Expanding Your MSP to Another City: How to Choose the Right Location and Avoid a Costly Misstep

So, you’ve got your MSP business humming along nicely, and you’re ready to take the plunge into a new market. But before you start ordering “Welcome to [New City]” banners, let’s talk about how to choose the right city for expansion—and just as importantly, how to avoid a disastrous move to the wrong one. After all, just like your niche, the right location can make or break your success. And as you learned from my earlier post, trying to be everything to everyone doesn’t work—so why would you treat your expansion any differently?

Step 1: Define Your Ideal Customer Profile (ICP) and Niche (Again!)

First things first: you’ve already nailed down your niche and your Ideal Customer Profile (ICP) at home, right? Good. Now, it’s time to ensure that the city you’re eyeing aligns with that ICP. For example, if your MSP specializes in healthcare IT services, you might want to avoid expanding to a city where healthcare isn’t a dominant industry. Or if you’re all about legal IT, you’re probably not going to set up shop in a town known for its…well, lack of lawyers.

Pro Tip: Revisit your niche and ICP to make sure they’re just as strong in the new location. If you sell to everyone, you might as well set up a lemonade stand on the side—you’ll have just as much focus.

Step 2: Research Potential Cities Like a Detective on a TV Show

Once you’ve narrowed down your list to cities that align with your niche, it’s time to dig deep. And by deep, I mean Sherlock Holmes level deep.

• Industry Presence: Does your target industry have a significant presence in this city? For example, if you’re focused on manufacturing IT services, a city with a strong industrial base is a must.
• Economic Stability: Is the city’s economy growing, stable, or in decline? A booming economy means more businesses with IT needs, while a struggling one might mean you’ll be the only business in town with any growth.
• Competitor Landscape: How many MSPs are already established in the area? If the market’s oversaturated, you might struggle to gain traction. Conversely, a city with no competition might have a good reason for that—like a lack of demand.

Pro Tip: Don’t just Google this stuff. Reach out to local business groups, chambers of commerce, and even some potential customers to get the inside scoop.

Step 3: Visit the City – Virtually and In Person

No amount of research can replace actually setting foot in the city. If it feels like a good fit on paper, take the next step and visit. Talk to local businesses, tour potential office spaces, and get a feel for the local vibe. Is this a place where you could see your MSP thriving? If you feel out of place, your business might too.

Pro Tip: Use online tools like Google Street View for an initial virtual tour, but don’t skip the in-person visit. There’s only so much you can glean from the internet (and no one wants to be catfished by a city).

Step 4: Decide Whether You Need a Field Office or Can Go Remote

One of the big decisions in expanding to a new city is whether you need a physical presence or can operate remotely.

When a Field Office Makes Sense:

• Face-to-Face Industry: If your target clients value in-person interactions, a field office can be essential. This is often the case in industries like healthcare or legal, where personal trust is key.
• High-Touch Service Needs: If your services require a lot of onsite support—like managing complex server setups—having a local team is a big advantage.

When Remote Works:

• Tech-Savvy Clients: If your clients are comfortable with remote management tools and digital communication, you can save a bundle by forgoing a physical office.
• Cost Concerns: Office space isn’t cheap, especially in major cities. If you can provide the same level of service without a physical presence, your bottom line will thank you.

Pro Tip: Consider a hybrid approach. You could start with a remote team and open a field office later if the need arises.

Step 5: Test the Waters Before Diving In

Before you go all-in on your expansion, test the market. Start by offering remote services to clients in the new city to gauge demand. This can help you determine if there’s enough interest to justify a physical presence.

Pro Tip: Use targeted marketing campaigns in the new city to drum up interest and see what kind of response you get. If your niche is solid, you should start seeing some traction even before you’re officially there.

Step 6: Make Your Move – But Have an Exit Plan

If all signs point to “go,” it’s time to set up shop. But—and this is crucial—have an exit strategy in place. Sometimes, despite all the research, things don’t go as planned. Maybe the market isn’t as strong as you thought, or competition is tougher than expected. Whatever the reason, don’t be afraid to pull the plug if things aren’t working out. Better to retreat and regroup than to stubbornly push forward and bleed resources.

Pro Tip: Treat the first year like a trial run. Measure everything—customer acquisition costs, churn rates, profitability—and be prepared to pivot if needed.

Wrapping It Up

Expanding your MSP to a new city is exciting, but it’s also a big gamble. By taking the time to align your expansion with your niche and ICP, thoroughly researching potential cities, and being strategic about whether to set up a physical office, you can increase your odds of success. Just remember: trying to be everything to everyone never works, whether it’s in your original city or your new one. Focus on what you do best, and bring that expertise to the new market. If you do it right, you’ll be selling global in no time. And if you do it wrong? Well, there’s always that lemonade stand idea…