All World Class MSPs take special interest in their cost drivers. Where are the funds being spent, and what expenditures could be eliminated? This is a major part of gaining command over your business.
What does it mean to gain command? It’s about having a 360-degree view of your MSP profitability – how you package and price your offerings, the impact of your service delivery and the profit margins you generate. When you pay attention to these key aspects of your business, you gain the knowledge to improve your operations. And, by working to gain command of your business, you reap three important benefits.
The Benefits Of Gaining Command
- Boost profit margins. Increasing your MSP profit margins is often easier said than done. Focusing on your service offering and delivery is an essential step toward bringing in more revenue.
- Increase leverage. By gaining command and tightening up your processes, you also gain leverage. This is the relationship between the number of people you have and the amount of service revenue you generate. When you have complete visibility into how your company is working, improve your processes and capitalize on your Super Power (your competitive advantage), you’re able to charge more for your services. Determining the correlation between an hour worked and a dollar billed is sometimes difficult for MSPs.
- Generate ATDIYPBA. Finally, gaining command helps you generate more ATDIYPBA, or After Tax Dollars In Your Personal Bank Account. This is one of the reasons why entrepreneurs go into business in the first place. You have a big idea or certain skills that you think have value and are going to make money.
Increasing profits, boosting leverage and generating more personal funds are all benefits you want to reap now, right? One step you should take today to start gaining command of your company is tracking key profitability indicators that impact your MSP’s revenue and using those metrics to make changes.
Get your calculators ready. We’re going to dive into your MSP Smart Numbers.
What Are MSP Smart Numbers?
Each quarter, there are important numbers you should follow to evaluate your MSP’s business growth. These are MSP Smart Numbers. What impact do they have on your profits? Smart Numbers are the key performance indicators (or KPIs) that enable you to manage the major cost drivers for your business.
These costs are based on five different values in your company:
- Operations
- Profit
- Revenue
- Leverage
- Sales
MSP Smart Numbers You Should Follow
Based on these categories, there are 20 MSP Smart Numbers that you should be evaluating on a quarterly basis.
Operations
- Reactive tickets/tech per month that you closed
- Total close percentage
- Reactive tickets per endpoint per month that are new
- Average resolution time
- Endpoints supported
- Percentage of service that’s reactive
Profit
- Quarterly net profit
Revenue
- Percentage of revenue from services
- Percentage of service from monthly recurring revenue
Leverage
- Annualized service revenue per employee
- Annualized service revenue per technical employee
- Average all-in seat price
- Average monthly recurring revenue
Sales
- New monthly recurring revenue added
- Lost monthly recurring revenue (or churn)
- Net monthly recurring revenue gain
- Number of sales appointments made
- Number of first-time appointments
- Sales call close rate
This is an important exercise, but many fail to follow these MSP numbers. When you look at your Smart Numbers, you’ll determine a few things, including where you should invest more resources and what areas of your business could be more profitable.
Put your Smart Numbers into a worksheet, and share the information with your team members during your quarterly business review.
When you start recording these numbers on a quarterly basis, it becomes easy to see trends and track them over time. Once you’ve evaluated the data, look for gaps in your MSP profitability indicators and take steps to tighten up your processes. For example, if you see that you’re not bringing in enough monthly recurring revenue, focus your efforts and resources on improving sales.
By tracking these metrics, you’ll increase insight into your business operations and the overall command you have over your company.
Want to learn more about boosting your profitability and becoming a top MSP? Download our free MSP business planning worksheet.
