How to Future-Proof MSPs With Agile Sales Incentive Plans

The MSP (or Managed Service Provider) marketplace is experiencing meteoric growth. In 2022, MSPs represented a roughly $279 billion industry. By 2029, projections show that number doubling, and by 2032, the market is expected to surpass $834 billion. 

With all of that growth comes a need for tremendous agility and innovation. As the market shifts towards subscription models and service-based offerings, MSPs — perhaps especially those in the SMB segment — face the challenge of maintaining profitability against a backdrop of increasingly thin, layered margins and frequent product refreshes. That calls for a dynamic sales compensation management approach that allows for transparent, real-time adjustments to sales incentive plans, ensuring your MSP sales team is equipped to move with market dynamics and stay on task to grow high-priority areas of the business. 

Feeling ready to create a plan that leverages incentive comp best practices, like automation, to future-proof your organization? Keep reading for actionable tips that’ll help you keep pace with industry changes (and maximize profit at the same time) with a modernized MSP sales incentive program. 

In this article, find: 

• How agile incentive comp plans help MSPs maximize profit
• Designing a strategic sales incentive plan for MSPs: 3 steps
• Streamlining MSP incentive compensation with Latitude 39

How agile incentive comp plans help MSPs maximize profits

Let’s be clear: We think most industries stand to benefit from incentive comp strategies centered on real-time clarity and informed adaptability. For MSPs, though, these aren’t just handy tools for organizational growth — they’re outright required for survival. 

Today, greater product overlap is being seen among the distributors and vendors MSPs partner with. And while it used to be commonplace for MSPs to hang onto the same product for years before determining its ROI, now, these reviews are happening a lot more frequently — as often as every six months.

That makes sense given the promise at the core of most MSPs: Helping clients scale up or down quickly, with instant access to the latest technologies. Providing this value today requires near-constant product refreshment, and MSPs can’t help clients achieve agility without staying nimble themselves. In short? Static, slow-changing, and manually updated sales compensation programs just won’t cut it in this industry.

Instead, the most strategic MSP leaders are taking advantage of automated incentive comp solutions. By prioritizing agility through incentive comp plan automation, MSPs can: 

Command more control of recurring revenue margins. 

As more and more MSPs transition to subscription-based models, ongoing services (rather than one-time product sales) are the name of the game. Dynamic sales incentive plans with real-time transparency — as seen on a sales compensation dashboard, like the one found in Latitude 39’s incentive comp software — let MSPs monitor and quickly act on MRR trends with instant incentive plan revisions that encourage the sale of high-margin services, like managed IT services or premium support packages. 

Structure your plan to reward sales reps not only for acquiring new clients but also for driving this ongoing revenue through contract renewals, service upgrades, and customer retention initiatives. A flexible commission model can be set up to reward reps for all of these outcomes. To manage and streamline it, use a sales compensation software to instantly calculate everything from simple payouts to tiered commission payments, reducing administrative burden and ensuring accuracy. No more manual math for products re-sold with varying margins. Just numbers your sales team will trust.

Drive smarter business decisions.

You already know an agile comp strategy supported by automation makes it possible to tweak incentive plans on the fly to reflect changing business goals. But it’s not only your sales incentive plans this data can benefit. Having an accurate, always-updated view into which services or solutions are selling enables MSPs to forecast future sales, fine-tune financial planning, shift focus towards more profitable offerings, adjust pricing models, and make data-driven decisions about staffing, resource allocation, and product offerings.

Plus, with greater insight into which vendor solutions are performing best, MSPs can have more meaningful conversations and negotiations with vendors, translating this data into better deals, more co-marketing opportunities, or enhanced support from key vendor partners.

The benefits MSPs stand to gain by utilizing automation for sales incentive plan agility are clear. So, what steps should you take as an MSP leader to start reaping those benefits? 

Designing a strategic sales incentive plan for MSPs: 3 steps

1. Address sales incentive complexities.

MSPs’ diverse range of products and services, varying vendor rebates or incentives, and fluctuating product margins can all make standard incentive plans inadequate. To manage these complexities, MSPs should adopt compensation management software that can handle intricate calculations and provide clear visibility into the incentive structure, allowing for immediate adjustments that accommodate changes in vendor rebates and shifts in product focus.

To effectively implement subscription-based offerings, MSPs will also want to design comp plans that reward long-term customer relationships over one-time sales, which may involve setting targets (and incentives) for customer retention and upselling additional services. 

Other ways to address sales incentive complexity include: 

• Incorporating vendor-specific incentives: Align sales incentives with specific vendor rebate programs by tying bonuses or additional commissions to the sale of products or services from key vendors.
• Building multi-service bundles into plans: Incentivize the sale of bundled services, which encourage reps to cross-sell complementary products (like security and cloud services) that add long-term value to customers.
• Create role-based incentives: Differentiate between sales roles, like new business vs. account management, and tailor incentives to each function’s unique contribution to revenue and client retention.

2. Leverage micro-changes to optimize profit. 

Micro-changes refer to subtle adjustments in incentive structures that can yield major impacts on overall financial outcomes. By fine-tuning factors like commission rates, performance thresholds, or bonus multipliers with strategic, small tweaks, MSPs can keep their sales strategies aligned with current market conditions and business needs. 

Micro-changes can also help you identify which precise sales behaviors drive the most profitable outcomes, enabling leaders to incentivize those actions specifically. That’s good for maximizing revenue and motivation, since sales reps will be able to see their efforts link directly to their earnings. 

Other ways to leverage micro-changes include: 

• Set dynamic performance thresholds: Instead of fixed targets, use flexible thresholds based on real-time market conditions, encouraging reps to consistently push for the next achievable goal.
• Adjust for seasonal demand: Make micro-changes based on seasonal trends, such as offering higher commissions during slower periods to maintain consistent sales momentum.
• Incentivize profitability over volume: Shift focus from sales volume to profitability by offering micro-bonuses for deals with higher profit margins, guiding sales efforts toward more lucrative opportunities.
• Experiment with short-term incentives: Introduce limited-time incentives, or “flash” bonuses, for specific services or products, allowing quick adjustments to sales behavior based on shifting priorities or promotions.

3. Enhance sales compensation transparency.

A transparent, clearly communicated comp plan ensures sales reps understand how their earnings are calculated and which strategic actions will most add to those earnings. To do this, implement clear communication channels that outline compensation structures, criteria, and, if your organization is utilizing an incentive comp software, access to the dashboard showing reps’ real-time performance and earnings.

After making sure all reps have access to this information, regularly update your sales teams on any changes to compensation plans or market conditions. That’ll foster an environment of openness, allow sales representatives to adjust their strategies proactively, and help minimize disputes and misunderstandings, promoting a more collaborative and motivated sales force. 

Other ways to achieve a transparent sales comp plan include: 

• Hold regular compensation review sessions: Schedule frequent review sessions where sales reps can ask questions and receive detailed explanations of their compensation structure.
• Offer predictive earnings tools: Equip reps with tools, like those offered by Latitude39, that predict potential earnings based on their sales pipeline, allowing them to keep tabs on how much they’ve made and could make.
• Encourage peer transparency: Create an environment where high-performing sales reps share best practices openly, giving others visibility into what drives success and how they can replicate it.

By embracing an agile and transparent sales comp approach, MSPs can remain responsive to industry changes, ensuring that their sales teams are motivated and focused on the most profitable opportunities. This adaptability not only drives growth but also builds resilience in an ever-evolving market.

Streamlining MSP incentive compensation with Latitude 39

For today’s MSPs, managing incentive programs transparently and efficiently is crucial for growth and competitive differentiation. Guided by years of partnership with leading MSPs, Latitude 39 offers a specialized solution that simplifies and scales the management of commissions, incentives, and bonuses, tailored to the unique dynamics of your industry.

MSPs like Latitude 39 because we:

• Help them achieve a 85%+ improvement in process efficiency, crucial for the fast-moving MSP landscape.
• Simplify comp complexity with a system that’s 10x easier to use than manual processes and purpose-built for business users, making for high adoption rates for MSP finance and operations teams..
• Effortlessly integrate with leading CRM solutions and efficiently interact with payroll, and bookkeeping systems for a smooth transition and immediate impact.
• Are pre-populated with templates that can b equickly tailored to MSP compensation plans
• Offer world-class customer support, just like you provide to your own clients.

Transform your MSP’s incentive compensation strategy and join the growing list of MSPs partnering with Latitude 39. Find more tips for a modernized sales incentive plan at your organization, and begin the journey to more efficient, transparent, and effective comp management with a Latitude 39 free trial.