How to increase MSP profitability

September 9, 2022

Running an MSP means spinning a lot of plates. Helping your clients to digitally transform and succeed through technology is always priority number one, so building your own capabilities through innovative technology often becomes something you only do ''when you find the time''. But, can you really afford to keep treating your business strategy and financial performance management as an afterthought in today's saturated MSP market?

The good news is that creating a strategy to increase MSP profitability and competitiveness isn't as time-consuming as it seems. You can start with these four actionable tips.  

Collect and analyse data to gain insights

As the old adage goes, you can't manage what you can't measure, and when it comes to increasing your MSP's profitability, it is essential to track key business metrics. There are dozens you can monitor and analyse to help you better understand your business's financial performance and make intelligent decisions on how to improve it. Some options include net operating profit, cost of service delivery, product margin, managed service agreement profitability, and sales expense. Monitoring these can help you see where you are losing money or underperforming and how you can resolve these problems to boost your profitability.

A word to the wise, though. It's easy to get carried away and spend too much time tracking KPIs - so identify the key ones and create streamlined, efficient systems and processes that give you the data you need in as little time as possible.

Automate as many issue responses as possible

Modern technology makes it possible to route tickets automatically to the correct employee and even fix issues without human intervention. Automating your helpdesk has several benefits that all add up to increased MSP profitability.

- It speeds processes up, reducing operational costs and boosting service margins.

- Your team has more time to focus on value-adding work that increases your turnover or improves other key metrics.

- You increase capacity in your business without hiring more people, giving you room to grow with less risk and financial burden.

There are several business-focused automation opportunities to take advantage of too, such as billing and quoting. Rather than manually creating quotes and invoices with CPQ software, you can produce them almost instantly, saving you time and increasing the accuracy of these business-critical processes.

Avoid bad clients

Not all business is good business. Unfortunately, you may have clients that aren't very profitable, are unnecessarily difficult, or even some that cost you money. Don't be afraid to walk away from them. While this might sound counter-intuitive, letting go of bad-fit clients creates room for you to take on high ROI clients that you enjoy working with.

To identify which clients are taking up too much space in your business, rank them based on revenue, customizations, and the time you spend servicing them. It's also good to consider whether there is potential to improve these metrics by introducing process and service automations. After weighing it all up, decide whether the profit margin you make is worth it. If not, make a strategic decision to create room for customers that bring more value. Remember, you want good business, not just any business.

Only bring on additional resources when you need to

It can be tempting to bring in additional resources when you see the need arising. However, this is a high-risk strategy. If your anticipated new clients don't all convert into paying clients, you'll be stuck paying higher salary expenses with no additional revenue. Even if this is only the case for a short time, it can still erode your MSP profitability.  

On the other hand, leaving it too late to hire more staff can impact your customer satisfaction, so getting this one right is tricky. Tracking your sales cycle can give you the data insights needed to intelligently forecast how many customers you'll convert and how long each sales cycle will likely take. Using these insights to make hiring decisions can positively impact the outcomes and your MSP profitability.

If you're striving to improve your MSP's profitability, Salesbuildr can help by giving you the tools to automate your quoting and proposal processes and better understand your sales cycle.

Using this powerful Cost, Price, Quote (CPQ) platform, you can create incredible customer journeys and deliver pre-sales and sales experiences that wow prospective clients and increase your proposal win rate. Salesbuildr also lets you automate cross-sells and upsells, further increasing your turnover while reducing your cost to quote and eliminating 80% of your repetitive sales-based tasks.  

To discover more about how Salesbuildr can help boost your MSP's profitability, get in touch with one of our representatives today.