Feb 12, 2025

Generate More Referrals for MSPs

Generate More Referrals for MSPs: Insights and KPIs

Relying on sporadic, passive referrals often leads to a "feast and famine" business cycle for Managed Service Providers (MSPs).When you start an MSP business, you generate more referrals for MSPs organically, and they can bring in significant business. So much sometimes that you might ignore other lead generation and sales activities, believing that referrals will be all you need to build a thriving MSP business. One day, the referrals stop coming in regularly. Then the ability to generate more referrals for MSPs seems to come to a halt.Part of the MSP Sales Process is an MSP Referral Generation course, which teaches you how to generate more referrals for MSPs, and create a reliable sales funnel by measuring client health and account management activities. In this post, we summarize one of the lessons from that course. The full referral generation course includes two hours of video content, a fully defined and documented process, and 45 short lessons that would benefit any MSP business owner, sales executive, vCIO or MSP account manager.Here is an overview of the top five KPIs that can help you refine your approach, generate more referrals for MSPs and build a referral process that consistently delivers results.

The Five KPIs That Will Help Generate More Referrals for MSPs

Hope is Not A Business Development Strategy

Without a strategy to generate more referrals for MSPs, the gaps between these referrals cause periods of stagnation. At some point, the referrals you relied upon to grow your MSP business are no longer flowing freely. Many MSP business owners turn to outsourced lead generation firms when this happens, believing they need to invest new tactics for finding more clients.Waiting for referrals means you're putting the future growth of your business into the hands of people who don't benefit from the growth of your business. It's not sales, it's just hope. And there's one thing you'll hear us say at Fox and Crow group over and over again: "Hope has no place in your sales pipeline!"Carrie's been saying this since 2016 - on many platforms, for many vendors, but here's a webinar hosted by Barracuda MSP where Carrie shares on referrals and business development.

Asking for MSP Referrals is a Process

"Passive referrals are a gift, not a reliable business development strategy."-Carrie Richardson, MSP Sales Expert, May 2016, Smarter MSP

To break free from the feast/famine referrals cycle, asking for referrals must be treated as an essential part of your MSP sales process.A process is repeatable, a process is documented, and a process can be trained. By implementing a structured referral generation strategy that is measured, refined, and improved over time, you can generate a consistent stream of high-quality referrals.In 2018, Ian Richardson was running an award winning MSP in Michigan. He doubled his ARR in a little over one year, winning awards and securing spaces on coveted lists like the MSP501 and the Inc5000. He published an article on the the MSP software vendor Connectwise blog, crediting the creation and management of key performance indicators as one of the major factors involved in that growth trajectory.Key performance indicators can be created to measure the health of any process you use in your MSP - including active referral generation!

Why Client Relationships Matter

Your referral system starts with delivering excellent client experiences.

As Ian Richardson emphasizes in the MSP Sales Process Referral Generation Course;“People only refer companies they trust.”

Happy clients are your best advocates, and building strong relationships with them is the foundation for generating more referrals. (Managing client relationships is also a process outlines in the MSP Sales Process!)

Key KPIs for Referral Generation

1. Number of Clients Reviewed

"Number of clients reviewed" refers to how many clients have gone through your referral generation process, whether or not a referral was requested.How to Calculate: Divide the number of clients reviewed by the total number of active clients (those who’ve paid in the last 12 months), and multiply by 100 to get the percentage.Why It’s Important: This metric helps you understand how much of your client base has been engaged in the process, highlighting opportunities for growth.

2. Clients Reviewed Per Month

Richardson advises setting a monthly target for how many clients should be reviewed. “Take your total number of active clients and divide it by 12,” he suggests.This gives you a consistent goal for client review meetings each month.Actionable Tip: Ensure your team adheres to this monthly goal to avoid falling behind and creating a backlog.Why It Matters: Regularly reviewing clients ensures a steady stream of potential MSP referral opportunities.

3. Client Health

"Client health" measures how many clients have no roadblocks to making a referral. These are clients whose review meetings ended with a successful referral request.How to Calculate: Divide the number of clients who completed the referral ask by the total number of active clients, then multiply by 100.Goal: Track this percentage and challenge your team to maintain or improve it. A healthy client base leads to more referrals.

4. Client Risk

Opposite of client health is client risk. "Client risk" measures the percentage of clients whose reviews ended in retention efforts due to dissatisfaction.How to Calculate: Divide the number of clients at risk by the total number of active clients, then multiply by 100.Why It’s Important: Monitoring client risk helps you identify areas that need improvement, allowing you to act before losing a client.

5. Unknown Client Status

An often-overlooked KPI is the unknown status of clients—those whose health is not yet determined. According to Richardson,“Until you've had the conversation, you can't assume the client is healthy.”How to Calculate: Divide the number of clients who haven't been reviewed by the total number of active clients, then multiply by 100.Goal: Over time, this percentage should shrink as more clients go through the review process. Aim to keep this number as low as possible.

Why Referrals Are Not a KPI

One of Richardson’s key insights is that referrals themselves are not a KPI. He explains,“A KPI has to be a number you can impact and control. You could perform this process perfectly and not get a referral.”While you should track the number of referrals, they are more of an outcome of your process, not a measure of its success.

The Five Most Important KPIs for Measuring Referral Success

Number of Clients Reviewed: Tracks how many clients have gone through your referral process.
Clients Reviewed Per Month: Ensures you're working consistently toward generating referrals.
Client Health: Measures the percentage of clients in a position to refer you.
Client Risk: Tracks how many clients need retention efforts due to dissatisfaction.
Unknown Client Status: Indicates how many clients haven't yet been reviewed.

By tracking these KPIs, you'll have a clear picture of the health of your referral generation process and the areas where you need to improve.

A Process Needs Action

Building a successful referral program for your MSP starts with understanding your clients, reviewing them regularly, and tracking key performance metrics.While you can't control the number of referrals you get, consistently following the process and focusing on the right KPIs will position you for success.As Ian Richardson states in the MSP Sales Process Referral Generation Course, “A perfectly run process doesn’t guarantee a referral, but it gives you the best chance to earn one.”If you need help building a strategy that will result in generating more referrals for MSPs, or creating processes for your MSP, get in touch with Carrie Richardson to discuss both "DIY" sales process options and fully supported strategic consulting engagements for MSPs with Fox and Crow Group. We'd love to help you build your best business.

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Feb 12, 2025