Key Points
What Is MSP Risk & How It Works
- What It Is: MSP risk is the exposure managed service providers face from client dependency, cybersecurity incidents, overtooling, and hiring challenges that can disrupt operations or revenue.
- How It Works: MSP risk management identifies, assesses, and mitigates these threats through diversification, proactive planning, and process optimization.
- Best Practices: Diversify clients, maintain transparency during incidents, streamline tool stacks, hire strategically, and stay proactive to reduce overall MSP risk.
- Why It Matters: Reducing MSP risk protects profitability, strengthens client trust, and builds long-term business resilience for sustainable growth.
Owning an IT business isn’t for the faint of heart. Risk naturally comes with the territory. However, according to successful MSP veterans, owners can do several key things to mitigate their MSP risk. This will also give themselves a foot up over the competition.
Instead of preparation and proactivity, many businesses find themselves where quick reactions to risks that arise are the only way forward. This becomes a sort of business whack-a-mole, for lack of a better term.
In this MSP Live Chat, our panel of IT pros included Tom Lawrence, MSP industry veteran, longtime owner of Lawrence Technology Services, and influential voice on Youtube in the IT and MSP space, as well as Georg Dauterman, a fellow MSP veteran, CISSP, and President of Valiant Technology.
The panel dissected some key risks MSPs face. They also offered real-world experiences and candid conversations about the most significant risks facing MSPs today. Plus, how best to mitigate them.
In this recap, we’ll share the whole recording and offer easy-to-skim moments from our panel’s conversation on MSP risk. Jump to your section of interest below:
- “When your biggest customer sneezes, you get the flu.”
- Communications methods to navigate a major security incident
- The opportunities and threats of hiring
- Are you “Overtooling?”
- View full live chat recording
What Are MSP Live Chats?
We launched the MSP Live Chats series to give our partners a forum to connect directly with each other and top experts in the channel. These sessions aren’t about being talked at or presented to. In fact, they’re fully interactive and built around active participation. So come join the discussion!
Full Recording
4 Top MSP Risks — And Tips to Mitigate Them
1) Losing your biggest customer
As the classic saying goes, don’t put all your eggs in one basket.
Tom Lawrence shared a story about a time when he used to work in corporate at an organization that generated 92% of its revenue from Ford.
Tom and his colleagues used to joke about this reliance on one client by saying, “When Ford got a cold, we got the flu.”
Another experience Tom Lawrence shared was around providing IT services to a local government client. Elections mean change. And sometimes that change means you’ll be replaced by a more “aligned” IT service provider.
When it comes to mitigating this risk, Tom offered the following tips:
- Build as big of a client bench as humanly possible (resource: start building a referral program)
- Diversify your clients and the industries you serve if your business is properly tooled to do so
- Take note of client relationships that could be challenging if current conditions change and act as if that big fish client is already on their way out. (These situations may range from internal family drama at a small business to a new administration coming into a local government client.)
Listen to Tom Lawrence tell the whole story and share his tips below:
2) A major security incident
You cannot 100% mitigate security risk; it’s something that all businesses face. That being said, the way you respond to and communicate a major security incident to a client can be the real game-changer , especially when it comes to mitigating cybersecurity risk.
Both Tom Lawrence and Georg Dauterman offered great color around their experience with responding to a security incident. But Tom Watson really summed it all up by saying:
“Documentation and transparency with the end-user are the best ways to mitigate this type of risk.
— Tom Watson, Channel Chief Advisor at NinjaOne
View the whole exchange on mitigating a major security incident below:
3) Investing in the wrong tools
“When I talk to tool vendors, I see that shiny city on a hill, and immediately I’m like, oh yeah, we’re going to get everyone on this tool in three months. It’s going to be an awesome game-changer. And then a year later, we still haven’t implemented this tool and our team is like, what happened guys?”
— Georg Dauterman, President of Valiant Technology
The dangers of “overtooling” are very real. And the practice comes with some severe side effects as well. From employee confusion to vendor sprawl sucking away precious dollars, the dangers of overtooling are something MSPs owners must be mindful of.
It’s essential to be mindful of the tools you bring in. And, ensure that every new tool serves a specific purpose for your business.
Often, MSP owners get stuck in Reddit forms that offer a list of tools that have changed their business for the better. However, these tools helped their business; they could be an anchor for yours. Don’t get caught handing over money month after month to a vendor you’re just not using.
The best way to mitigate this risk is to audit your tools. Tom Watson recommended an audit of all the tools you’re being billed for every six months. If your team hasn’t utilized a tool since purchase, it’s probably time for it to go.
View the whole conversation on “overtooling” and technology audits below:
4) Hiring challenges and employee attrition
Hiring and recruiting, especially salespeople in a technical environment, can be challenging. However, waiting too long to hire a sales professional can limit company growth. Additionally, hiring the wrong salesperson comes with some potential reputational challenges you should be aware of as well.
Sales professionals represent your company to the community at events, on webinars, and in every sales call they make. They act as the tip of the spear when it comes to your business going to market.
Tom Lawrence shared his personal experience of hiring a salesperson who had a drinking problem. This issue then negatively impacted his relationships with members of the local chamber of commerce, so the risks are significant.
Mitigating this risk involves developing more effective onboarding processes. It will also entail creating transparent metrics for the salesperson to share with the business leader.
View the full panel exchange on hiring challenges and how to navigate them below:
In our current candidate-centric job market, don’t forget about the risks of a stalled recruitment pipeline. Also, there is a high chance of employee burnout due to lacking staff and increased workload. Here are some resources for mitigating employee burnout and attrition:
- Build a referral program for recruiting top talent
- Review average salary data and understand what candidates are prioritizing to present competitive offers
- Invest in employee training and certifications
- Take proactive steps to prevent and address burnout
It’s risky being a business owner
All entrepreneurs understand that owning a business, large or small, comes with risks. But the best entrepreneurs have implemented tactics and strategies to mitigate this risk putting them ahead of their competitors.
For more content on mitigating risk to your MSP business, we have a live chat to cover this topic at length. Last year, we had Colin Knox, Founder & CEO of Gradient MSP, on to share their insights with us. Check out this recap blog for his three tips on strengthening your position.
Don’t miss our next MSP Live Chat!
Recapping our Live Chats is fun, but they’re even better live.
Find out when we’re hosting our next one, and be part of the conversation with your peers.
