From attracting funding to employing marketing initiatives, starting a managed service provider business is enough to make your head spin. Deciding on a legal structure should be a top priority, as it serves as the backbone of your new company’s success. Before you get bogged down by the startup process, you need to finalize your business plan and conduct market analysis to make the right choice.
Add value to your services
Part of your MSP business plan will include your value proposition. Knowing what differentiates your services from competitors is critical for delivering on customers’ wants and needs. With clear-cut statements on your proposed offerings, you can get a Road Runner-like head start.
Your value proposition shapes your business mission and strategy. Mapping out your worth puts you in a better position to determine an organizational structure that’ll best suit you down the line. To achieve your intended goals, you need to pick a legal structure that dictates the control level over the business. Without it, you’ll be worse off than Wile E. Coyote, left in the dust by competitors that are more prepared to take on new business from the start.
Learn from your competition
Market analysis provides a clearer idea of where you stand in the competitive landscape. Once you know what other businesses you’re up against, you can make the best decision on your legal structure. If you don’t understand your market, you’re wasting prospective customers’ time and money.
You need to take the time to determine your strengths and weaknesses. Once you have a better sense of your position, you can walk into the meeting a strong sense of your potential growth in the coming years.
Be sure to research any regulatory restrictions that your business has to follow. For example, if you have access to patient care information, you need to comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Your company — and potential partners — should be up to date on industry regulations to compete with other businesses. The very last thing you want is to be slammed with a HIPAA fine and watch profits fly out the window.
Identify your structure and execute
Now that you have the necessary business and market information, you’re ready to nail down your legal structure. You have several options to choose from, such as sole proprietorship, partnership (general and limited), corporation (C corp and S corp) and limited liability company (LLC). The legal structure that you choose should align with your short- and long-term goals.
For instance, an LLC is a common choice for many MSP startups. This structure offers protection from personal liability by keeping your personal assets separate from company debt. Due to this structure’s flexibility, it’s often a good option for an MSP startup that’s uncertain about short-term growth. However, all legal structures have specific tax implications, so in the end, the best decision will reside in your analysis. This is the primary reason why you should determine the strength of your business proposition and refer to the results of your market analysis before making this decision.
And, for the most part, nothing is set in stone. Depending on what you make of your MSP business plan, you can always pivot your classification as your company evolves. Consider yourself a young architect with a wild imagination; you can change as you go or stick with the original blueprints. With a value proposition and market analysis on hand, you have a solid foundation for your MSP business plan.
To really hit the ground running, learn about adding MSP security services to your business offerings.