Top Metrics for MSPs in 2020
BY IT GLUE | January 06, 2020
The New Year is arguably an arbitrary dividing point for making personal resolutions, but for a business whose financial year ends and begins at this point, there’s a strong rationale for setting goals and implementing positive changes. Accurate year-over-year business performance comparison is then possible, giving an apples-to-apples look at whether the changes you made for 2020 worked for you. I can’t tell you what your business goals for the New Year should be, but what I can do is highlight some useful metrics that will help pinpoint problem areas and measure improvement. Here they are, logically categorized, and offered for your benefit.
Business Health
Revenue Sources Breakdown
You’re probably already looking at big metrics such as your bottom line and EBITDA margin, but what could a more granular metric uncover? Looking at each revenue source in relation to the whole presents a stark look at which of your services make substantial contributions to your total gross revenue. What’s your bread and butter? Consider which are the most consistent and the most lucrative.
Gross Profit Margin Per Revenue Source and Service
Does a revenue source entail disproportionate expenses? Are the expenses worth the revenue that’s brought in? Are there opportunities to optimize the labour and expenses that go into providing a service? Monitoring profit margins across services is essential to determine this.
Monthly Recurring Revenue Metrics
Monthly Recurring Revenue is, of course, a great metric to keep an eye on, but if you take a look at what creates the fluctuations month-to-month there are insights to be uncovered. This includes explanations for new MRR (client acquisition, service expansion, upgrades etc.), and lost MRR (client churn, service reductions, downgrades etc.).
Customer Contribution/ Client Concentration
No one client is alike. Some are more valuable than others, and some are more trouble than others. Looking at each client’s revenue contribution as a ratio, sheds light on which clients are more or less valuable to your business.
Labor Loaded Gross Margin
Similar to Client Concentration, Labor Loaded Gross Margin highlights which clients are more valuable to your business, but adds another layer of insight. Instead of looking at gross revenue, this metric takes into account the total labor and total direct hard costs allocated to a specific client. By looking at the profit margin, you identify which clients demand disproportionate amounts of your attention and resources.
Effective Hourly Rate
Time is money, and if a client is demanding the attention of your technicians to a degree that exceeds the value of the revenue they’re bringing in, it’s time to establish a boundary. Calculating this metric requires a bit of leg work since it means tracking the total hours worked servicing a specific client, but it will be worth it. Having an accurate number on this will also help justify to a client any increases to your monthly fee.
Service Quality
Client Churn Rate
The logic is simple. If your service quality isn’t up to par, clients will look for something better. While churn is inevitable, sudden spikes or a consistent decrease can indicate whether your suite of services and delivery of service needs to be improved, or if they’re working for you.
Average Response Time
Technology has trained us to expect instant gratification, and this standard of immediateness bleeds into expectations for your MSPs IT services. An out of control Average Response Time can indicate poor management of your ticket queue, that unusually complex and demanding requests are being made by end-users, that your service desk and technicians aren’t efficiently handling tickets, or that it’s time to hire more staff.
Human Resources
Employee Churn Rate
Your people are your best asset. If turnover is high, you’re doing something wrong. Exit interviews are a good method for determining where your MSP can improve to retain your best talent.
Top Ticket Closers of the Week
A little competition never hurt anyone. The gamification of ticket closing can increase efficiency and the quality of service provided to clients. Be sure to account for tickets that are more challenging and time consuming, though.
Marketing and Investment
Conversion Rate
Is your inbound marketing strategy working for you? Conversion Rate is an essential metric to determine whether the channels you’re using, the messaging you’re putting out there, and the incentives offered are resulting in new client acquisition. Focus your dollars where the returns are, and don’t be afraid to test out a new strategy. Calculating leads is all well and good, but a lead doesn’t mean you’re seeing an increase in positive cashflow.
Return on Investment
This metric is a staple. With any investment, whether it’s a new software, fresh new web development for your online branding, or your marketing spend, you should be seeing a return.
At the end of the day, there are a ton of metrics to choose from, each useful in their own right. The bottom line is that a metric is only as good as the relevance to your business. They’re meant to create sightlines on your business blind spots, and help measure the success of a new strategy. Making changes within your MSP is all well and good, but if you’re only using qualitative, unstandardized methods for evaluating whether they made an impact, it’s a disservice to yourself. You only have a finite amount of resources, so you need to allocate these to where they’ll generate the biggest return. Using the right metrics will help. IT Glue is the world’s best documentation platform that not only saves your business time so it can be allocated to revenue-driving activities, but also helps you document all the data you need to track metrics.
IT Glue’s award-winning documentation platform allows for efficient storage and retrieval of all the documentation a managed service provider needs to increase efficiency and streamline operations. Watch a demo today!
