The Land and Expand Playbook: MSP Pipeline Growth Starts With Saying Yes
The Future of MSP
The Land and Expand Playbook: MSP Pipeline Growth Starts With Saying Yes
Zix | AppRiver
Even though Veeva is a publicly-traded company with revenues of $1 billion, its sales reps are happy to sell small projects.
There has been an industry trend to "say no" to any non-MSP customers or small projects with the mindset to protect MSP growth at all costs. However, if it’s done correctly, landing those projects could be the reason for growth if it’s viewed as a partnership opportunity. We have seen this with some of our top partners here at Zix and outside of the industry.
Say, for example, that a company recognizes a minor gap in its regulatory system and contacts the California-based cloud touch company to plug it. Instead of discarding the lead as a low-value contract, Veeva’s sales reps treat it like gold. Because securing a small project is the first step in their “Land and Expand” strategy.
This sales strategy works by pitching buyers on small deals. Once a sales rep has their foot in the door, they double down on relationships, building trust and earning rapport with stakeholders. With strong connections throughout the account, the sales reps then pursue larger, more profitable deals with the customer.
At Veeva, the strategy is working well. As Brian Witherson explained in The Motley Fool: “If Veeva is able to install a module that solves the customer's first challenge, the door is opened for other areas of business and a longer-term relationship.”
Over the past eight years the cloud technology company has expanded its customer base 9.5 times what it was before, but they have grown their product base by 15 times as much. By focusing on expanding its existing accounts, Veeva compounded its growth without acquiring net new customers.
Although it’s common in many industries, the Land and Expand approach has yet to take hold in the MSP space. Indeed, in recent years, MSPs have turned away from small contracts. Instead, they offer large, predefined packages. If a customer wants something smaller or more customized, many MSPs are prepared to pass on the deal. This approach does have its benefits. In particular, it’s simple to implement from marketing through sales to delivery. However, its rigidity risks leaving money on the table.
Meanwhile, Land and Expand capitalizes on a particular quirk in the IT landscape. According to SWZD, 76% of businesses plan to implement long-term IT changes after the pandemic. But there’s a concern among MSPs that IT leaders see them as competition, rather than as an asset. By focusing on smaller projects with less resistance, partners can get into accounts, build trust, and then pivot to larger projects.
In this article, we’ll unpack the basics of “Land and Expand” sales for MSPs. We’ll explore how to assess target accounts and design smaller deals to hook buyers. Then we’ll touch on rapport and relationship building. Finally, we’ll learn what it takes to turn a small existing contract into a large, lucrative deal.
Step 1: Identify target accounts
Land and Expand is a powerful growth strategy—but only in the right circumstances. For example, if you spend time landing an introductory deal only to find the company has zero expansion potential, that’s not great. You’ve tied up marketing, sales, and support resources that you could have invested in more profitable deals.
Before you kick off your Land and Expand campaign, it’s worth identifying what type of customers are worth your time. You can do this by writing your ideal customer profile (ICP).
Begin by looking through your existing client list for “good” companies—the ones that make you the most money for the least hassle. Search for similarities in industry, size, location, business model, and so on.
Once you have a feel for what companies offer the best expansion opportunity, create your ICP by answering the following questions:
- What industry are they in?
- Where are they located?
- How many people work there?
- What is their revenue?
- What’s their budget?
- Who are your main stakeholders?
- How well do they understand your product?
- What are they looking to achieve?
If you answer those questions, you’ll end up with a description of your ideal customer. It’s important to remember that most businesses you deal with won’t match your ICP exactly—and that’s fine. Your ICP is the kind of customer you want, not a specific example.
If a lead matches most of your ICP criteria, your sales reps should focus on them. And if a lead doesn’t hit any, it’s probably worth passing or de-prioritizing them.
Step 2: Land smaller deals
Now you know what sort of customers you want to work with, it’s time to design your smaller deals. These are the little, unobtrusive contracts that’ll get you in the door. For MSPs, you have two options: Consulting projects, and Limited MSA.
Most MSPs move away from consulting as they grow. It’s seen as less scalable and profitable than Managed Services Agreements (MSA), and it is. Once you’ve maximized your available consulting hours, that’s your revenue ceiling. But don’t discount it as a smaller deal. We’re not talking about launching consulting a standalone service line. Instead, you’re using it as a first step to larger projects.
Your second option is a Limited MSA. For example, you could offer a contract without desktop support. For companies with a little more trust and buy-in, this is a good option as it’s closer to the full contract you’ll sell them later.
Your sales reps should also consider the opportunity profile. Broadly, there are two varieties: takeouts and greenfields.
With takeout opportunities, your prospect already has a competitive solution in place. Through the sales cycle, focus on differentiation and education. Your goal is to make your buyer understand why your service is better than your competitors and how much they can gain from switching.
On the other hand, greenfield opportunities have no incumbent competitors. Your prospect is exploring your product for the first time. Spend your time on education, but lean into the problem domain itself, rather than your specific solution.
Finally, avoid deal creep. Fair warning: This will feel counterintuitive. Ordinarily, salespeople want to expand their deals and add more scope. But in Land and Expand strategies, you keep your initial contract tight to maximize its chance of landing. If your conversation balloons and the contract bloats, it’s much more likely for the deal to fall through—losing you the initial contract and the potential expansion deal. Instead, focus on a specific problem, get the contract signed, and deliver the best service your customer has ever received.
Step 3: Nurture customer relationships
Through the duration of your small contract, your goal is to win over as many stakeholders in the account as possible.
Search your customer’s organization for decision-makers and influencers for other potential projects. Is there an IT director you don’t know? Perhaps the company owner holds the purse strings and you haven’t met them yet. Reach out to the people with their boots on the ground, too. Find out how they’re using technology, explore their pain points, and lay the foundations for your upcoming sales pitch.
This work is a whole-company affair. Don’t leave everything up to your salesperson. If you’re the boss, reach out to executives and owners. If you’re the product manager, get in touch with technical stakeholders. If you’re an administrator, connect with the individual contributors.
Step 4: Expand your account
By now, you have a lot invested with your customer. You’ve sold them on a small project and built strong connections through the account. While these small projects can be profitable, they probably aren’t driving the sort of revenue growth you’re aiming for.
So let's up the ante.
Once you feel confident in your rapport and relationships, begin thinking about how you can expand the account. Here, you have three main options.
First, selling within. Your first option is to go back to the team or business unit you’ve already dealt with and look for new sales opportunities. For example, if you’ve wrapped up your consulting project, pivot the conversation to an MSA. If your Limited MSA is running smoothly, push them to expand the scope.
Your second option is selling across. Larger businesses have different functional departments, business units, and subsidiaries. If you have internal stakeholders willing to introduce you and vouch for your work, you can open up incredibly valuable opportunities with very little work. Alternatively, your relationship building in the previous step may have opened up new conversations already.
Finally, the mother of all expansion options is selling up. Your goal is to have someone senior make your service the standard for the whole company, rather than individual business units or teams. If you do it right, you can double, triple, or quadruple your contract value overnight.
Land, expand, grow, and thrive
Veeva is just one company among many growing on the back of a Land and Expand strategy. Other enormous companies like Twilio, Dropbox, and even Microsoft all rely on the sales strategy to grow their business. When you look at the numbers, it’s clear to see why.
Repeat customers are five times more likely to purchase products or services than new customers. They’re also five times more likely to forgive a poor experience, four times more likely to refer a new customer, and seven times more likely to try a new offering. Ultimately, that means more revenue. Repeat customers spend 33% more than new customers.
So before you chase after a white whale, stop and ask yourself a simple question: Would it be better to Land a small deal and Expand it into an enormous contract?