Buchianico recommends consolidating tools and vendors to reduce expenses , eliminate integration issues , and “ strengthen relationships with key vendors .”
The large IT management platform players — Kaseya , ConnectWise , N-able — have all recognized the direct impact stack consolidation has on the bottom line . They and others in the industry are trying to offer all the tools an MSP needs under one roof . Not only does it eliminate a bloated tech stack but it also increases efficiencies since the tools are all integrated .
Service Delivery — Inefficiencies Are Dragging You Down
Failure to get tool sprawl under control also impacts efficiency because employees must learn all those tools , which can cause service delivery to suffer . One consequence is low ticket kill rates .
Other reasons for low resolution rates are understaffing and poor training . Buchianico notes that high staff turnover can also delay ticket resolution , leading to poor customer service and low customer satisfaction .
Some MSPs struggle to manage 200 to 400 tickets a day , with their service teams always on the defensive , says Thornton . He recommends setting a daily percentage target for resolved tickets . “ If it ’ s less than 100 % resolution , you ’ re behind ,” he says . That ’ s OK if it happens occasionally , but not if it becomes the norm .
Improving service delivery transcends staffing and technical issues . It also involves strategy . Cissel recommends narrowing your target customer profile — for instance , companies with 25 to 100 users . This allows you to also narrow the tech stack and keep the staff very focused , he says .
Operations strategy is important too . Failure to take advantage of AI and automation features in your tool stack to achieve operational efficiencies is costing your business money . “ It is critical to have automation and workflows in place to ensure tickets are quickly assigned to appropriate resources , documentation is clear and easily repeated , processes are thoroughly trained — with continuous training — and followed for the most efficient outcome ,” says Kelly .
Optimize Your Staff — Don ’ t Put Square Pegs In Round Holes
How you manage your employees and their responsibilities affects everything , from how effectively they use technology to delivering customer satisfaction . However , Buchianico estimates that employee mismanagement contributes as much as 20 % to profit leakage through overstaffing , overpaying , skills mismatch , and poor tech utilization .
For instance , senior engineers should not be fixing printers and Level 1 techs shouldn ’ t be troubleshooting server cluster issues , says Kelly . “ Resources must be allocated properly and matched with their strengths and knowledge to various tasks , or you ’ ll be upside-down quickly ,” she notes .
In addition , employees need continuous training to learn and update skills . And their roles and responsibilities should be clearly defined .
Overstaffing is a common problem , adds Cissel . Next to reluctance to raise prices , it is the most prevalent issue he comes across when working with MSPs . While service payroll should be no greater than 40 % of service revenue , typically it accounts for 60 % or more , he says . Best-in-class MSPs keep it at 35 %.
How much work you demand from each employee affects staff utilization . Push employees too hard and you run the risk of “ slavedriving ,” says Thornton . He expects six hours of productivity in an eight-hour shift , which equates to an average staff utilization of about 70 %. That compares to a 65 % industry standard .
If your MSP isn ’ t meeting that standard , investigate the causes : Are techs on the phone too long ? Is lack of training forcing them to do too much research ? Are they still doing mundane , repetitive tasks that could be automated ?
Know Your Numbers — They Don ’ t Lie
Whatever the cause of profit leakage , it always comes down to numbers . You can ’ t stop a leak if you don ’ t know what is causing it . “ Without proper financial visibility and accounting oversight , MSPs may not have a clear understanding of their financial health . This can lead to poor business decisions such as underpricing or overspending on resources ,” says Buchianico .
Start from the beginning . MSPs should figure out profit and service margins before closing a customer contract , says Thornton . If you ’ ve taken care of everything else , he says , such as “ your tools are correct , agreements are aligned with tools , and all customers are on the same toolset ,” then you ’ ll be on the right track to stopping profit leak .
Actionable Tips To Boost Your Bottom Line
Increase annual revenue 10 %– 20 % with clear statements of work , defined deliverables , and appropriate pricing .
Keep service payroll at 35 %– 40 % of service revenue . Aim for 70 % productivity per shift .
Reduce costs by 10 %– 30 % through vendor consolidation and regular audits .
Calculate profit margins before signing contracts .
Pedro Pereira is a writer in New Hampshire who has covered the IT channel for two decades . He has worked for a variety of media companies , including Ziff Davis , CMP Media , The Nielsen Company , and daily newspapers .
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