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How To Transform Your MSP With Financial Strategies

If an MSP wants to grow and increase net profitability, there needs to be a strategy in place that leverages all of the company’s greatest strengths. While critical for business growth, sometimes providing the best possible service just isn’t enough to take things to the next level. Improving your MSP’s Utilization Rate is one of the best ways to accelerate growth, and there are multiple strategies to achieve that end.

In our most recent webinar on MSP growth, we developed this comprehensive list of what your MSP needs to focus on to take the next step in your growth journey. Next Level Now also offers this free calculator to help you determine your utilization rate. See for yourself, and if you’d like to discuss options further or learn more, read one for more details or reach out to our team!

Staffing Matters

Your business will never reach its full potential if there are hanging questions about the structure of your organization or level of responsibility each member has, be they an owner, manager, or a standard employee. Because of the nature of the industry, a lot of the time MSPs are run with a significant degree of fluidity; where individuals put in whatever or however much work makes sense based on the needs of the company. That fluidity can be a strength, but it can also be a weakness that is left unmanaged. Having a unified front amongst your workforce is key to driving profitability.

  • Have a concrete mission statement that the whole team can rally behind
  •  Make sure employees are compensated in accordance with the amount of time/work they’re putting in
  • Develop clearly laid out, well-defined job descriptions that delegate responsibilities in ways that make the most sense for your team
  • Make sure your team members are all good fits for your company culture

Set Financial Benchmarks

Making sure your business is set up for success in the long run requires carefully thought out planning. Organizations with well-thought out financial roadmaps are more likely to grow overtime due to the strong sense of direction the roadmap will bring. After all, it’s hard to know if you’re moving in the right direction if you don’t know what direction you want/need to be going in. This is true for every type of business, but MSPs uniquely benefit from this type of long term planning. Benefits for setting these types of benchmarks include:

  • Setting revenue goals to work towards over the course of five-ten years
  • Clarity on resource allocation
  • Easier identification of potential risk factors 
  • A convenient metric to measure the company’s performance
  • Cash flow management that can help maintain liquidity, meet financial obligations, and avoid cash shortages

Individual benchmarks are obviously going to vary from organization to organization. The best way to establish a long term financial roadmap for your MSP is to have sit down meetings with your accountant or a qualified financial advisor or fractional CFO, preferably one well-versed in what makes an MSP successful. 

Finding the Right Peer Group

Peer groups have been a staple of the MSP landscape practically since the beginning and it’s not hard to see why. The value they present is immense and gives individuals and organizations an opportunity to expand their knowledge bases by learning from and networking with like minded professionals in the field. And their effectiveness extends well beyond the technical aspects of the job; MSPs that are further along in their growth journey will be able to share notes with you, allowing your organization some sort of benchmark to measure itself against. 

That said, it’s important to figure out which peer group is the best fit for your organization. Some are more formal (usually those attached to a major vendor like ConnectWise or the like), while others foster a more laid back, casual culture. Take some time to investigate several peer groups and find which one seems like it will be the most conducive to your team’s growth over time. And remember to contribute to the group regularly as well!

Use Software to Streamline Your Processes As Much as Possible

As MSPs, it’s easy to think that only your clients need technology restructuring. The truth of the matter is there comes a time (especially as an organization grows and scales) that your old ways of doing business need reevaluation. Your tech stack should be working for you, not the other way around.

By leveraging your existing software to streamline clunky processes, you can reduce operational bottlenecks, enhance service delivery, and improve client satisfaction. Tools like remote monitoring and management (RMM) software, automated ticketing systems, and cloud-based platforms help MSPs automate routine tasks, optimize resource allocation, and ensure proactive system maintenance. 

Tracking the Right Figures 

A lot of the KPIs you’ll be tracking as a growth-minded MSP are pretty similar to what you might expect.

  • Customer lifetime value 
  • Customer churn rate 
  • Employee productivity/accountability charts 
  • Gross revenue 
  • Gross profitability 
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA)
  • Average resolution time 
  • Open/Closed ticket ratio
  • Customer satisfaction ratings

This is fairly straightforward; no need to reinvent the wheel on this. Setting up a user-intuitive dashboard to track your KPIs will get the ball rolling in a big way. At the end of the day, it’s all about zeroing in on the numbers that will help you direct your strategy, improve your decision making and, ultimately, increase overall revenue. 

Data analytics, or modeling, if you prefer, is one of the best ways to give you an idea where your MSP needs to go in the future. As such, it’s one of the best tools at your disposal when trying to increase profitability. These KPIs are what will tell you where your business is currently and serve as the best predictor you have as to where you’ll be in the future.

Work with a Fractional CFO to Find your MSP Utilization Rate

Ultimately, as an MSP, you’re going to be best served by focusing on making your service the best it can be. By starting a dialogue with a fractional CFO, they can help you manage your finances while you put your focus on what you and your team do best for your clients. One of the primary ways to start this journey is to determine your MSP Utilization Rate. 

Your MSP Utilization Rate is a figure which refers to your organization’s efficiency when it comes to completing tasks and effectively using resources. With an accurate utilization rate calculator, you can see just how much of your finances are being dedicated to which tasks, and can make some of your first decisions from there; What projects need more focus? Which projects need less? Which employees are putting in more hours at the office? Answering questions like these are a critical first step in growing any MSP. 

If you’re ready to start your MSP’s journey into financial growth, Next Level Now offers a totally free calculator to help you determine your utilization rate. See for yourself, and if you’d like to discuss options further, don’t hesitate to reach out to one of our representatives to take the next step. Our team has the skills, experience, and commitment to help you and your MSP business reach your fullest potential!

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