14 Business and Financial Tips for MSPs
Which financial and business metrics are most important for a managed service provider to track? Larry Schulze, co-founder and principal consultant at Taylor Business Group, offered up key thoughts during the N-able Partner Summit. Here are 14 key business and financial metrics he mentioned.
All thoughts below are paraphrased from Schulze’s presentation.
1. Mandate that your preliminary finances are on your desk by the 10th day of every month. If you aren’t looking at real numbers regularly, you can’t make informed decisions.
2. Sales team should have a predictable day: Don’t manage people, instead managed their activities.
- Client-only focus time (9:00am to 11:30am, 1:30pm to 4:0opm)
- Cold calling: 20 to 50 per day (or until one new appointment is created per day)
- Appointments: strive for 10 per week
- Proposals: 3 per week
- Closes: 2 per week (not just managed services)
- 70 to 80 percent of all your proposals should be closed. Don’t waste time doing proposals for business you won’t likely win.
3. First meeting with customer should be a needs analysis rather than a product or service pitch. On the second meeting, you present the solution based on their budget, timeframe and needs.
4. Timesheets turned in every day; utilization of at least 75% billable time. Pursue technical certifications as required. Measure customer satisfaction achivement. Utilization rates are still part of the MSP formula, according to Schulze.
5. Service: Only one question for your customer matters: “Would you refer us to someone else?”
6. At least 35 percent of revenues should be services
7. Minimum 8.6% net operating profit
8. Annuity revenues should represent at least 37.5% of your services revenue.
9. Services salaries should be no more than 33% of service revenues
10. Minimum of 18 percent gross margin on product.
11. Sales expense not to exceed 10% of total revenues.
12. One third of every GP dollar goes to the sales person, two-thirds of every GP dollar goes to the company.
13. No more than 10 percent of accounts receivable over 60 days past due.
14. Sales days outstanding less than 35 days.
Did I miss anything? I’m all ears.