ENTREPRENEURIAL TOOLBOX CONT .
6 . Customer Retention
While some MSPs like to focus on churn rate , Farr prefers retention , strictly measuring the percentage of customers he keeps . “ If I start the year with 100 customers , how many of those 100 do I still have at the end of the year ?” He considers it “ cheating ,” for example , if you acquired eight new customers and lost 10 , and say your churn rate is just two . “ Losing 10 customers is a service problem ,” Farr says , “ and [ MSPs have ] deluded themselves that just because they sold more , they ’ re not that bad .” Acquiring new customers is just part of the job , he says , but retention is a more telling metric .
Farr recommends looking at this metric monthly and strictly measuring MRR .
Your Goal : 95 % ( 90 % minimum ) 7 . Employee Retention
Technology is important , but in the end , MSPs are about people and relationships , so Farr says it ’ s critical to keep your eye on overall retention and your retention of rock stars . If employees are consistently walking out the door , you need to examine what you may be doing wrong .
Your Goal : 90 % overall ; 100 % all-stars 8 . Employee Satisfaction
This goes hand in hand with retention . He recommends quarterly ( mostly anonymous ) surveys that ask employees to rank the company on a 1 – 5-star rating in areas like culture , morale , ability to do their job , etc . If you ’ re getting bad ratings , you need to make adjustments . “ Some of the biggest nuggets of gold I ’ ve ever gotten are from those surveys .”
This metric , he says , “ is about understanding the impact of these small little cuts .”
Your Goal : Calculate enterprise value every month ( look at revenue , MRR , and EBITDA )
10 . Marketing and Sales Pipeline
“ I think one of the biggest areas where MSPs fail is not only do they not really know how to sell and market ; they don ’ t measure anything ,” Farr notes . “ If you ask an average MSP how many appointments they had that month , they won ’ t be able to tell you . That ’ s literally malpractice .”
Tools like HubSpot and Keap can help you track incoming leads , first-time appointments , close rate , and more . Tracking these weekly or even daily helps you keep your foot on the gas , he says .
Your Goal : Set metrics based on goals for growth , hiring , and new customer acquisition
Now , Spot and Fix the Trends
Armed with these metrics , you have the ability to identify and fix problems that are trending in the wrong direction . For example , a one-month drop in service gross profit because you had two techs out sick and had to pay overtime is not an issue . However , if you notice continually declining service gross profit , it ’ s a problem you need to address . Perhaps you overhired based on clients you thought you would land but haven ’ t yet .
Metrics can take the emotion out of hard decisions : “ We just hired Joe , we really like Joe , but we ’ re overspending in service ,” Farr illustrates . “ The answer is , Joe has to go .”
Your Goal : 4.5 + stars
9 . Enterprise Value ( The Monetary Value of Your Company )
MSPs often inadvertently die of those thousand little cuts Farr mentioned earlier . Here ’ s an example : “ One of your techs will tell you , ‘ We need this really cool tool ; it ’ ll make us much more efficient . It ’ s only $ 400 a month .’ That doesn ’ t sound like much , right ? Well , let ’ s take the $ 400 a month multiplied by 12 . So that ’ s really $ 5,000 a year . OK , that ’ s starting to feel a little more impactful . Now take that $ 5,000 and ask how much does that reduce the overall value of your business ? That $ 400 a month doesn ’ t seem so cheap anymore .”
Colleen Frye is Executive Editor of MSP Success . A veteran of the B2B publishing industry , she has been covering the channel for the last 18 years , most recently as managing editor of ChannelPro . Her work has been published in a variety of media , including TechTarget sites , InfoSecurity Professional magazine , and Application Development Trends .
22 | MSPSUCCESS . COM