Inside SMB Owner’s Mind: Negotiating Managed Services Agreements

We discussed negotiating a managed services agreement with an SMB that is looking to switch to another service provider. The MSP was surprised that whatever they were offering was not accepted, while they were offering all the good stuff — improve reliability and security, implement a robust business continuity plan, and refresh the software the business runs.

The proposal was an obvious “yes” for the MSP and an obvious “no” for the SMB because they had different views on the proposal. What seems to be a reasonable thing to do for the MSP to deploy more software was just the increase in the technology cost and decrease of margin for the business owner. The business owner wants to increase margin, getting more efficiency from the technology and the new MSP partner for their business — reducing the cost of doing business and the cost of the headcount.

Therefore, the negotiation hits the wall. One party suggests decreasing the margin, while the other wants to increase it.

The way to unblock it is to go beyond the current state of the business and discuss what can be done on the technology side and which tools relevant to the company can be deployed to increase employee productivity, resulting in business growth.

For instance, it is deploying Microsoft 365, improving collaboration and processes, enabling businesses to provide services to more customers and increasing revenue. Or reducing time and administrative overhead and freeing up the time of employees and contractors on hourly rates by deploying applications that automate accounting and billing.

It is essential to start by discussing what is important for the business owner — increasing their profits.