Should You Give a Proposal at the First Meeting? SMB Sales Strategies Explored

This is the SMB Community Podcast, the longest-running MSP-focused podcast in the industry. I'm James Kernan. My background's IT sales, marketing, and leadership, and most recently, M&A Advisory Services. And I'm Amy Babinchak.

I help MSPs run stronger, more profitable firms from a tech-first perspective. Here, you'll find practical insights for MSPs and IT service providers. powered by Small Biz Thoughts. Hey, Amy, good morning.

Hey, good morning, James. We have got a jam-packed agenda, so I'm going to dive right into it. Here's what we're going to talk about today. We've got a great question of the week, and then we'll talk a little bit about Apple's price hike coming, the unwelcome news of that.

We're going to talk about how to finance a large product order if you get that opportunity in your business. Uh, also we're going to talk about what happens if you have a project for current client in another state, what are some options there that, that came up this week. Uh, and then also we're spending a little bit of time talking about a problem. All of us are facing in the, in the industry is the thinning of margins and how to increase your overall margin.

And then we'll close out with a story of how to deal with an irate customer. We've got a great question of the week. should you provide pricing to your customer on the first meeting? And they were talking about, of course, managed service pricing.

So it's a service opportunity. They're meeting with their prospect for the first time. And what is your thoughts about providing pricing during the first meeting? I'm pretty sure I know the answer to this too.

I do it. Yeah. I do it. I go in ready, knowing a lot about that business before I get there.

So, you know, I look up their social medias. I look up the people that run the company. I look on LinkedIn. I look all over the place to see what I can find out.

And I do a little discovery on that call that we've made to set up that meeting. If I'm going in talking to a law firm and they've got 20 people there, I'm experienced enough to know about what that's going to cost to support that sort of environment. So I go in ready to present my value proposition and have a price on it for them, too, because most of the time I find that these companies are making their decisions on that first meeting. They'll schedule one meeting with four MSPs.

Then they want to make their decision. Historically in the industry, we've all been taught to build value and build mystery. And you've got to invest some time and energy and maybe an assessment into the prospect before you provide the pricing. I think where this is coming from.

But, Amy, you hit it nail on the head. Number one, you said prepare. My answer would have been most of the time it's okay to give pricing, where 10 years ago I would have said absolutely not. You need to meet with them first, do an assessment, come back, provide the findings, and give them some options.

People want it simpler now. They can't meet with three vendors and go on three meetings. So I love what you said, and I've seen more and more MSPs successfully migrate into coming in prepared and giving pricing during that first meeting. I think you demonstrating that you're making it easy to do business with is a great way to earn a new client.

There's rare occasions where you go in and the customer doesn't know what they have. It could be a very complex environment. And to me, that's a great opportunity for an assessment, whether you charge for that or not. Sometimes you need to do an assessment to really wrap your arms around what they've got.

But nowadays, it seems like that's rarer and rarer. All right. So in the news, the big Apple price hike was unwelcomed news across the board. It looked like Apple had on their iPads, the MacBooks, the iMacs, basically their bigger hardware items.

It was a 20 percent or greater price hike across the board. And then it looked like the iPhones and some of the smaller devices were really unchanged. but what do you think's driving up the pricing? The chips, the tariffs, the, you know, trying to source memory space and drives, you know, those things are being swallowed up by AI.

And so they're having to, you know, their negotiations are really steep. Whereas before a company like Apple could just walk in and say, here's how much, you know, here's how much we're going to pay you for these. those days are gone and uh yeah every everything is going up it's apple hit the news but it's not just apple if you look around you know and i'm sure our listeners know right you go to order a server for somebody it's two to three times the cost that it was five years ago um and it's it's all those all those same reasons so you know this is just a reality and unfortunately i don't think these prices are going to go back down.

I mean, price pressure to go back down isn't really a thing. The white box builders have the same price pressure. You may get a slightly better price there. Some off-lease is often a good deal.

We used to sell some off-lease for general office computers. They're just using the office suite and that's pretty much it. A browser, they don't need a huge amount of power. So those off lease machines were pretty decent.

You know, buy some that are gonna last, right? Get a decently powered machine for much less. And then also computers are just more reliable than they used to be right We used to have to cycle these out every three years because by that time you know the fan on the hard drive you know sorry in the CPU would go and the hard drive would overheat and CPU would run hotter than it used to And these things wore out. And now it's all fanless, spinless technology and they just don't wear out as fast.

So if you were cycling out at three, you can go to four, you can maybe even go to five. remind your customers of that too. Yeah, we know the price has gone up, not our fault. This is just a thing.

And, you know, here's how some steps we can take to mitigate that partially, right? We're not going to be able to mitigate it fully, but we can help out in this a little bit. Yeah. Another important point on this is not only is the price going up, but the availability on the popular ones are very low.

And sometimes, you know, I've been hearing this a lot the last few months, you price out something two weeks later, the customer wants to order it. The price has already gone up and the one they wanted is out of stock. And the only one available is now the most expensive model. I love your idea about open box.

You know, white box is another option. And then refurbs, you know, there's a whole refurb center for a lot of the major, you know, HPE, for example, Dell, Dell, you can save a lot of money by getting refurbs. So those are some nice options to help you out. One pattern I've seen consistently over the years is that experience alone doesn't automatically lead to better systems.

A lot of MSP owners build their operations organically, one decision at a time, without ever stepping back to ask whether there's a cleaner, more intentional model available. That's how complexity piles up and stress becomes normal. IT Service Provider University exists to interrupt that pattern. It provides structured, practical education on how MSP businesses actually function, so owners can make deliberate choices instead of default ones.

If that kind of reset would be useful, you'll find the full course catalog at itspu.com. So, hey, this month I had on a peer group call, we had one of our members bring before the group. It's like, hey, I've got a great opportunity.

It's over a million dollars. My biggest client has a big infrastructure order, but it's over a million dollars of hardware, you know, and it was it was more the conversation at that time kind of started more along, you know, deal reg, protect your margin, get as much as you can, you know, and box out the competition. Well, he got the order and then it was like, oh my gosh, I don't have enough credit to finance an order like this. I don't want to go back to the customer and say, I need a million dollars up front for something I haven't even delivered on.

You know, how would you finance a larger order like that? So have you run into a situation like that or have you seen that? Yeah, I have seen that. There's a lot of opportunities for MSPs to get good rates on financing for these things.

You can get it from the manufacturer. You can get it from the distributor. There's different options for that. I would also press the client on it as well, though, because I hate financing hardware for the customer.

I'd rather have the customer finance the hardware. Right. So, you know, I would press them on that and say, hey, you know, how are we going to finance this purchase, you know, and give it back to them? And you can help them get set up with leasing.

There's a lot of that's available through your distributors as well, right? You'll set it up at the lease. The customer is actually taking out the lease pricing on that material. I always like the idea of, you know, let the clients finance your business, not you.

And if they're buying hardware, you should try to collect all of it up front if you can. In this instance, they weren't able to because it was a Fortune 1000 client and it was a competitive bid. So they didn't feel like they could go back. The other thing you said just a moment ago is a really good option.

A lot of people forget about this, but you can lease it. You know, you go through a third-party leasing company. Now, it's a little bit more paperwork, but the good news is, you know, you buy it from distribution, you get a PO from the leasing company, you typically get your money within 30 days of delivery, and the client can pay or, you know, make payments over a period of time. Another great option that the customer of mine ended up doing, we told them to look into PO financing.

So PO financing through the distributor allowed them and they just took a quarter basis point. So it was a really low fee. But long story short, they were able to finance the deal seamlessly and they didn't really have to go back to the client at all. And that was really the primary objective.

Don't finance unless you have an extraordinary opportunity like this because, well, that will suck away your margin. The leasing option that we talked about, if you're going to offer that to your client, you have to anticipate that because those rates are not a quarter percent. They're like 15 percent or maybe higher. So you really have to watch your margins if you are going to be the bank for your client.

So another question actually came in and it was, you know, what if you have a project in another state for a client? Is this a deal I should take or how do I get resources in other states? Well, that's exactly what you have to do. And I know this from personal experience.

You know, my MSP had clients in eight states. And, you know, there were times when we had projects that needed to be done or we had we needed boots on the ground. this is when you have to have friends. Right.

You got to have friends in the industry that you trust that you can send over there And you know that what I would lean on You know find these people Don find them that day that you need them get to know them over time This is why you join peer groups This is why you pay attention you know, and contribute into those, you know, Facebook and Reddit groups so that you get to know who's who and who has the capacity and who has a reputation for doing good work. and then, you know, when that moment comes along, you know, you know who to call.

If it was a large enough project, I sent a person out there, you know, we put them on a plane and sent them out there for a couple of days. But for small emergency stuff, you need friends. Right. Yep.

Yeah, you're exactly right. Peer groups are great. Field Nation is another big an entity that you could tap into. And if it's and this costs a little bit more money, but they're a little bit more sophisticated with the process is your distributor partners like a TD Cinex, for example.

They've got not only people in all 50 states that you could subcontract, but they also have technical resources in multiple other countries. So I love this question almost more on the marketing side. You know, no longer are you a little three-person or four-person shop in the middle of nowhere, Nebraska. But hey, I'm a high-performance partner.

I'm part of a peer group that taps me into another 50 high-performance partners in all of the United States. And then we use distribution like a TD Cinex that gives me access to 40,000 technical resources internationally. So you're not a little three-person shop anymore and trying to do this all by yourself. Love that too, James.

You just sold me. All right. One of the major concerns right now is the thinning of margins. And a question came in about how can we increase the margins overall, you know, for our business?

What are some things come to mind, Amy, when you hear that question? What should I do to increase my margins? Well, there's two things. One, these margins are thinning because prices are going up in your tool set, the things you've got in your MRR that you need to support those.

So that's a large part of it. My solution to that is more long-term thinking. We need to get away from things that are becoming low margin opportunities and move into higher margin solutions. We keep having to say the words, the letters AI.

That's opening new opportunities in security and management, data governance. And those things will have higher margins because not everybody's doing them and they're new. Right. They're not the thing that you've been doing.

Everybody's been doing for the last 20 years. So I'm encouraging MSPs to take a hard look at what they're doing and say, OK, what can we get? What can we stop doing? And then let's add these more valuable things on on top.

Cybersecurity, compliance services. Those are all three examples of higher margin services that people will pay more money for. you know, for sure. I see people more and more, especially the smaller MSPs are afraid to raise their prices and haven't done it in 10 years.

So I think it should be an annual thing to take a look at. Do you agree with that? I do. Yeah.

You know, I used to be that person that was afraid to raise prices. And then once you do it, you realize it was just a monster under the bed that actually wasn't there. Right. They just the customers don't blink.

They say, oh, yeah. And, you know, price goes up and life continues on. I like having the auto renew in your MSAs, your contracts, and with an automatic increase upwards of 5%, 3% to 5% is kind of the norm. Some other things, you could standardize your stack.

That makes things a little bit more efficient overall. And then I like some of the other things that I thought of with taking some of the other project-based stuff like a one-time security project or maybe backup, maybe a security audit, you know, take those and then change that from, you know, hourly to monthly recurring. Take all of those and just package up your other services that are complementary to your managed services and make them part of the contract and make everything recurring.

That's a really effective one, James. So, you know, I leaned on all my staff to generate new projects, right? That was part of the tech staff's job is they were talking to clients and they were interacting with them to identify project opportunities for us. And when they did, then they started to get good at that.

And then I said, okay, every project opportunity needs to have a reoccurring piece attached to it. And so that was a little harder for them to think about. But, you know, that really started to turn around things and make these projects much more valuable now to the company. Tales from the Build.

So I had a story come up earlier this month during a peer group call. And I wanted to share it with everybody because it just kind of reminded me of some of the crazies that we have in our industry. And this was many moons ago when I was running my company. I remember a call came in to one of the sales reps that worked for me.

And he said, hey, I've got a really upset client. They're trying to return something that's over 30 days old. And it was a relatively inexpensive item. I think it was a couple, like $250.

And the policy on things that are non-returnable was, no, we can't accept that return. and you kept it past the manufacturer that you decided to buy. This is their policy, not ours. Well they didn like that answer And so they really got upset with the sales rep and got personal got unprofessional And so they passed the call over to me and I talked to them And the guy was like, hey, I'm coming down to your office right now.

And I said, okay. And I didn't think anything of it. I thought it was just kind of a shallow threat. And then And about an hour later, all of a sudden, the door opens up.

And my office at the time was just a big rectangular 1,500 square foot office where it was like open cubes. But pretty much everybody could see everything. And the door came wide open. There was a receptionist right there.

Oh, can I help you? And it's like, I'm here, you know, to see James Kernan. But he was shouting it. And so immediately I jumped up and diffused the situation.

I stepped outside in the hallway and we walked down the hallway a little bit and he he was he was screaming and he was just trying to make a point, trying to intimidate me. And I just you know, we just talked and he was talking at a much higher level than me. But just to maintain the energy, I was bringing things down a lot lower. And I and I always kept it professional.

And to me, I would draw the line in the sand and end the conversation. And it's a lot easier when you're on the phone. But if somebody raises their voice, they get unprofessional and start attacking you or swearing. Then it's like, listen, you know, don't talk to me like that.

If you can't talk to me professionally, then the conversation's over. Why don't you call me back when you have your temper in control? And I would hang up the phone. When you're face to face, you can't really do that.

But what I have noticed, when you are face to face, people really don't act that kooky and crazy. but this person's energy kind of started going down and, you know, they made threats of like, we're going to report you to the Better Business Bureau. We're going to report you to the Chamber of Commerce and all this. And I said, listen, you know, we'll take this item back.

You know, if it's that important to you, you know, was it worth the hassle for me to deal with that? But it wasn't until the guy's energy came down and he started talking reasonable. And one thing I think in conflict resolution or when you're really even in a negotiation of anything, I just wanted it to be fair. You know, I already knew that I wasn't going to do business with this client any longer, but, you know, just wasn't worth my time.

And so we quickly were able to resell that product to someone else at a later date. It just wasn't something that they wanted. But it's really interesting. You know, I'm sure all of us have had to deal with irate customers in the past.

I always like trying to respond to them within 24 hours. It's normally easier if you're doing it over the phone. I would recommend not doing it through email because emails can escalate very quickly and people not understand where you're coming from. Have you ever had a situation like that come up, Amy?

Yeah, I've had that situation. It was really that kind of like you said, the person's temper got hold of them. It wasn't really the issue, you know, that was that they thought it was, you know, and they let their temper go wild. It was every time I dealt with that, it was over the phone.

And I did hang up on one person. I was like, I'm not going to let you treat me this way. And I'm not going to listen to this conversation anymore. if you want to talk about this another time, give me a call back when you're in a more conversational mood and I have the phone.

And, you know, they were still, and it was like, click, you know, sorry. Yeah, I mean, you shouldn't have to do business with mean people. You just shouldn't, you know, and nobody should be treated that way. You know, I just, I get mad and personally offended if you're in a store or restaurant and you hear somebody being rude to staff there.

I'm just like, wow, what a jerk. You should leave here immediately and never come back because they should not have to deal with you. When you see one of your staff being treated incorrectly, just jump in and stop it. You know, appreciate it.

Nothing kills morale more than your employee being abused and then the leader not doing anything about it. You need to stick up for them. That's a really important message, too. I've had that situation as well where, you know, customers frustrated about something.

They come to the call pre-frustrated, right? Yeah. And then, yeah, and then they're just rude and they're mean. And, you know, the tech tells me about it or I can see that they're frustrated.

100% of the time they were like, oh, I'm really sorry. I was just super frustrated. I'm like, well, I'd really appreciate if you called back Tim and tell him and apologize. Yeah.

And they would. And they would. Good. Yeah, that's a good point.

Well, hey, Amy and I would love to hear from you. If you've got a question of the week or a topic around anything that we've been talking about or a new topic, reach out to James at KernanConsulting.com or submit your video clip over to SMBCommunitypodcast.com.

We'd love to have you on the program. So I think that's a wrap for today. Safe sailing, Amy, and we'll see you next week. See you then.

Thank you for listening and or watching. Dave breaks down the IT news of the day on his show, The Business of Tech, with bonus content on the weekends. Watching this on YouTube? Be sure to like and subscribe so you always know you've got our latest episode.

We'd love to hear from you, so feel free to use the contact form on the SMB Community Podcast webpage. That's smbcommunitypodcast.com Or leave your comments on our YouTube episode page.