best practices , and providing cost-effective ways to implement new technologies .
So far, we've already established that organizations are drawn towards MSPs. A question arises here:
What is it exactly that organizations are expecting to get out of these services?
Research indicates that the services offered by MSPs are not necessarily the only reasons why organizations consider hiring an MSP. Organizations are looking for a wide range of benefits when they decide to invest in a managed services model. The following are the reasons organizations decide to go with an MSP (based on the research mentioned above):
Cost-effectiveness:.
Outsourcing services to an MSP offers an organization the ability to significantly cut operational expenses thanks to the MSP’s constantly upgraded technology and expertise in the field, helping to control IT costs and saving the organization's resources from menial tasks and processes such as hardware issues and other general break-fix services.
MSPs adhere to an SLA that's shared with the client and includes the client’s precise requirements. An SLA helps ensure timely service delivery and efficient management of hardware and software, in turn boosting the client’s productivity.
Apart from that, subscription-based pricing (discussed in detail in the " Pricing models of managed IT services " chapter) makes an organization’s expenditure on outsourced business processes and functions predictable, which helps in keeping the organization’s budget in check.
Apart from the latest tech, MSPs also come with well-qualified, trained, and experienced IT professionals who are equipped to handle certain tasks that an organization's resources are not built to handle, neither are they supposed to. This frees up IT teams to focus on strategic initiatives.
Sometimes an organization requires a specific ability once in a blue moon. In such cases, an MSP can help an organization avoid the expense of training internal staff for skills that are rarely required.
Be it day-to-day IT help desk activities, network monitoring , or management of IT assets, MSPs can expertly provide 360-degree management of outsourced business functions and processes.
As a business grows, certain business functions and processes may become the responsibility of the IT team, swaying them from their original objectives or simply remaining incomplete because they’re beyond the team’s scope or capacity.
Capabilities such as updating and patching systems, backing up data, and generating reports on how well IT infrastructure is functioning can be outsourced to MSPs, shifting the focus of IT departments back to uplifting their business via innovation and revenue-generating activities.
Businesses need to scale up or down as demand fluctuates. When a business expands, unexpected hurdles may arise. To deal with this internally, a business will need to add or remove a substantial amount of resources. Organizations aren’t typically ready to make these adjustments when it comes to IT requirements.
This is where an MSP’s ability to rapidly accommodate IT changes helps a business stay productive and avoid downtime. MSPs can provide the necessary amount of services and support as and when required and handle any IT issues that arise on the way.
MSPs proactively identify opportunities for improvement to support their clients' business objectives.
Millions of businesses fall victim to hacking due to poor network security. Many SMBs go out of business every year because of security breaches, as customers lose trust and shift to competitors. With the exception of huge conglomerates, implementing a separate IT team just to ensure data security can burn a big hole in a business’s pocket.
MSPs can offer proactive security solutions to help avoid security breaches. Their services include constant monitoring of servers and websites, performing data backups, and immediately alerting the organization upon noticing any suspicious activity.
Staying technologically compliant is imperative for organizations to stay in business. There are rules and regulations set by certain governing bodies that organizations need to follow. For less established organizations, handling compliance on their own can be a nightmare.
MSPs are likely familiar with the compliance regulations that organizations are required to follow and can easily point out the areas that require work and help find solutions. An MSP will notify its clients of the expiration dates of their software licenses periodically, keep clients' payment information secure, and ensure that its clients’ security practices are compliant with the current rules and regulations.
When an organization has a global business presence, working hours shift from 9-5 to 24x7, and so does the need to have a system in place to deal with all sorts of IT issues. MSPs offer 24/7 support, 365 days a year. With SLAs in place, MSPs ensure service continuity and remain highly responsive whenever required.
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When running a small business, there are always a lot of tasks to juggle. IT issues will often pop up at the most inconvenient times, acting as both a distraction and a possible setback. With 31.7 million small businesses in the US representing 47.1% of the total workforce, IT problems are common across many industries. Although they take up a significant part of the economy, their challenges are more impactful due to their size.
According to the Bureau of Labor Statistics , 80% of small businesses make it through their first year. 50% are around after five years. And this progressively drops to a 20-year 15% survival rate. Several factors create those rates. There’s a globally high technology adoption rate, where 93% of adults use the internet , making more than just a storefront needed. Small businesses are expected to have an online presence too.
With the internet being essential, it’s also exposed small businesses to more threats than ever before. Alarmingly, 60% of hacked small businesses go out of business within six months. Whether attempting to steal credit card information or ransoming valuable data, they can damage companies and customers alike. That has created a demand for managed IT services for small businesses.
What Is a Small Business? What Are Managed IT Services for Small Businesses? What Types of Services Can They Provide? Why Not Just Use In-house IT? Top 7 Challenges Faced by Small Businesses
Cybersecurity Technology Changes Money Management Overworking Customer and Client Needs Troubleshooting IT Preparing for the Future
Top 7 Benefits of Using Managed IT Services for a Small Business
Better Cybersecurity Improved Productivity Scalable IT Services Experienced IT Staff Reduced Costs On-demand Support Maintaining IT Compliance
Cutting Costs with Small Business Managed IT Small Businesses Can Afford Industry-standard IT Services Learn How Managed IT Services Can Help
A small business is an independently owned and operated company with fewer employees and revenue than a standard-sized business. They often focus on a specific commercial industry or economic sector. This targeted approach allows them to compete with larger organizations and doesn’t require as much revenue to stay profitable.
Managed IT services offer third-party support with any IT-related issue or project, bringing broader expertise to small businesses. That removes the need for in-house IT staff. Since they work with multiple clients across many industries, they have insight into the latest issues and innovations. They can react to problems as they develop and proactively implement new hardware and solutions to help companies stay competitive.
MSPs can provide many types of IT services requested by small businesses. Consultations and assessments are also available for those unsure of what they need. These are catered to the company’s needs, goals, and future expectations. Through this process, they can prioritize areas of greater improvement while minimizing costs by not implementing unneeded solutions. Some of the services offered are:
IT consultants can recommend services based on their needs, allowing small businesses to receive customized support. Every company has unique functions or products, which means IT can benefit them diversly. Managed IT services aim to match the solutions to those specialized needs.
Many small businesses have at least one person to rely on for basic IT needs. Whether they’re a trained IT engineer or simply the most experienced person in the room, there’s a limitation to the time, resources, and knowledge to handle major problems and provide routine support. That can be inefficient and can have severe consequences if something is outside the scope of what they can address.
Hiring internal IT staff can also be an expensive and risky approach. It requires upfront funding to get them trained and integrated. An IT specialist can cost an average of $54,495 a year, while the median for cybersecurity experts is $120,708 annually. That can go upward depending on location, demand, and experience. Since they’re on staff payroll, they’re also being paid for lull periods when there’s nothing to do.
Since the staff member is internally trained, all the risk and liability go to the small business. If they’re dismissed, it requires restarting the process anew. It can take anywhere from 8 to 26 weeks for a new worker to reach full productivity. IT professionals are on the higher end of that scale.
Besides those factors, they may also be missing the knowledge necessary to handle every problem. Their understanding centers on the company’s focus areas, preventing them from acquiring the broader experience of small business outsourced IT. As a result, in-house staff isn’t always equipped to handle every problem.
Small businesses face many challenges beyond what they can quickly solve as a self-run entity. These can come in many shapes and sizes. Some can be prepared for, while others may be unexpected and only happen in specific situations.
Most organizations store a lot of valuable information. There’s a variety of threats, like viruses, ransomware, and hackers whose goal is to exploit any weaknesses they can find. Whether it’s ransoming a database or collecting information to sell to third parties, the end goal of cybercriminals is to make money off the small business’s data.
Technology continues to change steadily, with innovations shifting the way businesses, customers, and clients interact. Online shopping is one example, with 74% of adults doing it in some form. Having an online presence and website-based retail has become important for those who don’t visit in person.
There are a lot of risks with starting up a company, and a lot of them revolve around money management. Most people don’t have the luxury of significant outside investments, meaning their success or failure relies on their ability to be profitable. Having the proper accounting and payroll tools can go a long way in tracking money and costs.
Employees and owners alike may have to wear many hats within a small business. That means filling in multiple roles to keep things functional, leading to overworking and higher fatigue without proper workload management. In the long run, this can be damaging to a company as burned-out staff are less productive and may provide lower quality work.
Like with technology changes, customer and client needs can shift over time. They might expect new services while society’s needs continue to evolve. These might be completely different from state to state in countries like the US. Keeping up with these can be challenging, especially with IT, where mistakes can be costly.
A full-time worker spends 22 minutes a day , on average, troubleshooting IT problems. That translates to 95 hours a year, or almost 2 ½ weeks of lost productivity. Depending on the issue or job, it may take additional time to get back on task after a distraction.
Anticipating future changes in IT is not an easy task. Whether it’s a new security issue or a fresh digital innovation, two main factors are involved: reaction and preparation. Both parts can be complex, especially without specialists who can answer questions, anticipate problems, and support setting up new systems.
Competition with larger organizations means finding ways to get higher quality solutions at a fraction of the cost. With the help of managed IT services, small businesses can better use money through several benefits offered.
MSPs use a variety of digital tools to help keep clients safe. That includes endpoint protection like antivirus, firewalls, DNS filters, and spam detection to counteract most threats to your devices and networks. By combining those with monitoring software, an IT specialist can quickly respond to anything that manages to bypass those layers of protection.
With overworking being an ongoing concern, managed IT services can help reduce some workloads and improve employee efficiency through additional software tools and staff training. By reducing worker strain, there is less likely to be a drop in productivity that can accompany burn-out.
There’s no one-size-fits-all solution to the services that a small business needs. Customers and clients can be variable, products offered will differ, and the tools that employees use may change over time. With scalable IT services, it can be customized to individual needs and adapt to changes in operational scale.
Managed IT services have access to a larger pool of employees due to their organization specializing in providing IT and managing multiple clients. Since all the staff is well trained and certified, they have expanded knowledge and ability compared to an in-house team. That allows them to help with common problems and have outside-the-box thinking with complex and unexpected issues.
Training IT staff and providing the needed experience can be costly for any small business. Finding the right solution can also be the difference between improvement and years of spendy IT maintenance of a poorly designed system. Managed IT services remove the risk of in-house IT staff and directly implement the best and most cost-effective solutions.
Organizations never know when a problem will emerge, even with a strong IT foundation. Instead of wasting time troubleshooting IT issues, helpdesk services can provide on-demand support for issues of any size. Assistance can arrive even during off-hours, as many small business IT companies will provide 24/7 helpdesk services with an emergency contact line.
Meeting IT compliance is essential for cybersecurity and meeting compliance requirements within many industries. Assessing infrastructure for compliance is a complicated role and requires someone with specialized experience. Managed IT services can do all the heavy lifting by ensuring compliance is up to par.
For a small business, managing IT problems can be a big and expensive task that they aren’t always equipped to handle. Relying on employees to troubleshoot their issues can lead to large drops in productivity as time spent dealing with IT problems is time not used on doing their job. That being said, hiring a full-time IT technician can be expensive and unnecessary since they won’t be needed or best used much of the time. That’s where having a small business managed IT team can help companies cut costs while offering a higher level of service.
Instead of hiring an employee full-time, you’re only paying for working hours and core user support, which decreases the overall price. That ensures the company budget goes towards services being received and is not spent on an employee who uses a lot of their time simply waiting for problems to happen. That makes it both a more affordable and more effective use of a limited budget.
Using small business managed IT services isn’t just about cutting costs but is also about receiving industry-standard IT. Even at their best, a single in-house IT technician can’t handle the output of a whole team of IT specialists. When an emergency happens, a solo technician will be underequipped and leave companies with much longer periods of downtime. That not only lowers the revenue of a small business but can also harm the experience of its customers.
By using managed IT services for small businesses, that problem is avoided due to IT companies maintaining a larger pool of employees. That means industry-standard IT support is within reach even for small businesses on a tighter budget. Scalable services are what is keeping that more affordable. If a problem only requires a simple fix by one person, then that is what’s provided. If disaster strikes and a larger team is needed to react quickly and solve a significant issue, that’s also available on demand. Using a scalable approach to IT has allowed even small businesses to afford top-tier IT services.
Managing a small business can be an expensive and hard task. With everything from equipment costs and incorporation fees to office spaces and inventory management, upfront and monthly expenses can quickly grow. Cybercriminals are a constant threat too. As each day brings new situations and unexpected challenges, building a solid IT foundation helps financially and can boost productivity in many areas.
Whether a stable specialty store or a new start-up, operating costs are central to the function of any small business. Without revenue, there is no company. Outsourcing with managed IT services can help cut expenses while better utilizing available resources. Staff can focus on their business and worry less about their IT systems by letting third parties handle IT functions.
Running a small business isn’t easy. ITonDemand’s managed IT services offer an experienced team to take on any IT challenge. We provide fully outsourced IT or can partner with in-house staff to better utilize them. Our client-first approach will help you get the most out of your money while keeping your IT costs down with the right tools and software. Your technology should work with you, not against you. With help from ITonDemand, we can make that happen.
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Updated: Sep 26, 2022, 12:00pm
Definition of a managed service provider, common msp coverage areas, how does an msp work, benefits of using an msp, how to find an msp, is an msp right for your business, frequently asked questions (faqs).
An organization responsible for managing and delivering services to another organization as per their requirement is called a managed service provider (MSP). The services provided by an MSP typically are ongoing and remote. Traditionally, an MSP was used to manage or deliver information technology (IT) services like infrastructure, security, networking and applications. But a modern-day managed service provider may also manage an organization’s other business needs, such as staffing, payroll , customer engagement and vendor management.
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In this article, we will discuss what an MSP does, what are the benefits of using an MSP and how you can find the MSP right for your business.
A service provider that manages one or more of your business areas to maintain business continuity on a day-to-day basis is a managed service provider. MSPs are used as strategic partners to improve operational efficiency of businesses of all types and sizes from small to medium-sized (SMBs) to government agencies and nonprofit organizations.
Managed service providers have a pool of experts that can handle the most complex business processes. Thus, through MSPs, you get access to the best talent and latest technology available in the market without costs increasing quickly.
You can find a managed service provider to handle almost all your business processes. Traditionally, when IT infrastructure became crucial for business success, organizations started outsourcing their IT processes including Infrastructure installation and management, networking, security and data warehouses, this gave them access to the MSP’s expertise and capabilities without incurring high costs.
The same principle is now applied to any business processes in which organizations do not have in-house expertise and setting up the capabilities would require diverting resources from more important activities. For instance, with hybrid work models and multiple categories of employees―full-time, part-time, freelance, contractual and more―in every organization, human resources has become a complex process. So, many businesses choose to outsource their different human resources (HR) activities to professional employer organizations (PEOs) .
Business processes that are usually outsourced to a managed service provider includes:
Once you have selected an MSP and the contracts and service-level agreements (SLAs) are in place, the service provider starts by fully analyzing the outsourced processes. This enables them to identify how to maximize resource utilization and reduce costs while improving process efficiencies. Their experts also identify challenges within your processes, which you might not have been able to do yourself.
Based on the analysis and liabilities and risk identification, the service provider builds a fully customized solution and provides ongoing maintenance and support for the outsourced processes.
Current business landscape is highly competitive and it makes sense for businesses to focus on their core competency. However other departments like staffing, HR , payroll and benefits administration, IT infrastructure and applications, are crucial for smooth running of the overall business.
MSPs have expertise in the processes that they manage. So, when you hire an MSP for noncore processes, you and your team can focus on activities that drive growth while ensuring that other processes are also being run by experts and not getting neglected. Here are some benefits of hiring an MSP:
Before you find an MSP to manage a business process/area, you need to assess your needs and decide on a budget for it. Ask yourself―do you have the necessary in-house expertise to handle the processes you are planning to outsource. If you have the expertise, is it available freely or will you need to reallocate from other projects? Also, you need to consider if you will need to hire more people.
If you do not have the necessary expertise in-house, what will be your expenditure in the short-term, such as initial establishment costs, and then the recurring costs in the long term if you want that capability in-house. You should be spending less than that amount on the managed service provider.
Once you have decided that hiring a managed service provider would be more efficient and cost-effective, make a shortlist of eight to 10 MSPs. Research into their past performance, available team of experts and testimonials from past clients to understand if they will be able to meet your needs.
Remember that it is not necessary that they have a prior experience that is identical to your requirements. If they have the necessary expertise and the willingness to provide what you want, that should suffice.
Talk to the service providers representatives and understand how they will be managing and maintaining the services. This will help you in comparing the shortlisted MSPs and reaching a conclusion. Needless to add, the MSP must be able to work within your budget.
An MSP with a proven track record of success is best for you but if someone is new but willing to learn and provide excellent services, you should be open to trying them out. Changing MSPs frequently does not bode well for business continuity and growth. So, explore their company culture and try to judge if you would be able to forge a long-term relationship with them.
An MSP should cost less than it takes you to set up the capability in-house. While calculating the cost of setting up the in-house team, take into account not the initial fixed cost of hiring and buying tools but also recurring costs of employee payment and engagement.
A managed service provider is responsible for delivering services, such as IT infrastructure and maintenance, security, payroll and benefits administration, vendor management, HR, and customer relationships management (CRM) to your business. They are further responsible for the day-to-day administration and management of these services.
The business area that you have outsourced is typically managed by the MSP using SaaS. The application creates users with requisite permissions, and they can use the application as if it were running in-house.
A seasoned small business and technology writer and educator with more than 20 years of experience, Shweta excels in demystifying complex tech tools and concepts for small businesses. Her work has been featured in NewsWeek, Huffington Post and more. Her postgraduate degree in computer management fuels her comprehensive analysis and exploration of tech topics.
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Whether there are trained professionals on staff or a small group of technology-minded employees brought in to mind the IT, most business’s “IT” is not covered by their area of expertise.
While it is tempting to keep everything internal, modern cloud, mobile, and IoT computing make the need for properly managed IT essential to businesses of any size.
Managed IT services plans consist of multiple types of managed services that are bundled together for purposes of customer convenience and cost savings. The term “fully managed” means that the managed service provider functions as the customer’s full IT department, while the term “co-managed” means that IT management responsibilities are distributed across the customer and their IT service provider. Managed IT services plans generally provide a combination of proactive and responsive IT support to customers, helping them to proactively maintain their IT infrastructure but also responding quickly to any technical support issues that arise. Managed IT services plans commonly include offerings such as managed patching, help desk services, infrastructure monitoring and alerting, application management, and technical consulting.
Support care.
Foundational IT Services for Businesses Seeking a Fully Outsourced IT Department
NexusTek Support Care is a fully managed IT service plan that was specifically designed to function as a business’ full IT department. Our certified engineering team provides your business with both proactive and responsive support to maintain the health of your IT infrastructure. The plan includes remote engineers who will provide you with expert consultation and support on IT matters ranging from day-to-day technology issues to long-term planning. Providing an additional layer of support, our 24-hour help desk is there to assist your employees to resolve any technology issues that may arise.
Proactive IT Maintenance & Security for Businesses Seeking a Fully Outsourced IT Team
NexusTek Total Care is a fully managed IT service plan that delivers the support of a full IT team, fortified by the security that today’s businesses need. In addition to infrastructure and user support services to keep your IT healthy and running smoothly, the Total Care plan also protects your business with a multi-layered cybersecurity defense. With a combination of preventive and responsive solutions, the Total Care plan reduces the likelihood of cyberattacks while also ensuring a swift, effective incident response should an attack occur.
The complexity of the modern IT infrastructure offers countless opportunities to businesses. Even small and medium-sized businesses (SMBs) are taking advantage of all that technology has to offer the business world. With cloud computing, the explosion of business applications that have hit the market, and the variety of device types from laptops to servers to IoT devices, needless to say the management of the average business’ IT landscape has gotten quite complicated. When you partner with NexusTek for a managed IT plan, your business gets the luxury of taking advantage of all that modern technology has to offer, with the convenience of an expert team of technicians to manage the complexity such technology brings. With NexusTek as your managed service provider, you can focus on using your IT to make your business a success, while we focus on making your technology work for you.
NexusTek offers a Virtual CIO or vCIO with any of its managed IT plans as an add-on service. The vCIO is an executive-level technology leader who possesses in-depth knowledge on both technology and business, as well as the interconnections between the two. As technology has advanced and become more complex (and pervasive) over the years, business leaders increasingly recognize that a business’ IT cannot truly be separated from its business strategy. Thus, it is important to create an IT strategy that is aligned with your business strategy. This is easier said than done, as business leaders are not typically well versed in IT, and IT leaders may not have much experience with the principles of business management. A vCIO does have knowledge of both areas, however, and because of this can provide invaluable insights that business leaders can use to make more informed and strategic IT decisions. With NexusTek as your managed service provider, you can add a vCIO on an ongoing basis, effectively adding a technology leader to your executive team. Or you can add a vCIO on a time-limited basis, which may be useful when planning IT overhauls or for IT assessments in areas like cybersecurity, modernization, or IT spend.
NexusTek’s Managed Care plans were created to match what the majority of businesses are looking for when seeking fully outsourced IT services. However, some businesses may need a different level of support than our fully managed IT plans offer. In this case, we suggest reviewing our Co-Managed IT Service Plan, which was designed for businesses seeking a customized, co-managed IT partnership that allows them build upon their existing IT capabilities. We encourage you to connect with one of our expert technology consultants, who will learn more about your business’ specific needs and determine whether a customized plan might be feasible. To connect with a technology consultant to discuss your business’ IT support needs, you may call, email, or submit an online request. Click on the “Contact Us” option on the upper right-hand corner of our website for details.
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Bitcoin financial services firm Swan Bitcoin pulled its plan to take the company public, discontinued its managed mining unit and cut staff across several units.
Swan CEO Cory Klippsten said in a social media post that the company will still offer bitcoin {{BTC}} financial services and free bitcoin education. "Without the expectation of significant near-term revenue from our Managed Mining unit, we are pulling our plans to IPO in the near future," Klippsten wrote in the X post.
"Accordingly, Swan is pulling back from our accelerated spending plan for our core financial services business. Unfortunately, this includes staff cuts across many functions," he added.
ANNOUNCEMENT - @Swan is unlikely to continue with our Managed Mining business in the near term. Without the expectation of significant near-term revenue from our Managed Mining unit, we are pulling our plans to IPO in the near future. Accordingly, Swan is pulling back from our… — Cory Klippsten 🦢 #Bitcoin is for everyone (@coryklippsten) July 22, 2024
The move comes at a time when the mining landscape has become more competitive after the recent Bitcoin halving , which cut the block rewards by half. The availability of spot bitcoin exchange traded-funds (ETFs) have also deterred many investors from the mining industry, shutting some doors to capital for miners. As a result, many miners are struggling to keep their business profitable by being pure-play mining operations and pivoting some of their infrastructure to serve artificial intelligence and cloud computing-related services.
Despite the Bitcoin halving making the mining ecosystem tougher and less profitable to navigate, several private miners are still vying to go public following bitcoin's record high earlier this year. Genesis Digital Assets , formerly backed by FTX's Sam Bankman-Fried, and two of Northern Data's units were among other firms reportedly planning IPOs.
Earlier this year, Swan said it will go public within the next 12 months and the mining unit had 160 megawatts (MW), or 4.5 exahash per second (EH/s), worth of computing power up and running.
At the time, the firm also said that the mining business has been funded by institutional investors, with more than $100 million and hopes to raise more capital to expand its operations. Tether was among the backers of Swan's managed mining service, with as undisclosed amount of investment into its business.
Read more: Bitcoin Halving Is Poised to Unleash Darwinism on Miners
UPDATE (July 22, 18:29 UTC): Adds additional context in the last paragraph about Swan's $100 million funding and investors.
This story originally appeared on Coindesk
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Crowdstrike outage explained: what caused it and what’s next, a crowdstrike update caused a massive it outage, crashing millions of windows systems. critical services and business operations were disrupted, revealing tech reliance risks..
What might be considered the largest IT outage in history was triggered by a botched software update from security vendor CrowdStrike, affecting millions of Windows systems around the world. Insurers estimate the outage will cost U.S. Fortune 500 companies $5.4 billion.
The outage occurred July 19, 2024, with millions of Windows systems failing and showing the infamous blue screen of death ( BSOD ).
CrowdStrike -- the company at the core of the outage -- is an endpoint security vendor whose primary technology is the Falcon platform, which helps protect systems against potential threats in a bid to minimize cybersecurity risks.
In many respects, the outage was a real manifestation of fears that computing users had at the end of the last century with the Y2K bug. With Y2K, the fear was that a bug in software systems would trigger widespread technology failures. While the CrowdStrike failure was not Y2K, it was a software issue that did, in fact, trigger massive disruption on a scale that has not been seen before.
The CrowdStrike Falcon platform is widely used by organizations of all sizes across many industries. It is the pervasiveness of CrowdStrike's technology and its integration into so many mission-critical operations and industries that amplified the effect.
The outage was not a Microsoft Windows flaw directly, but rather a flaw in CrowdStrike Falcon that triggered the issue.
Falcon hooks into the Microsoft Windows OS as a Windows kernel process. The process has high privileges, giving Falcon the ability to monitor operations in real time across the OS. There was a logic flaw in Falcon sensor version 7.11 and above, causing it to crash. Due to CrowdStrike Falcon's tight integration into the Microsoft Windows kernel, it resulted in a Windows system crash and BSOD.
The flaw in CrowdStrike Falcon was inside of a sensor configuration update. The sensor is regularly updated -- sometimes multiple times daily -- to provide users with mitigation and threat protection.
The flawed update was contained in a file that CrowdStrike refers to as "channel files," which specifically provide configuration updates for behavioral protections. Channel file 291 is an update that was supposed to help improve how Falcon evaluates named pipe execution on Microsoft Windows. Named pipes are a common type of communication mechanism for interprocess communications on Microsoft Windows.
With channel file 291, CrowdStrike inadvertently introduced a logic error, causing the Falcon sensor to crash and, subsequently, Windows systems in which it was integrated.
The flaw isn't in all versions of channel file 291. The problematic version is channel file 291 (C-00000291*.sys) with timestamp 2024-07-19 0409 UTC. Channel file 291 timestamped 2024-07-19 0527 UTC or later does not have the logic flaw. By that time, CrowdStrike had noticed its error and reverted the change. But, for many of its users, that reversion came too late as they had already updated, leading to BSOD and inoperable systems.
Microsoft estimated that approximately 8.5 million Windows devices were directly affected by the CrowdStrike logic error flaw. That's less than 1% of Microsoft's global Windows install base.
But, despite the small percentage of the overall Windows install base, the systems affected were those running critical operations. Services affected include the following.
The outage grounded thousands of flights worldwide, leading to significant delays and cancellations of more than 10,000 flights around the world. In the United States, affected airlines included Delta, United and American Airlines. These airlines were forced to cancel hundreds of flights until systems were restored. Globally, multiple airlines and airports were affected, including KLM, Porter Airlines, Toronto Pearson International Airport, Zurich Airport and Amsterdam Schiphol Airport.
Public transit in multiple cities was affected, including Chicago, Cincinnati, Minneapolis, New York City and Washington, D.C.
Hospitals and healthcare clinics around the world faced significant disruptions in appointment systems , leading to delays and cancellations. Some states also reported 911 emergency services being affected, including Alaska, Indiana and New Hampshire.
Online banking systems and financial institutions around the world were affected by the outage. Multiple payment platforms were directly affected, and there were individuals who did not get their paychecks when expected.
Multiple media and broadcast outlets around the world, including British broadcaster Sky News, were taken off the air by the outage.
In this podcast, TechTarget Security editors Rob Wright, Alex Culafi and Arielle Waldman assess last week's CrowdStrike outage and the organization's response.
CrowdStrike's software doesn't just run on Microsoft Windows; it also runs on Apple's macOS and the Linux OS .
But the July outage only affected Microsoft Windows. The root cause of the outage was a faulty sensor configuration update that specifically affected Windows systems. The channel file 291 update was never issued to macOS or Linux systems as the update deals with named pipe execution that only occurs on the Microsoft Windows OS.
The way that the Falcon sensor integrates as a Windows kernel process is also not the same in macOS or Linux. Those OSes have different integration points to limit potential risk.
However, there was a reported incident in June from Linux vendor Red Hat, where the Falcon sensor -- running as an eBPF program in Linux -- triggered a kernel panic. In Linux, a kernel panic is a type of crash, though typically not as dramatic as BSOD. That issue was resolved without Red Hat reporting any major incidents.
Discover the possible consequences of relying on a concentrated and interconnected pool of vendors for all your infrastructure needs.
What happens when the IT infrastructure is too big to fail?
CrowdStrike chaos shows risks of concentrated big IT
CrowdStrike disaster exposes a hard truth about IT
CrowdStrike itself was able to identify and deploy a fix for the issue in 79 minutes. While CrowdStrike quickly identified and deployed a fix for the issue, the recovery process for businesses is complex and time-consuming. Among the issues is that, once the problematic update was installed, the underlying Windows OS would trigger BSOD, rendering the system inoperative using the normal boot process.
IT administrators had to manually boot affected systems into Safe Mode or the Windows Recovery Environment to delete the problematic channel file 291 and restore normal operations. That process is labor-intensive, especially for organizations with many affected devices. In some cases, the process also required physical access to each machine, adding further time and effort to the process.
Some businesses were able to apply the fix within a few days. However, the process was not straightforward for all, particularly those with extensive IT infrastructure and encrypted drives. The use of the Microsoft Windows BitLocker encryption technology by some organizations made it significantly more time-consuming to recover as BitLocker recovery keys were required.
It is estimated that it could potentially take months for some organizations to entirely recover all affected systems from the outage.
Bitlocker workaround may offer aid for crowdstrike customers, crowdstrike: 97% of windows sensors back online after outage.
CrowdStrike outage underscores software testing dilemmas
While the outage was not due to a cyberattack, threat actors have taken advantage of the incident .
According to a blog post from CrowdStrike, the security vendor has received reports of the following malicious activity:
CISA urges individuals and organizations to only follow instructions from legitimate sources and avoid opening suspicious emails and links.
The CrowdStrike Windows outage highlighted the vulnerabilities of modern society's heavy reliance on technology. While system backups and automated processes are essential, having manual procedures in place can significantly enhance business continuity during tech outages.
But there are a few things businesses can do to be better prepared for tech outages, including the following.
It has been a best practice for years to allow automated updates to ensure systems are always up to date. However, the CrowdStrike issue laid bare the underlying risk with that approach. For mission-critical systems, testing updates before deployment or having some form of staging environment before pushing updates to production might help to mitigate some risk.
Manual workarounds ensure critical business processes can continue even when technology fails. This approach was common before the digital age and, in the event of outage, can serve as a fallback. Documenting and practicing manual procedures can help mitigate the effect of outages, ensuring businesses can still operate and serve their customers, even during an outage.
Outages happen for any number of different reasons. Having extensive disaster recovery and business continuity practices and plans in place is critical. Part of that effort should include the use of redundant systems and infrastructure to minimize downtime and ensure critical functions can switch to backup systems when needed.
Sean Michael Kerner is an IT consultant, technology enthusiast and tinkerer. He has pulled Token Ring, configured NetWare and been known to compile his own Linux kernel. He consults with industry and media organizations on technology issues.
For more information about the CrowdStrike outage, read the following articles:
Is today's CrowdStrike outage a sign of the new normal?
CrowdStrike chaos casts a long shadow on cybersecurity
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Frequently asked questions (faq), how interest rates affect the stock market, how to invest in stocks: a step-by-step guide for beginners.
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Looking to maximize your money and beat the cost of inflation ? You want to invest in the stock market to get higher returns than your average savings account. But learning how to invest in stocks can be daunting for someone just getting started.
When you invest in stocks , you're purchasing a share of a company. They're basically a slice of ownership in a company that can yield returns if it's successful. There are various ways to invest and leverage your money. But there's a lot to know before you get started investing in stocks.
It's important to know what your fundamental goals are and why you want to start investing in the first place. Knowing this will help you to set clear goals to work toward. This is a crucial first step to take when you're looking to create an investing strategy later on.
If you're unsure of your goals, first review your financial situation, such as how much debt you have, your after-tax income, and your expected retirement goal date. Knowing when you plan to retire can let you know your overall time horizon — or how much time you plan to hold onto your investments to reach your financial goal.
Based on that information, you can start figuring out your investing goals. Do you want to invest for the short or long term? Are you saving for a down payment on a house? Or are you trying to build your nest egg for retirement? All of these situations will affect how much — and how aggressively — to invest.
Finally, investing, like life, is inherently risky And you can lose money as easily as you can earn it. For your financial and mental well-being, you want to consider your appetite for risk. This is typically referred to as "risk tolerance" or how much risk you can reasonably take on given your financial situation and feelings about risk.
Once you've got some solid goals set, it's time to review your budget. Here are some things to consider:
All of these are key ingredients that can help you determine your budget.
One last thing to consider: when you expect to retire. For example, if you have 30 years to save for retirement, you can use a retirement calculator to assess how much you might need and how much you should save each month. When setting a budget, make sure you can afford it and that it is helping you reach your goals.
Now it's time to start doing research on what to invest in. There are different ways to invest in the stock market and there's a lot to know so doing your research is well worth your time. As a regular person who is investing (not a professional trader, accredited trader, or institution), you're what's called a "retail investor."
Stocks are a good option to consider if you want to invest in specific companies. Just keep in mind that you should look into the company itself and how it's performing over time:
"If you're going to pick a stock, look at the [company's] financial statements and select the stock based on the "bucket" you're trying to fill in your portfolio. For example, are you looking for a dividend stock? Look at the dividend history. Are you looking for a growth stock? Look at the earnings per share : Is it showing consistent growth? [Consider] how these indicators measure against [its] peer group," says Amy Irvine, a CFP® professional at Rooted Planning Group.
So you want to take steps to look at your income and expense balance sheets and make sure you're hitting the right bucket — which refers to the grouping of related assets or categories — for your investing needs. For example, investing in small-cap, mid-cap, or large-cap stocks, are a way to invest in different-sized companies with varying market capitalizations and degrees of risk.
If you're looking to go the DIY route or want the option to have your securities professionally managed, you can consider ETFs, mutual funds, or index funds:
You want to get familiar with the various types of investing vehicles and understand the risks and rewards of each type of security. For example, stocks can be lucrative but also very risky. As we mentioned before, mutual funds are actively managed, whereas index-based ETFs and index funds are passively managed.
This is important to keep in mind because your costs and responsibilities vary depending on an active versus passive approach. Mutual funds are professionally managed and may have higher fees. With ETFs and index funds, you can purchase them yourself and may have lower fees. Having a diverse portfolio can help you prepare for the risk and not have all of your eggs in one basket.
"You can choose to invest in individual stocks, a stock mutual fund, or an ETF. ETFs are somewhat similar to mutual funds in that they invest in many stocks, but trade more similarly to an individual stock," explains Kenny Senour, CFP® professional at Millennial Wealth Management. "For example, let's say you open a brokerage account with $1,000. You can use that money to purchase a certain number of shares in ABC Company, the underlying price of which fluctuates while the stock market is open. Or you could choose to invest it in a stock mutual fund, which invests in many different stocks and is priced at the close of each market at the end of the day."
The main things to consider when defining your investment strategy are your time horizon, your financial goals, risk tolerance, tax bracket, and your time constraints. Based on this information, there are two main approaches to investing.
After choosing your investment strategy, you want to choose an investing account that can help you get started. Decide if you want to do it yourself or get a professional to help out.
If you want to be a passive investor and DIY, you can look into:
If you want to get started with active investing, you can use:
When considering active versus passive investing and if you should DIY it or get a professional, you want to consider several factors. Look at total fees, the time commitment involved and any account minimums as well.
The easiest way for many people to get started with investing is to utilize their employer-sponsored 401(k). Talk to your employer about getting started and see if they'll match part of your contributions.
The key is to choose an investment account that fits with your budget and investment strategy, open an account, and then submit an initial deposit. Just know that when you submit money, it's in a cash settlement account and not yet actively invested (I made this mistake when I first started investing!)
Now it's time to start managing your portfolio. So that means buying stocks, ETFs, or index funds with their appropriate codes from your account. That is when your money is actually invested.
But it doesn't stop there — you also want to continue to add to your portfolio so consider setting up auto-deposits each month. You can also re-invest any earnings or dividends to help build growth over time.
Diversify your portfolio by investing in different types of investment vehicles and industries. A buy-and-hold approach is typically better for beginner investors. It can be tempting to try out day trading, but that can be very risky.
Lastly, you'll want to rebalance your portfolio at least once a year. As your portfolio grows and dips, your asset allocation — or how much you've invested in stocks, bonds, and cash — will have shifted. Rebalancing is basically resetting that to the proportion you want.
"Rebalancing is the practice of periodically selling and buying investments in your underlying portfolio to make sure certain target weights are stable over time. For example, let's say you are an aggressive investor with 90% of your portfolio in stocks and 10% of your portfolio in bonds. Over time, as stocks and bonds perform differently, those weights will drift," explains Senour.
"Without periodic rebalancing, your portfolio could become 95% stocks and 5% bonds which may not be in line with your intended financial goals for the account. There's no "perfect" time frame for rebalancing as some financial professionals suggest doing so every quarter, but conventional wisdom says at a minimum rebalancing at least once per year can make sense."
Continuing to invest money and rebalance your portfolio periodically will help you keep your investments in good shape.
Choosing stocks can be overwhelming for beginners — but you don't have to just invest in individual stocks. It can be less risky (and good for diversifying your portfolio) to invest in funds.
You may choose to invest in an index fund, which is a group of assets that tracks an index such as the S&P 500 or the Dow Jones Industrial Average.
Investing in individual stocks can be useful. However, you should thoroughly research the company before doing so. And as a beginner, you'll probably want to seek advice from an expert like a financial advisor .
Learning how to invest in stocks can be overwhelming, especially if you're just getting started. Figuring out your goals and determining a budget are the first steps to take.
After that, get acquainted with various investment vehicles and choose the right ones for your financial goals and risk tolerance.
The key is to get started and be consistent. The best investment strategy is the one you'll stick with. Just be aware all investing comes with risk and do your research on any related fees.
Investments come in many forms. If you want to start investing, understanding the main types of investments is helpful.
You may hear the breakdown of investment types as asset classes. Here's a look at some of the most common types of investments.
Over time, inflation can erode the purchasing power of your dollar, and also chip away at your investment returns. But with some foresight and planning, it's possible to protect your money. The solution is investing for inflation — choosing investments that will give you a return greater than the current rate of inflation — or at least keep up with it.
Several asset classes in particular lend themselves to inflation-oriented investing.
Growth stocks are shares of companies that are expected to experience high growth rates in both their revenue and returns to investors. Growth stocks are those that investors believe will have higher-than-average returns in the short term, while value stocks are those that investors feel are overlooked by the market at large. They are more volatile than value stocks, but they also have the potential to generate higher returns.
Value stocks, on the other hand, are shares of companies that trade at a lower price relative to the company's financial performance. They are measured and defined by their financial performance, such as sales, earnings, and select financial ratios.
Another way of looking at the difference between the two: Growth stocks would be the expensive designer jacket, value stocks would be the jacket at the thrift store.
The Fed meets eight times per year to discuss the federal funds rate, and investors tend to react to what occurs once the notes of the meeting have been released. During these meetings, the Fed uses economic data like the Consumer Price Index (CPI), the unemployment rate, and more to determine what the Fed Funds rate should be.
The stock market reacts to the changes in the interest rates because it generally signals whether or not the economy is strong. It could also have an impact on a company's cost to doing business, thus changing how investors may value a company. This is because of the impact that interest rates have on the stock market.
Here are the ways interest rates affect the stock market:
1. When rates rise, stocks tend to fall — when rates fall, stocks rise
"When interest rates are low, companies can assume debt at a low cost, which they may use to add team members or expand into new ventures," says Harrison. "When rates rise, it's harder for companies to borrow and more costly to manage what debt they already have, which impacts their ability to grow," he adds. These higher costs may result in lower revenues, thus negatively impacting the value of the company.
Also keep in mind that as rates fall on savings accounts and certificates of deposit, investors generally seek out higher paying investments like stocks and are generally seen as a catalyst for growth in the market; in a rising rate environment investors tend to shift away from stock to places with less risk and safer returns.
2. The rates impacts bonds
Most traditional bonds pay a fixed interest rate through maturity. For example, if you own a 10 year bond paying 3% per year, the 3% annual payment will not fluctuate. However, if interest rates are cut during the life of the bond, the value of the bond rises. This is because as new bonds are issued, it is unlikely that they will be as attractive financially. The opposite is true in a rising rate environment.
3. Investor expectations can cause volatility
In some cases, how investors feel about the prospects of an interest rate hike or cut can cause the market to swing. Due to announcements by the Fed and other economic data, investors may anticipate a threat of rising rates and begin selling causing short term volatility. This was the case at various points in 2018 and 2021. Investors can do the same and expect a drop in interest rates. In either case, the market can react simply to these expectations of a change in rates without the Fed actually making a move.
Trading and investing are two different ways of approaching the stock market. With trading, you're hoping to earn quick returns based on short-term fluctuations in the market. Long-term investors, in contrast, tend to build diversified portfolios of assets and stay in them through the ups and downs of the market.
Trading can be a thrilling way to earn quick cash. However, like with gambling, it can also quickly lead to big losses. Investing usually means smaller short-term wins, but also fewer severe losses.
If you're comfortable with the risks, trading with a portion of your money can be enjoyable and could lead to profits. If reducing risk and exposure to volatility are your main goals, you'll want to stick with long-term investing. But if you're saving for a financial goal you hope to reach by a specific time, a slow-and-steady investing approach is usually best.
The first step is choosing a brokerage account. It may be important to you to use a large, widely recognized company like Charles Schwab or Vanguard. Or you might prefer a robo-advisor, like Wealthfront or Betterment. You'll also want to look at which types of assets you can invest in with a brokerage, and how much each of your top options charges in fees.
Once you've chosen your brokerage, you should be able to apply online. Open the account, deposit money into it, then invest that money in stocks or other assets.
Investing as a beginner can be safe if you do your due diligence. Funds, rather than individual stocks, tend to be safer investments. You can also use a robo-advisor or in-person advisor for a fee to help you decide how to invest. It's important to look at the best financial advisors to ensure you're making wise decisions with your investments.
Yes, it can be worth it. More and more brokerages are starting to offer fractional shares. Let's say a share of a stock costs $100, but you only have $20. With a fractional share, you can buy $20 worth of that share.
Investing in the stock market always comes with risks — it's possible to lose any money you put in. But there's also a chance that your money will grow. If you invest a small amount now, that amount might not be so tiny later.
Investing is the process of putting your money to work for you. Investors buy an asset with the hopes of making money from it either from increases in the price or through regular interest or other income. While investing comes with risks, it offers an opportunity to grow your funds.
Investors purchase an asset with the hopes that it will appreciate in value or generate income. Appreciation happens when an asset, like a share of stock, grows in value over time. Many investors purchase assets with the goal of creating an income stream, like a property to producing rental income or securities that make regular payments to the holders. Investors interested in income generation might be drawn to stocks that pay dividends or fixed-income assets like bonds that make regular interest payments.
Also known as ordinary stock, common stock is a type of investment asset or security. Each share of stock represents a tiny portion of ownership of a company. Although you can own shares in any sort of company or investment enterprise, the term "common stock" mainly refers to stock in a publicly traded company, as opposed to a privately held one.
Preferred stock is a type of equity (ownership) security issued by companies to raise money. Preferred stocks pay a higher, fixed dividend than common stock, but their share prices don't appreciate as much as common shares do. Preferreds are best for institutional investors or sophisticated individuals who want them for tax reasons and can weather the risk of the shares being recalled.
A shareholder is an individual or entity — such as a company or organization — that owns stocks in a particular company. If you invest in the stock market, you're already considered a shareholder, or what is also referred to as a stockholder. Shareholders, as part owners of a company, also have the right to vote in some cases regarding matters of the company and can receive dividend payouts when the company is doing well financially.
Impact investing is buying shares in a company that's designed to have a positive effect on society. These companies have a "double bottom line," focused both on turning a financial profit and making a measurable, positive impact on a social need in the process. This could be through generating renewable energy, making only eco-friendly and sustainably produced products, or financially empowering workers in emerging economies.
Passive investing, also known as passive management, says that, while the stock market does experience drops and bumps, it inevitably rises over the long haul. So, rather than try to outsmart it, the best course is to mirror the market in your portfolio — usually with investments based on indexes of stocks — and then sit back and enjoy the ride. Simple to understand and easy to execute, passive investing has become the go-to approach for many investors.
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Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.
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The rooftop where a gunman shot at former President Donald Trump during a campaign rally was identified by the Secret Service as a potential vulnerability in the days before the event, two sources familiar with the agency’s operations told NBC News.
The building, owned by a glass research company, is adjacent to the Butler Farm Show, an outdoor venue in Butler, Pennsylvania. The Secret Service was aware of the risks associated with it, the sources said.
“Someone should have been on the roof or securing the building so no one could get on the roof,” said one of the sources, a former senior Secret Service agent who was familiar with the planning.
Understanding how the gunman got onto the roof — despite those concerns — is a central question for investigators scrutinizing how a lone attacker managed to shoot at Trump during Saturday’s campaign event.
The Secret Service worked with local law enforcement to maintain event security, including sniper teams poised on rooftops to identify and eliminate threats, Secret Service spokesman Anthony Guglielmi said. But no officers were posted on the building used by the would-be assassin, outside the event’s security perimeter but only about 148 yards from the stage — within range of a semiautomatic rifle like the one the gunman was carrying.
The Secret Service had designated that rooftop as being under the jurisdiction of local law enforcement, a common practice in securing outdoor rallies, Guglielmi said.Butler County District Attorney Richard Goldinger said his office maintains an Emergency Services Unit team, which deployed four sniper teams and four “quick response teams” at the rally. But he said the Secret Service agents were in charge of security outside the venue.
“They had meetings in the week prior. The Secret Service ran the show. They were the ones who designated who did what,” Goldinger said. “In the command hierarchy, they were top, they were No. 1.”
Goldinger said the commander of the Emergency Services Unit told him it was not responsible for securing areas outside the venue. “To me, the whole thing is under the jurisdiction of the Secret Service. And they will delineate from there,” he said.
The former senior Secret Service agent also said that even if local law enforcement “did drop the ball,” it’s still the agency’s responsibility “to ensure that they are following through either beforehand or in the moment.”
“Just because it is outside of the perimeter, it doesn’t take it out of play for a vulnerability, and you’ve got to mitigate it in some fashion,” the source added.
A volley of shots rang out minutes into Trump’s speech. He reached for his right ear — he said later it was pierced by a bullet — then dropped to the ground as Secret Service agents rushed to shield him. Trump emerged with blood on his ear and his face. One attendee was killed , and two others were injured.Witnesses listening to Trump’s speech from outside the event’s security perimeter recalled pointing out the gunman to law enforcement a couple of minutes before the shooting began. After the gunfire started, Secret Service personnel shot and killed the 20-year-old gunman, Thomas Matthew Crooks .
The clamor over the Secret Service’s biggest failure since the shooting of President Ronald Reagan in 1981 is coming from both political parties, from former agents and from security experts.
“My question is: How did he get onto that roof undetected?” said Anthony Cangelosi, a former Secret Service agent who worked on protective details for presidential candidates, including John Kerry in 2004.
The Secret Service’s work on campaign events like Saturday’s begins with advance planning, setting up a security perimeter and positioning teams on the ground and on rooftops — often in partnership with local law enforcement. The ground deployments include a counterassault team, and the rooftop personnel include counter-sniper teams.
Guglielmi, the Secret Service spokesman, said the agency had two of its counterassault agents at the event and filled out the rest of the platoon with at least six officers from Butler County tactical units. The Secret Service also deployed two counter-sniper teams. Two other security units needed for the event were staffed by local law enforcement agencies, Guglielmi said. Those details were first reported by The Washington Post.Investigators will want to examine the Secret Service’s site security plan for the rally, said Cangelosi, the former Secret Service agent. He expects they’ll discover one of two things: Either officials failed to make an effective plan for keeping potential shooters off the building Crooks fired from, or officers on the ground failed to execute the plan.
“I don’t like making any assumptions, but it does look like some mistakes were made, that this was preventable,” said Cangelosi, now a lecturer at John Jay College of Criminal Justice in New York.
Although it’s common to task local law enforcement agencies with patrolling outside an event’s security perimeter, Cangelosi said, the ultimate responsibility for ensuring that all vulnerabilities are covered rests with the Secret Service.
If officials had placed an officer on the building where the gunman fired from, Cangelosi said, chances are he “wouldn’t even attempt what he attempted.”
“You don’t surrender the discretion of what’s supposed to be done to the local police,” he said. “In other words, you guys have the outer perimeter, but you would want to say, ‘We need an officer on that roof.’ Not ‘that’s your responsibility; do what you see fit.’”
Jim Cavanaugh, a retired special agent in charge with the Bureau of Alcohol, Tobacco, Firearms and Explosives who has worked on Secret Service details, told NBC News that while the Secret Service did a good job taking out the gunman after shots began, the failure to post officers on the building he scaled was “a tremendous lapse.”
“The only way to stop that is you have a lot of people, you get there first, and you command the high ground,” Cavanaugh said. “This is basic, and the Secret Service has done it for years successfully, so I’m really surprised that they did not have that high ground covered.”
The questions extended to Congress, where members demanded answers from the Secret Service and its parent agency, the Department of Homeland Security.“This raises serious concerns regarding how a shooter was able to access a rooftop within range and direct line of sight of where President Trump was speaking,” House Homeland Security Committee Chairman Mark Green, R-Tenn., wrote in a letter to Homeland Security Secretary Alejandro Mayorkas.
Green asked Mayorkas to provide documentation relating to the event’s security plan, the screening of attendees and the level of resources provided to Trump’s Secret Service detail. A committee spokesperson told NBC News that Republican members would hold a briefing with Secret Service Director Kimberly Cheatle on Monday “to voice their concerns and ask pressing questions.”
Another lawmaker, Rep. Ruben Gallego, D-Ariz., wrote Cheatle asking who approved the security plan, whether a proper threat assessment was conducted, whether attendees raised alarms and whether there were failures in following protocols that allowed the attack to happen.
“I call on all those responsible for the planning, approving, and executing of this failed security plan to be held accountable and to testify before Congress immediately,” Gallego wrote in a letter to Cheatle .
Robert McDonald, a former Secret Service agent who ran protection for Joe Biden when he was vice president, told NBC News that he believes the assassination attempt will prompt soul-searching and procedural changes at the agency.
“The Secret Service is going to need to ask some hard questions of itself here and be prepared to stand up and represent why, what happened,” McDonald said.
Cangelosi, the former Secret Service agent, said investigators are also likely to ask when agents identified Crooks as a potential threat, how they reacted and whether it’s possible they could have taken him down before he fired at Trump.Secret Service snipers are trained to make rapid decisions, he said. But it’s possible that if they noticed Crooks on the roof but couldn’t tell whether he had a rifle, agents might have waited to fire on him.
“If the sniper can’t tell whether he has a gun, he or she is not going to take the shot,” Cangelosi said. “Because God forbid it’s a child who’s just excited to see a political candidate, right? So you want to make sure that there’s actually a threat.”
If there was uncertainty, Cangelosi said, it’s possible the sniper team would have dispatched officers to investigate and confirm. But investigating a potential threat can take minutes, he said, while a gunman with a semiautomatic rifle can fire several shots in a matter of seconds.
That’s why, Cangelosi said, the best defense would have been to plan ahead to keep the shooter off the roof in the first place.
“Who wants to be in that position?” he said of the snipers protecting Trump on Saturday. “You’ve got to make a split-second call. And imagine if you’re wrong.”
Sarah Fitzpatrick is a senior investigative producer and story editor for NBC News. She previously worked for CBS News and "60 Minutes."
Julia Ainsley is the homeland security correspondent for NBC News and covers the Department of Homeland Security for the NBC News Investigative Unit.
Mike Hixenbaugh is a senior investigative reporter for NBC News, based in Maryland, and author of "They Came for the Schools."
Andrea Mitchell is chief Washington correspondent and chief foreign affairs correspondent for NBC News.
Jon Schuppe is an enterprise reporter for NBC News, based in New York.
COMMENTS
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