Maximizing and sustaining long-term profitability for your managed services company requires you to strike a delicate balance among your labor expenses, what you charge clients, and the service levels your tech team provides. We will now explore one of these levers: engineer salaries and how they relate to your MSP’s profitability.
Whether your MSP focuses on IT infrastructure, application development, project management, outsourcing, hosted services, or something else, one truth remains universal: for your MSP to flourish, your engineers must cover their salaries, their share of the overhead, and the profit threshold you have deemed reasonable given the risks you run as a business owner.
That means each engineer should create monthly billings equal a multiple of their salary.
Even if you have to tweak this rule of thumb to account for special situations, it can be helpful to identify which technicians are contributing to profits and which create liabilities. Market demand limits your flexibility when it comes to engineers’ pay. Each will fall into a fairly tight range based on their experience, longevity with your company, your community’s standard of living, and other factors. As a result, your focus to drive revenue growth while keeping expenses at bay, must be informed by accurate engineer productivity information.
To truly optimize your billable rates, you need to understand what you are paying your engineers and what you are billing. You can’t optimize performance until you measure it. And you can’t measure it without the right data. MSPCFO digs deep into your data with powerful, granular reports that give you critical insights into engineer profitability and how that relates to agreement pricing.
We are eager to show you how your MSP can become as profitable as possible. Reach out below and we’ll be happy to schedule a personalized demonstration – just choose the time and date that works best for you below.
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