This blog summarizes insights from a recent joint webinar between Mark Loveys, CEO of Datagate and Brent Reeves, Co-founder & CRO of CereTax, exploring the agent and white-label models for MSPs and how these strategies can enhance profitability in the telecom sector.
In today’s telecom landscape, MSPs have two primary models for selling telecom services: the agent model and the white label model. Each offers distinct benefits and challenges, and understanding the differences is key to maximizing profits.
At the core of this discussion are two crucial technologies that make it easier for MSPs to navigate the complexities of telecom billing and tax compliance—Datagate and CereTax.
About Datagate and CereTax
Datagate simplifies telecom billing for MSPs, enabling them to rate and bill for telecom services like unified communications (UCaaS), VoIP, tolls, cellular, data plans, and other subscription-based services. With seamless integration into widely-used software like HaloPSA, ConnectWise, Datto Autotask PSA, and more, Datagate eliminates the need for standalone billing systems. This integrated approach allows MSPs to unlock new revenue streams, scale their business, and streamline their operations.
CereTax, on the other hand, specializes in automating sales tax for complex industries, including telecom. Integrated with Datagate, CereTax handles the often-overwhelming task of calculating the various taxes, fees, and surcharges that MSPs need to collect. Whether it’s telecom services, hardware, software, or professional services, CereTax automates tax compliance, helping MSPs reduce their IT burden and ensure accuracy across multiple jurisdictions.
By combining the power of Datagate and CereTax, MSPs can easily manage their billing while navigating the complexities of telecom tax compliance, allowing them to focus on growing their business.
The Growing Role of MSPs in Telecom Services
The rise of Managed Service Providers (MSPs) has been a standout business trend in recent years, accelerated by global events like COVID-19. More and more businesses are opting to outsource their IT needs to MSPs, allowing them to focus on their core operations while MSPs handle the complexities of technology management. This shift has caused the MSP model to thrive, even in challenging times.
In fact, at a recent ConnectWise IT Nation conference in Sydney, Australia, industry experts shared that there are now over 400,000 MSPs operating globally—a number that’s steadily increasing. MSPs are gradually replacing traditional in-house IT departments, taking over responsibilities like data management, cybersecurity, disaster recovery, and technical support. However, one area that remains a largely untapped opportunity for many MSPs is telecom services.
Historically, IT departments managed both phones and communications, along with data circuits and network infrastructure. Today, this opens a window of opportunity for MSPs to extend their service offerings into the telecom space, including unified communications (UCaaS), VoIP, and telecom billing.
Some MSPs have embraced this telecom opportunity and are seeing strong revenue growth from it, while others remain hesitant. This webinar aimed to clarify the benefits of selling telecom services and provide insights that might encourage more MSPs to explore this profitable avenue.
Agent vs. White Label: Two Models for MSPs Selling Telecom Services
When MSPs decide to provide telecom services, they face a key decision: how to structure their offering.
The two most common models are the agent model and the white label model. Each approach comes with its own set of advantages and challenges, particularly regarding profit margins, control, and brand visibility.
In the agent model, MSPs fully outsource the provision of telecom services. As Mark Loveys, CEO of Datagate, explains:
“[The agent model is] when they basically get somebody else to provide the telecom services, to take care of the tax and compliance side of things, take care of the service delivery, even bill the service out and pay them a commission.”
This model offers a simpler path, as MSPs don’t need to worry about the operational complexities of delivering telecom services themselves. However, the trade-off comes in the form of lower margins and less control. The MSP’s brand is also less prominent since their customers understand that the telecom services are being provided by another entity. This approach, while easy, limits the MSP’s ability to maximize their profits.
On the other hand, the white-label model offers a more profitable and brand-centric approach. In this model, MSPs take full ownership of the customer relationship and manage telecom services under their own brand. As Loveys points out:
“The MSP uses a product like Datagate with a service like CereTax behind Datagate to take full control over the customer relationship, do the billing themselves, do it all under their brand, the MSP brand.”
While the white label model requires MSPs to have more systems in place, solutions like Datagate and CereTax are designed to make this process seamless, handling telecom billing and tax compliance with ease. This model allows MSPs to enjoy higher profit margins while strengthening their brand presence and retaining more control over the customer experience.
Loveys concludes: “Brent and I, our companies are really all about [making] it really easy [to] enable, the MSP to make a lot more money out of it.”
Check out our blog post on how to maximize your telecom revenue by choosing the right model.
The Growing Need for Differentiation: Embracing the White Label Model
As the managed service provider (MSP) market continues to grow, many MSPs find themselves exploring various models for selling telecom services. This need for differentiation has never been more critical.
The white-label model allows MSPs to consolidate services under their brand, increasing customer loyalty and making it harder for competitors to encroach on their territory. Brent Reeves, Co-Founder & CRO of CereTax, highlights this strategy:
“The more services you can provide on your own label, on your own invoice, it just creates one more barrier to entry, one more barrier to the competition.”
See how white-label services can enhance your brand identity.
By adopting the white-label approach, MSPs can not only enhance their relevance but also solidify customer relationships. While the operational demands of this model may seem daunting, Reeves reassures:
“Those operational needs are minimal when you compare to the increase in valuation of their businesses just by creating that recurring revenue… and the stickiness of their customers.”
The telecom industry is recognizing that MSPs are becoming key players in the distribution of telecom products, further highlighting the importance of this model. With the right systems and support in place, MSPs can successfully transition to this approach, positioning themselves for growth and enhanced profitability.
The Financial Benefits of the White Label Model
When it comes to the financial landscape of Managed Service Providers (MSPs), the choice between the agent model and the white label model can significantly impact profitability.
Loveys emphasizes that, “there is a lot more money to be made in white label. The margins are a lot higher than they are in the agent model.”
While it’s challenging to provide specific numbers due to varying providers and deal structures, the message is clear: greater control equates to greater potential for revenue.
In the white label model, MSPs sell the full gross value of the telecom services, enhancing their business valuation tied to recurring revenue. Conversely, the agent model offers only a commission based on a percentage of revenue, which ultimately results in a lower business valuation.
Loveys highlights the importance of this aspect, stating, “If you’re in the white label model, you’re selling the full gross value of the telecom services. Whereas if you’re in the agent model, you’re only getting a commission.”
Additionally, aligning with effective tax solutions, such as CereTax, is crucial. Proper tax management can help MSPs avoid potential pitfalls during business valuations or acquisitions.
Reeves, notes their involvement when businesses are anticipating tax liabilities: “We get involved a lot of times when there is a business valuation going on, or someone’s trying to anticipate tax liabilities.”
By leveraging white-label services and integrating comprehensive tax solutions, MSPs can not only boost their profitability but also strengthen their business foundation for future growth. This financial empowerment is essential in an increasingly competitive market, allowing MSPs to differentiate themselves and build stronger relationships with their customers.
Understanding Business Valuation: The Impact of Revenue Models
The choice between the agent model and the white label model profoundly affects the valuation of an MSP’s business.
According to Reeves, the perceived value of commissions in the agent model is minimal.
He notes, “agent commissions are almost valued at zero because they’re looked at as personal-relational.”
This means that when the key individual facilitating those commissions leaves, so does the revenue stream, leading to a stark devaluation of the business.
In contrast, the white-label model allows MSPs to own their customer relationships fully.
Reeves emphasizes that ownership of customer relationships translates into significantly higher valuations:
“When you do own that customer because they’re being billed on your invoice, then those are usually looked at as a multiple.”
Instead of merely receiving commissions, white-label MSPs are seen as businesses with intrinsic value, often trading at multiples of their earnings before interest, taxes, depreciation, and amortization (EBITDA).
This distinction is crucial for potential acquirers, who prefer to buy a business with established customer relationships rather than a person.
Reeves explains, “They’re buying from the business. They’re not buying from, you know, “John”,” suggesting that relying on individual relationships can be risky and unattractive for investors.
Reeves further advocates for the white label model, saying,
“to me, if I was on the other side of this, there would be no question that I would be pursuing the white label model versus an agent model.”
This sentiment resonates with many MSP owners who view their business as a long-term investment for retirement or generational succession. For legacy businesses, which often aim to pass down their hard-earned success to the next generation, the white-label model serves as a strategic safeguard.
Reeves explains that this approach is “another way to strategically protect that when you are trying to pass it down to the next generation potentially.”
By adopting the white label model, MSPs not only enhance their financial prospects through improved margins and revenue but also strengthen their overall business valuation. This shift towards ownership fosters sustainability and resilience, making their business more appealing in the eyes of potential acquirers. Understanding these valuation dynamics is essential for MSPs looking to thrive in a competitive market.
Overcoming Barriers in Telecom Reselling: The Role of Datagate and CereTax
Entering the telecom reselling market presents unique challenges, particularly when competing against established telecom giants. A key hurdle is producing professional, detailed invoices that meet industry standards, while also handling the complexities of telecom billing.
Datagate simplifies this process by enabling MSPs to customize invoices to include telecom-specific details, such as overage charges, international call ratings, and bundled services. This customization allows MSPs to compete directly with large telecom providers, leveling the playing field.
In addition to invoicing, managing tax compliance can add complexity, especially when bundling services. Datagate’s partnership with CereTax helps MSPs navigate these challenges by providing the systems and guidance needed to manage telecom taxation efficiently. This collaboration ensures that MSPs can meet compliance requirements without becoming tax experts themselves, offering support every step of the way.
Another advantage of the white label model is the control MSPs have over pricing and margins. Unlike the agent model, where prices are set and commissions are fixed, MSPs in the white label model can dictate their pricing strategies to protect margins and increase profitability.
By streamlining billing and tax processes, Datagate and CereTax free up MSPs to focus on growing their business. This partnership not only simplifies operations but also helps MSPs enhance their business valuation, potentially increasing it significantly by offering telecom services. With the right tools and support, telecom reselling becomes a lucrative opportunity for MSPs looking to expand their service offerings.
Streamlining Telecom Billing for MSPs
When diving into telecom reselling, MSPs face the challenge of competing against established telecom giants. An essential part of this is producing professional, informative invoices that cater to telecom-specific requirements—something distinctly different from typical MSP billing.
☎️ Datagate’s Role in Simplifying Billing
At Datagate, we empower MSPs to directly compete with larger telecom providers by enabling customizable invoice formats that encompass standard pricing elements such as overage charges, international call ratings, and bundled services. We understand that tax implications can add complexity, but with our solutions, MSPs can navigate these challenges efficiently.
🦾 Automation at the Forefront
In today’s fast-paced environment, hyperautomation is becoming a key trend. MSPs increasingly seek solutions that automate repetitive tasks, from billing to tax calculations. Our systems facilitate this by allowing MSPs to run billing cycles effortlessly, making data extraction and processing efficient and hassle-free.
🤑 Flexibility and Creativity in Pricing
Telecom regulations dictate that invoices must meet specific standards, but they also allow for flexibility. MSPs can create unique pricing plans tailored to their clients’ needs, such as offering free calls to specific destinations to attract new business. This flexibility can lead to significant opportunities in both telecom and IT services, enabling MSPs to win more contracts.
💪 Empowering MSPs to Succeed
The integration between Datagate and CereTax is designed to alleviate the burdens of compliance and billing for MSPs. Our integrated solutions ensure that MSPs can focus on their core business while we handle the complexities of billing, taxes, and invoicing. With our combined expertise and support, MSPs can maximize their potential and drive substantial growth by expanding their service offerings.
Conclusion
Ultimately, the decision between the agent and white label models comes down to how much control and profitability an MSP wants over their telecom services. The agent model offers simplicity, with outsourced responsibilities and predictable commissions, but it comes at the cost of lower margins and limited brand visibility. In contrast, the white label model empowers MSPs to take ownership of their telecom offering, providing the flexibility to set pricing, build stronger customer relationships, and significantly increase profitability. While it requires more operational oversight, the long-term financial and brand benefits of the white-label model make it a compelling choice for MSPs looking to differentiate themselves in an increasingly competitive market.
For MSPs ready to embrace the white label model, solutions like Datagate and CereTax make the transition easier by streamlining telecom billing and tax compliance, allowing them to focus on growth while delivering telecom services under their own brand.
If you’re ready to take control of your telecom offering, explore how solutions like Datagate and CereTax can help you seamlessly transition into white label reselling. Book a demo today to learn more and start enhancing your revenue today!
