Building a thriving IT or Cybersecurity Service business in Australia

As a business owner in the IT or Cybersecurity industry, you are no stranger to challenges. Not only do you play in a highly competitive landscape, but you also face significant disruptions on the technology front. However, as customer demand for IT and Cybersecurity services continues, there is room in the market for newcomers and existing players to grow. Arguably, the best way to leverage growth opportunities is via a Recurring Revenue business model, which allows for a predictable revenue stream and sets the foundation for sustainable future growth. 

In this blog, I will cover the steps necessary to grow a profitable IT or Cybersecurity business. I will cover how to establish a strong brand, choose the right vendor partnerships, simplify your service offerings, set the right prices, and learn from other industry leaders.

Recurring Revenue – setting the right price

As a service-based business, focusing on building a recurring revenue business model, benefits you immensely. Recurring revenue affords you a predictable stream of income, which allows you to effectively plan and scale in a structured manner.

Say you want to achieve a goal of $1 million in ARR. If you are early in your business journey, this number may sound daunting – I understand.

Let’s take a quick look at the maths:

• $1 million ARR requires $83,333 in monthly recurring revenue.
• We only need 9 customers paying $10,000 per month to get us above this goal.
• 14 customers at $6,000 each per month gets us to $84,000 in MRR.
• 17 customers at $5,000 per month is $85,000.

These are achievable in under 18 months at the rate of 1 new client per month, and there are plenty of SMEs in Australia who pay $5K or more per month to their MSP, and plenty of larger businesses who pay similar numbers for other ‘as a service’ IT or cyber offerings.

If your average monthly fees are $3,000, however, you need 27 retained customers to hit your $1M in ARR – and unless your business processes are mature and highly automated, there is a strong chance these clients will be less profitable.

Arriving at a high-value as-a-service offering with sufficiently broad appeal is a quick path to a strong valuation and fewer cash issues.

The importance of value-based pricing

During the early stages of your business journey, it may be tempting to underprice your services. While this approach may deliver a few quick wins amongst price-conscious customers, it is not a sustainable model. Operating under market rates will ultimately reduce your quality of service delivery, causing reputational damage and hindering your long-term growth – not to mention making your financial goals harder to achieve, as demonstrated in the previous chapter.

If you have a mix of project-based and managed services revenue, both should be profitable, and generally speaking, projects should have a fatter margin than managed services. 

However, don’t price based on costs. It’s vital that your pricing model accurately reflects the value you provide to your customers.

In the long term, cost-driven pricing is only scalable for highly commoditised businesses. The Australian IT and Cyber market is not the place for a business like this.

Value-driven pricing keeps you centred on outcomes, the value of the service to the customer – and then motivates you to become more efficient and effective in order to increase your profits. It is good for you, good for the customer, good for the market.

Simplifying your service offering

Value is best communicated simply.

Honing in on a select suite of key offerings makes you a go-to expert and simplifies your sales message. It is vital that you can deliver your services at a level of excellence and at a sustainable price point.

By keeping your offering simple, you avoid the significant resource strain often accompanying more complex offerings, and avoid diluting your value. With a simplified service offering, you can deliver at a high-quality level with consistency, end-to-end.

Developing a strong brand

I must not make the mistake of under-emphasising the need for you to build a brand.

We have thousands of small IT and cyber players in Australia. You do need to stand out from your competitors to succeed outside of your own little circle.

Prospective customers who come in the absence of a relationship or a referral need to see evidence of a brand they can trust. To choose you over a competitor, a prospective customer must trust each and every facet of your business they interact with, including your digital presence. Do not make the mistake of thinking your brand is merely your logo when, in fact, it is the promise of reliability you offer to your customers.

Choosing the right vendors

Choosing the right vendors to enhance your credibility and expand your service offering is crucial. Partnering with major vendors such as AWS or Microsoft delivers instant brand recognition.This is especially relevant if you are starting out and building your business from scratch. 

Small vendors also have a strong place in your business. Small vendors with few or no partners in the Australian region will often give more favourable terms to their partners, such as higher commissions or rebates, more leads, and even exclusivity (especially if you reach out to them). Even without exclusivity or better commercial terms, there is also value in partnering with niche players if they can enable you to offer something unique that sets you apart from your competitors.

So, what should you look for when evaluating vendors? Consider their market reputation. Will an association with them engender trust with your potential customers? Beyond reputation, are they compatible with your service offering? Last but not least: what will they contribute to revenue and profitability directly (through share of software or hardware revenue), and what will they contribute indirectly, through creating opportunities for you to deliver services?

Benchmarking against industry leaders

One benefit of operating in a crowded market is that those who have come before you have already made mistakes and developed solutions to common challenges. 

Here are six ways you can learn from industry leaders:

1. Seek out companies that operate at the level you wish to reach.
2. Identify businesses that have scaled steadily, have a consistent customer base and have a good reputation for high-quality service. 
3. Utilise LinkedIn to analyse their history, growth milestones, strategy and team structure.
4. Periodically monitor their website to assess their market positioning and service evolution. 
5. Keep up to date with their blogs and social media posts to review their thought leadership, case studies and company culture. 
6. Listen to industry-relevant podcasts and attend industry events.

Conclusion

Finding success in the IT and Cybersecurity services industry may come with a fair share of challenges; however, there is much opportunity to succeed for those willing to take a considered and structured approach to business growth. Building a successful business involves adopting a recurring revenue business model, developing a compelling brand identity, choosing the right vendor partnerships, learning from established leaders, simplifying offerings, value-driven pricing, and effective marketing. Focusing on these core principles will set you on the path to long-term success and stability in the tech industry.

Partnering with Resonate to accelerate your IT or Cybersecurity Business success

We understand the unique challenges and opportunities of growing an IT or Cybersecurity business in Australia. Our experienced team has a proven track record of guiding companies through these critical steps. Visit our Strategy, Marketing and Sales pages to learn more about what we do or get in touch to discuss how Resonate can help you achieve your business goals. 

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