Why MSP Clients Leave 2024

Common reasons clients of MSPs leave is the topic of today’s topic. I want to talk about the common misconceptions that tend to be repeated by service providers and if it is possible to reverse the damage once it has been done as well as discuss whether you want to keep the client even if you could.

The best way of determining why clients leave their previous service provider is to ask new MSP clients why they chose the expensive and time consuming path of leaving. The reasons given will all be the same and will allude to incompetence. How and who you ask these questions will allow you to see through to the real reason why they decided to move on.

While you are here, Take a look at some of our other Technical Consulting related articles below that may interest you:

• Onsite Visits For MSPs And How Often?
• Managing Your Own Documentation - Is There A Better Way?
• How Important Is Improving Client Technical Ability?
• Are There Clients Not Worthy Keeping - Should They Be Fired?
• Do You Have Difficult MSP Clients Or Is It You?

New Clients And Old MSPs

In my 20 plus years of working in and around service providers, I have yet to come across a new client who was not in some way critical of the previous service provider's ability to undertake the work required.

It has always confounded me because most MSP clients do not possess the knowledge or ability to critique what makes an MSP proficient as far as the technical side of things go. That is most often the exact reason they are hiring an MSP.

Something that is even crazier, the incoming MSP always believes the new clients perspective, hook line and sinker every time “Look at how these clowns have not even setup a proper backup for this client, they should be locked up the incompetent halfwits”

The client gets a chubby over you confirming their significant and costly decision of moving service providers was a good one and you as the incoming MSP gets to feel the romance of being desired and wanted for your no doubt unsurpassed combination of talent, experience and knowledge.

Has anyone ever seen a client onboarding go any other way?

Avoiding The Important Questions

I am sure the more sophisticated providers out there tend to have a screening process to avoid onboarding clients that will cost you rather than save you money and there are plenty out there.

Less experienced MSPs, you need to pay attention to this. There are a small yet significant number of companies who always look for weak and inexperienced MSPs that they can use and abuse for 12 to 18 months before they do a rinse and repeat cycle often owing significant sums of money.

Take them to court you say? Enjoy that countersuit for 10 times what they owed in unpaid invoices. Sure if you actually go to court and fight it their counterclaim will fall apart but that takes time, effort and most of all, lots of money which they know you do not have being a new business.

They are on the lookout for MSPs that are relatively new and are desperate for new business. Anyone who has started an MSP from scratch knows how difficult those first few years are prior to reaching the critical mass required to attract interest without much direct effort.

Other companies know that you will pretty much say yes to anything at this point. By understanding this motivation we can see one of the reasons a small yet significant number of clients will leave.

It is important to note that this is not a huge risk for more mature MSPs for two reasons, one, the experienced MSP will have a selection criteria and checklist for who they take on as clients and second, these unscrupulous organizations know that larger older MSPs have the funds to defend as well as attack and so avoid them.

Think of how any predator stalks its prey, they always go after the small and the weak. Business is no different.

The most important question you need to ask is “Why did you leave your last MSP?” It is not so much asking that question but asking the right people that question to get a feel for the real reason they left.

Discrete questions to the staff at the audit phase of the onboarding before an agreement has been signed is a great place to obtain intelligence as to if the prospective client is a good candidate for your organization.

Attempting to obtain reasons for the split with both executives and technical support of the previous MSP is a gold mine of information if you can crack that nut. 

Remember, these guys are in the same industry as you, they live a life and experience and have the same difficulties as your company does, if you can get on their side and allow them to see that you are not just an adversary then not only does it make the client onboarding so much easier, you may uncover information that forces you to reconsider taking on the potential new client.

MSP Clients Rarely Leave Due To Technical Reasons

I guarantee that almost every new client will allude to the previous service provider as incompetent in some way. You will rarely get specific events that demonstrate this incompetence and one of the questions you really need to ask when onboarding a new client is for the specific technical events that caused the relationship to fracture.

I mean what is the point of taking on a new client if you uncover the fact that they have unfairly and unreasonably behaved towards the last MSP? Take away the warm glow of gaining a profitable new client for a second and spend some time analyzing things critically because it is better to have no client than to have an unreasonable client who costs you more than they bring in.

Unless you can pinpoint ongoing specific instances of technical and or service related incompetence then you have to assume that the last MSP was doing their job correctly and there was some other motivation for the client terminating the agreement.

Predatory MSP Client Behavior

We need to check this off the list and ensure the reason your prospective new client did not leave their old MSP was because they are a predatory business who loves up new service providers every 18 months often leaving massive debts they know full well the MSP does not have the funds to chase.

There are tools that allow you to look up a prospective client's financial and legal history at least here in the United States. They cost money however are worth every cent. 

If there is a mismatch in the obvious maturity of the prospective client as in they have been around many years however their history only goes back a year or two then that is a huge red flag. 

Bad companies often change their name and company structure every few years so it makes it harder to track their misdeeds. My recommendation is do not take a client who has a mismatch between their actual history and their official history.

Of course there are valid reasons such as merging or being bought out however the client should not be hesitant to give you the full details of their corporate history including when they were operating as a different entity.

Many do not try and hide their past and so if you find the potential new MSP client is in court more often than they are running their business and those court records are for non payment of invoices and or countersuits for technical incompetence then you need to hire an ex olympic sprinter to help you run from this potential client because they absolutely intend to assault you financially.

In summary, when it comes to predatory MSP clients, intelligence is key as well as to push down that desire as a growing business, to take on every client that says yes. Over the long term the MSPs that are selective in who they bring on as clients are far and above the most successful.

Familiarity Breeds Contempt Amongst MSP Clients

This is the second and more benign of the reasons MSP clients leave. In any relationship both in professional and personal life, the longer you are in it the more chance there is that you start to feel contempt for the other person.

Ever notice the automatic respect you tend to give someone in a professional setting and yet the longer you know them and the more you know about them, the less you tend to think of them.

The fact is and with very few exceptions that the longer you know a person or organization the more time you have to find the faults that you do not like in a person or organization. This outlook that we all tend to engage in is a cumulative function over a long time period.

Ever notice when you engage in a new business relationship, it is all perfect, everyone loves the other party? Do you ever wonder why you give your trust and respect so freely to an entity you have just met while another entity that you may have years or even decades of shared experience with is looked at with contempt?

This tends to originate from the client as they begin to take for granted the work that an MSP does for them. The harder the MSP works, the higher the expectation. Humans tend to adapt to whatever environment they are in so you could be doing a perfect job of maintaining the client's environment and so the client adapts to perfect and those times where mistakes happen, these events cumulatively collect in the clients consciousness.

Clients adapt in reverse too and coupled with the desire not to have seen to have made a mistake, even if a substandard MSP when compared to your organization takes over, the increase in ticket completion, the delays in getting tasks that prior to the change over did not exist along with their staff just not being as effective as before, it will all be put down to teething issues. It is rare that an organization will admit they made a mistake after having come to the conclusion that their old MSP was substandard.

I know it can happen as I have heard stories of clients coming back to an MSP but I never experienced this either in my own business or those I have worked for. All I can say is if that has happened to your business and you have been able to overcome the hurdle of the client having to admit they were wrong then you must be running one hell of a good operation.

Either that or you are undercharging by a significant margin. If it was me, I would certainly be increasing my agreement value for a returning client and there would have to be some pretty compelling reasons why I would allow a client that walked away because they thought we were not good enough to come back.

The one compelling reason built in though is their willingness to admit they got it wrong. That is a rare quality to have in today's business world.

Familiarity breeding contempt is not all one sided though, it goes both ways. As the leader of an MSP operation you need to keep a close eye on the behavior and attitudes your staff has with regards to your clients.

I have seen support desk staff gradually behave unprofessionally towards client staff as well as seeing how quickly a good help desk can go rotten due to one senior technical staff member.

This needs to be consistently monitored and when observed, nipped in the bud. Tech staff will gradually get irritated with the same usual suspects ringing up with the same problems and after a while they become conditioned to the idea that the people on the other end are morons and this perception starts to seep in via their behavior and written communication to the point it is not only noticeable but highly unprofessional.

The other way this behavior takes hold is when a senior tech has the attitude that anyone who does not know as much as them is not worth their time. Of course junior help desk staff tend to need role models and so this behavior will start being exhibited in all of your support desk if it is not eliminated quickly.

Your staff should be taught that the only reason they have employment working in I.T is because they know more than others about information technology and the day they do not know as much as the people on the other end of the phone is the day they will no longer be needed.

Compassion and the ability to help those client staff who continually struggle with technology or who have an “interesting or high strung personality” should be a high priority for any support desk. Hiring support staff who are able to empathize and tolerate a large variation of personalities is very important if a support desk is to be successful.

One Reason Given - Two Real Reasons

Aside from some outliers such as corruption, merging or actual technical incompetence there is one primary reason clients say they are leaving an MSP and that is some type of performance issue.

Of course most of the time, they do not have the base skillset to determine if the MSPs performance is deserving of being labeled poor or substandard as there are an almost infinite amount of variables that contribute to that.

Often those variables are due to client based decisions (Example: Refusing a MSP proposal for an appropriate backup solution and then complaining when the backup solution in place fails to satisfy the specific scenario the proposed backup solution would have satisfied)

There are 2 actual reasons why the vast majority of MSP clients will leave, the first and smallest of these two groups are the predatory organizations that choose weak MSPs that are incapable of defending themselves.

They go in with the plan of gradually racking up a sizable debt before disputing it and walking away. 

They will almost always from the very start ensure that they use outstanding invoices as a stick to get you to do more work so that you end up on a never ending treadmill of chasing what you are owed and yet being unable to walk away. 

They know that owing you money is power and they use it until the amount is enough for you to put your foot down. They will then begin the hunt for the next victim and the 18 month cycle will begin all over again. This is a relatively small number of organizations on a sliding scale.

The second real reason is because often people end up disliking each other over a long time frame coupled with both sides often taking each other for granted. It could almost be said that a good 50% of client/MSP relationships have a shelf life of between 2-5 years before they move on.

How To Retain More MSP Clients?

This in my book is the wrong question to ask. The right question to ask is how do I determine which existing and or potential clients are the true diamonds that are run by people that stay loyal over a long time frame and that you really have to mess things up before they will look at terminating a relationship.

It seems the law of averages deems that every MSP organization has everything being equal, about 10% of their clientbase that could be considered the perfect client. In my own MSP, I had clients that were with me from the start right the way to when I sold the business.

They generated the most income and caused the least pain. The question needs to be, how do I increase my clientbase so that it holds the majority of clients in this category.

There are many ways to do it including putting all clients into categories such as A/B/C/D and looking to eliminate the D category until you are at capacity and there are no D category clients left and then moving onto the C category clients until at some point you are left with only A class clients.

I am not going to pretend that is easy, it is hard to terminate a client relationship when they are on paper bringing in income. It is however the answer, the less difficult and underperforming clients that you have in your MSP, the more success you will have.

Imagine if you say your top 5% of clients were 100% of your clients? It would be like a license to print money because you could take on even more 5% level clients because of all the extra time as well as making more money on each service agreement.

So aggressively trimming the fat (I do not mean getting rid of the fat people) while looking for potential clients that value loyalty is the single best way to both reduce the chance of your clients leaving and improve your chances of financial success. 

Conclusion

Removing and ignoring that there are a small number of clients that target weaker MSPs to use and abuse them, the single remaining reason clients leave MSPs is down to relationship breakdown. 

It does not matter how the relationship got to that point, the only takeaway here is it has nothing to do with an MSPs technical abilities or servicing levels, they may well be above the industry recommended standard and you could be hitting all of the SLAs with room to spare. 

It is because the client has become so used to you that they have decided that their day will be improved by you not being in it and the massive hassle of offboarding your service is worth the effort so that you are not part of their day going forward.

It sounds harsh but that is what it boils down to. The solution to this is finding clients that have above average levels of loyalty towards their business relationships. Displacing the majority of clients out there that gradually have contempt for you due to the familiarity with which both organizations have for each other is a great long term aim.

That is the secret to reducing the amount of clients that leave your MSP and that is to be highly selective of the clients you do bring on while being absolutely merciless in cutting the existing clients that do not consistently meet your standards.

You are the prize and you need to give that perception to potential clients. Make it appear like a club that they are likely not going to be a member of.

We have a number of other IT Solutions Provider articles listed below that will provide you with more detailed information on a number of related topics:

https://optimizeddocs.com/blogs/consulting/consulting-index-page-01

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