MSP Experts Share Their Most Important Metrics and KPIs

MSP Experts Share Their Most Important Metrics and KPIs

By Contributing Writer
Stuart R. Crawford

Running an MSP business demands considerable attention to detail. It's easy to lose track of the financial aspect of your MSP business when you're responding to the questions and concerns of your clients, responding to new leads, enhancing your managed IT services, and outlining new projects. When looking to grow and scale your managed service provider (MSP) business, the best move is to develop a strategy that is driven by data and monitoring trends over time. A data-driven decision can lead to much better choices compared to a decision that is made based on a gut feeling.

One of the most-used and easiest ways to monitor your business performance is to implement Key Performance Indicators(KPIs).  KPIs accumulate several financial or operational metrics that show the efficiency of your business. By implementing KPIs, you will have the metrics you need to define any potential issues, find growth factors, and eliminate ineffective operations.

While Key Performance Indicators (KPIs) are used often, they are often misunderstood in terms of business and analytics. I reached out to MSP experts to gain insight into the KPIs MSPs should be looking at to gauge the current and future health of their managed service business.

Take some time to read and implement the strategies of the MSP experts in this post. I am positive that you will find KPIs that can have a positive impact on your business.

Aaron Kane, Chief Executive Officer, CTI Technology

Below are a few KPI's we use for organizational health.

  • Service Gross Margin
  • This is a critical calculation for MSPs to understand if their service department needs more revenue or expense reduction such as tools and employees.
  • Agreement Gross Profitability
  • Evaluate each agreement to make sure the clients are not over-consuming your team's service and burning out the staff.
  • CSAT
  • Happy customers equal happy business.

A combination of each of these KPIs can help an MSP owner find the right balance between staff and revenue, most importantly identifying those clients who are not aligned with your technology as an asset strategy!

Anthony Buonaspina, BSEE, BSCS, CPACC, CEO and Founder, LI Tech Advisors

AT Li Tech Advisors, customer service has always been our top priority and our KPI's are designed and utilized to regulate our responses to certain clients.

These KPIs also allow us to negotiate mutually beneficial service agreements with our clients and help fortify relationships with certain clients and sometimes eliminate clients. The primary KPI we utilize is called our "Time and Profitability Matrix" (TPM). The data that feeds this matrix is garnered from other KPI sources such as client rating, W2 ratio, and others.

The bottom line is that we now know and can rate clients based on their utilization of our support services, allowing us to adjust their agreements accordingly that best benefit both the client and my company. The typical adjustments we have been recommending focus around adding additional services enhancing cybersecurity, especially with the continuous rise in cyber-attacks. Most MSPs, however, suffer from what we call in this industry a "race to the bottom", where more and more services are expected from the MSP but for the same agreement price or many times even less.  Also, one bad client can sink the entire ship, so it's important to monitor not just client satisfaction and agreement levels, but garner feedback from our support team and our KPI metrics.  

Utilizing our TPM, we are able to adjust our agreements accordingly with great accuracy since our matrix gives us data down to the hour utilized and also allows us to either throttle low-performance clients or eliminate them if necessary. We would rather lose 5 bad clients that don't follow our advice than 1 good one and our TPM KPI allows us to approach these bad clients and make adjustments in our agreements with them and if they are unwilling to accommodate the recommended changes we recommend, then we will off-board them as a client. 

Ashu Singhal, Founder and President, Orion Network Solutions

We look at the inverse P/E ratio for each client. For example, how many hours are spent on each client (price or cost) and how much revenue we generate. We only include direct servicing, license, and cogs costs to keep this simple. We also further split the Inverse P/E ratio by recurring revenue and non-recurring revenue components to get a better gauge of stickiness.

Brandon Miller, Chief Operating Officer/Chief Financial Officer, The Miller Group

We also look at all of our MSP clients from an efficiency standpoint, both individually and as a whole, to determine A) what is our overall staff costs (salary + overhead + misc) for anyone that is involved in supporting that client and compare that to B) the overall number of hours it takes to support that client. We then take that a step further and turn our vCIO's focus on the clients that are lopsided % wise to see what we can do to reduce the number of hours needed to support them since a major part of our MSP client base is on an "all-you-can-eat" support model. This is probably standard but this is what we use to figure out where we were and where we are going in a quick number.

From a financial sense, we also focus on what MRR we need to have with our goal being to have that $ be our break-even, and then all one-time (projects, billable labor, hardware, consulting, etc) work become "icing on the cake".

Holden Watne, IT Consultant, Generation IX Technologies

Besides customer lifetime value and customer acquisition costs, we meticulously measure monthly recurring revenue (MRR). It allows us to track our growth and value of the company most accurately. Generation IX had a 40% increase in MRR from January 2021 to January 2022. Not only should you track the MRR, but what percentage is IT support versus other managed services like backups or a SIEM. When tracking MRR, it is important to know how many clients account for each percentage. We strive to have a healthy balance of clients and not all our eggs in one basket. I understand MRR is a common metric to track but there is a lot more that goes into it than one number.

Another metric we track is employee training hours. We have an employee training program called Elevate and provide access to ITProTV to all employees. The program provides dedicated hours during the workday for training. If we aren't finding time for our employees to develop, we are not going to grow as a company and we are not going to retain our employees. With the ever-evolving skillset necessary for IT, it is important for us to track the hours dedicated each month to employee training and development. It is great for the company and the individual.

Justin Sampsel, Vice President of Sales and Business Development, ExcalTech

There is a multitude of performance indicators we track. A couple of the bigger ones are below in no particular order:

  • Topline/bottom line Revenue
  • New business (new logos added) and additional MRR
  • Service Level Agreement times (whether we are meeting our response times)
  •  Time since a managed services client was last breached (in our case it's been 9 consecutive quarters we've gone without any of our 800 clients being impacted by ransomware) which we are very proud of!
  • Service Ticket counts, descriptions, and number of daily inbound calls
  •  Client renewals and retention
  •  Licensing counts
  •  Ticket resolution and escalation times
  •  Sales outbound contacts and conversion rate
  •  Website traffic
  •  Client hardware/software inventory and age for support and patching
  •  Quarterly revenue from channel sales and residual payments
  •  Client complaints (and if there are any recurring themes)
  •  Team certifications, training, and credentials
  •  Client and channel partner referrals

At this point, you are probably fascinated by this abundance of knowledge! I hope you have enjoyed reading these awesome strategies. A special thanks to the MSP experts who willingly shared their knowledge and experiences with me.

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