From Industry Averages to Internal Alignment: A Smarter Way to Measure MSP Performance

Chasing the Wrong Metrics Is Costing MSPs Profitability

Benchmarking is deeply ingrained in the MSP industry.

Everywhere you look, there are reports, averages, and “standard” targets telling MSPs how they should be performing. And while those numbers can be helpful, they only tell a part of the story.

That tension came up during an end-of-year webcast where Larry Cobrin joined Parker Kabak, CTO of MSP+ to  discuss how MSPs measure performance, profitability, and efficiency — and why well-intentioned efforts to utilize benchmarks may miss the mark.

The takeaway was clear: the most valuable benchmarks for an MSP are internal, not external.

The Problem with Industry Benchmarks

Industry benchmarks are both valuable and provide insight on the industry. 

We should be aware, though, that while industry benchmarks promise objectivity, but they assume one critical reality: that all MSPs are the same.

Different verticals, service depths, pricing models, and client expectations all influence metrics like effective hourly rate and margin. When those differences are stripped away, benchmarks can become misleading comparisons.

The result? MSPs comparing themselves to numbers that weren’t designed for their business — and drawing conclusions that don’t hold up in practice.

How External Benchmarks Can Lead MSPs Astray

When MSPs rely too heavily on industry averages, it often leads to reactive decisions:

• Cutting costs to “get closer to average”
• Raising prices without addressing delivery inefficiencies
• Assuming underperformance when the issue is actually inconsistency

Benchmarks and averages can potentially hide what’s really happening inside the business. They offer a snapshot — not an explanation.

Example: Effective hourly rate is a great example of how external benchmarks miss the full story. An MSP reporting a $200 effective rate may look more profitable than one at $150 — but that comparison falls apart without understanding what’s included. The $200 MSP may be bundling a broader managed service that includes things like:

• More proactive support and higher-touch service
• Additional security tools or compliance requirements
• Greater engineer involvement per client
• Onsite visits or covered projects

Meanwhile, the $150 MSP may be delivering a narrower scope with fewer inclusions. When those differences are ignored, the effective rate becomes a misleading comparison. The number itself doesn’t explain value, cost structure, or profitability — only what was billed relative to time, not what was actually delivered.

Why Internal Benchmarks Matter More

During the webinar, the conversation shifted toward a more actionable approach: benchmarking against yourself.

Internal benchmarks focus on consistency:

• Similar clients should produce similar margins
• Engineers delivering the same services should generate comparable outcomes
• Identical agreements shouldn’t behave wildly differently

When those things aren’t true, the issue isn’t industry positioning — it’s internal alignment.

Parker Kaback of MSP+ explained during the webinar discussion:

“Benchmark to yourself. Your own data is your par. That’s the number that actually matters.”
— Parker Kaback

What MSPs Should Be Measuring Internally

Rather than chasing industry averages, MSPs gain far more insight by comparing:

• Client profitability against similar client profiles
• Margin performance across comparable agreements
• Service delivery consistency across engineers
• Variance in support consumption for similar contracts

These internal comparisons surface patterns that external benchmarks never will.

What Internal Benchmarks Reveal

Looking inward often uncovers uncomfortable — but valuable — truths:

• Some clients quietly subsidize others
• Margin pressure often comes from delivery behavior, not pricing
• Inconsistencies in service execution drive profitability gaps

These insights are difficult to spot when MSPs only look outward. Internal benchmarks expose where expectations, pricing, and delivery are misaligned.

Turning Insight Into Action

Internal benchmarks don’t just explain what is happening — they inform what to do next.

They help MSPs:

• Adjust pricing with confidence
• Identify where service delivery needs to be standardized
• Decide which clients need to be fixed, repriced, or restructured
• Reduce margin pressure without guesswork

Parker reinforced:

“Once you know your own benchmark, everything else becomes a lot clearer.”
— Parker Kaback

Watch the Full Conversation

This blog captures just one theme from the broader discussion.

👉 [Watch the full webinar recording here]

The conversation dives deeper into:

• Why margin pressure is inevitable for MSPs
• How internal data reveals hidden profitability risks
• What consistent service delivery really looks like in practice

Final Thought: Measure What You Can Control

Industry benchmarks are interesting.
Internal benchmarks are actionable.

The most successful MSPs don’t manage to an average — they manage to consistency. And that starts by understanding their own data, their own delivery, and their own clients.

When MSPs shift their focus inward, better decisions follow.