5 Reasons Your MSP May Not Be As Profitable As It Could Be

Possible Culprits Include Pricing, Utilization, Workflow

Everything looks great on the surface. Your average customer lifetime value and first-contact resolution rate sit above industry benchmarks. Your profits are growing each quarter. But you suspect you’re leaving money on the table. The bad news is, that you probably are; the good news is that the answer can be found with proper analysis of your PSA data. That means digging below the surface of aggregate data to investigate individual agreements. MSPCFO extracts granularized information from your data so you can see what drives profits and where problems exist. Here are some suboptimizations the MSPCFO platform can uncover:

Reason #1: Excessive Engineering Demand

A recurring-service agreement can deliver low profitability when the client requires more service time than you budgeted when you priced your services. FFA Monthly Tracking – one of more than 50 reports MSPCFO generates – highlights clients that overuse the managed services time you provide, compared to the rate they are paying. As a bonus, reports point out which clients underutilize your services so you can proactively suggest additional services you provide, generating goodwill and mitigating flight risks.

Reason #2: Undue Equipment Repair and Maintenance

Clients’ old, outdated, and legacy computers, peripherals, and other office machinery may force your engineers to devote significant time to keeping equipment up and running. MSPCFO reports drill into the work that your MSP delivers – down to ticket level – so you can easily identify where replacing a printer, upgrading a server, or making other equipment investments would not only create greater efficiency for your client but also alleviate the strain on your resources.

Reason #3: Underpriced Agreements

MSPs often jump to the conclusion that they need to charge more to reach their profitability goals. Sometimes they are correct, but they can’t know for sure unless they run the numbers through MSPCFO’s data analytics filters. A client’s consistent, rapid expansion may simply outgrow the fixed-fee agreement you have in place. More users, more workstations, and additional equipment necessarily lead to greater service demand. MSPCFO’s Per-Client P&L Report clearly demonstrates when it’s time to increase a client’s fees.

Reason #4: Undercharging for Non-recurring Projects

MSPs tend to underprice their services for the assistance they provide on client projects that fall outside their existing agreements. These may include vendor-selection consultations, cloud migrations, platform upgrades, and other change-management tasks. While recurring revenue pays the bills, covers payroll, and delivers most of your profit – MSPCFO’s Project P&L report can show if there is a mispriced project responsible for sapping profits and more.

Reason #5: Workforce Incongruity

Insufficient engineering resources can cause service gaps, while an excessive engineering workforce may add unnecessary overhead costs that detract from profitability. Too many engineers or an improper mix of experience levels can lead to senior-level employees performing entry-level work – an inefficient use of their time. A shortage of experienced engineers, on the other hand, may force less-skilled workers onto high-level projects, where they require more time to complete each task. MSPCFO Member Billing reports parse revenue per engineer, the percentage of billable time they log, and the kinds of projects they manage. 

 

How You Can Apply These Insights To Your Business Now

Understanding your profitability drivers and drags equips you to make the strategic decisions and operational changes that make your MSP business more efficient. The data insights MSPCFO provides give you the actionable intelligence you need to make better-informed decisions every day such as moving more work away from the break-fix model of business and refocusing capacity on recurring-revenue managed services. 

 

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