Your Growth Plan Has a Client-Size Problem

Every value creation plan for a managed services company says the same thing about growth: add clients, raise prices, attach more services. Almost none of them say which size of client, which is the one decision that governs whether any of the rest works.

Here is the argument in plain words. Demand for outside IT help rises with the size of the customer. The average MSP’s client list runs in the other direction. Most of the book sits in the band that buys least, buys least often, and takes almost as much work as the accounts that buy properly.

The demand curve nobody prices

GTIA surveyed 720 people who make technology decisions at companies under 250 employees in North America last May. About half use a managed services provider. Split by size, the picture changes: 37 percent of the smallest firms, those with fewer than ten people, against 62 percent of firms with 100 to 249.

The same survey asked how often they lean on outside help rather than whether they do at all. Among the smallest firms, 36 percent use it frequently or regularly. Among the two larger bands, 51 and 56 percent.

So the difference between a nine person company and a two hundred person company is not a rounding error in your pipeline. One is roughly twice as likely to hire you, and once hired, far more likely to keep asking for things. That second part is what recurring revenue actually is.

The book runs the other way

Now look at what the average provider carries. In Kaseya’s benchmark survey of 984 MSPs, more than a quarter said their typical managed services contract brings in up to a thousand dollars a month per client. Another quarter sit between one and two and a half thousand. Two percent, one in fifty, average more than ten thousand a month per client. And the movement over that year was toward the lower bands, not the higher ones.

A thousand dollars a month is a ten or fifteen seat company. That client still gets onboarded, still gets a quarterly review if you run them, still calls when the printer stops, still needs the same security stack because attackers do not check headcount first. The work does not shrink in proportion to the invoice.

This is the cliff. Demand density climbs as clients get bigger, and the book is concentrated where density is lowest.

Moving up costs money that nobody writes down

The obvious move is to sell to bigger companies. That is a real strategy and it has a real price, most of which does not appear in the plan.

Larger buyers ask for evidence. They send security questionnaires, they want an attestation you can hand to their auditor, and in regulated work they want it before they will sign. A SOC 2 examination from a named audit firm runs from twenty thousand dollars into six figures, with a median around thirty thousand, and that is the invoice, not the year of readiness work that comes before it.

Then there is the question of whether the client pays for any of it. Barracuda asked two thousand organizations that buy from providers what they would pay for compliance support. Thirty six percent would pay up to ten percent more. Another thirty six percent would not pay more at all. Compliance is a reason clients hire you. It is not automatically a reason they pay you more, and the difference between those two sentences is a whole business case.

The number that does not exist

Here is what makes this hard to govern. Nobody publishes what an MSP’s client book looks like by client size. Not the distribution of accounts by employee count, not revenue per client by band, and above all not cost to serve or gross margin by band. Kaseya publishes contract values, GTIA publishes buyer behavior, and neither joins the two.

The one organization certain to have the answer is Service Leadership, which benchmarks the operating metrics of hundreds of these companies. That data sits inside a paid report and a peer group product. The industry’s most important segmentation question has an owner, and the answer is not public.

You cannot buy this number. You already own the only copy that matters, which is your own general ledger.

The work, starting this quarter

Sort every client by employee count and put revenue and gross margin next to each one. Not average revenue per client, which hides the shape. The distribution, so you can see how much of the business sits under twenty seats.

Cost a small account honestly. Take three clients under twenty seats and add up technician hours, onboarding, tooling, and the account manager’s time. Compare that to what the same effort returns in a hundred seat account. If nobody in the company can produce those numbers this week, that is the finding.

Decide the target band and write it down, then price and staff for it. A provider built for ten seat clients does not become a provider for two hundred seat clients by winning one. It gets there by paying for the attestation, the coverage, and the people the larger buyer expects, and by saying no to accounts below the line while it does.

Watch concentration as you climb. Deal trackers in this market are consistent that buyers pay a premium for books where no client is more than five to eight percent of revenue, and discount books that lean on a handful of relationships. The goal is not one large client. It is a denser band of medium ones.

Your growth plan has a client-size problem if it names a revenue target without naming a customer size. One question for the next operating review: what share of our revenue and our gross margin comes from clients with fewer than twenty employees, and what would it take to move the next twenty accounts up one band?