As the year draws to a close, MSP management should take the opportunity to invest in analyzing and understanding core key performance indicators and begin planning for year-end -- and get a jump on 2014.
Now is the time to ensure your company has good data so that it can properly measure all business processes. The connection between PSAs and accounting is the crucial intersection into really understanding how a business works and if it is profitable.
An important, yet often-overlooked part of the business is staffing levels, as measured by profitability. Many of our clients do not have an effective way to do this. Good measurement of an MSP's labor force includes analyzing time by managed services agreements, projects and variable time and materials. It is good to then recalibrate against historical as well as industry data.
There is often a story being told by your metrics. Are income opportunities present? Could you create an incentive program for your employees to make sure they drive profitability? Think of your personal portfolio. Most likely, your financial adviser tells you to rebalance your investment portfolio as the equity markets move to better protect against risk and take advantage of opportunities. Are you rebalancing your MSP business as markets shift? And if so, are you doing so using the appropriate data?
The companies that will thrive in the coming years will rebalance their business approach to adapt to a changing market in addition to providing best-in-class service to their clients.
MSPss must learn and act on this information to properly plan, manage and execute the management of their business to be competitive in a more competitive world of managed and cloud services.
Many small businesses turn to their accountants and CPA firms to help but, more often than not, these professionals are focused on tax laws and are not familiar with the ins and outs of PSAs, vertical industry information and are not current on managed services fee plans and cloud service offerings. A general analysis also will not take into account the different levels and complexities of the MSP business model.
It is always important to ask the who, what, why and how of an MSP's story has been written. Managing by the numbers is a key component for all winning MSPs.
Larry Cobrin and Michael Kraner are directors at MSPCFO, an outsourced CFO and bookkeeping firm focused on technology service providers. For more information, please email the group at firstname.lastname@example.org or visit www.mspcfo.com.
PUBLISHED NOV. 6, 2013