Are You Profitable?
MSP business tactics that make full use of metrics are more effective. You might not know if you’re making a profit without proper metrics tracking. You’ll have to spend money in order to source clients, so even if they’re paying a large fee, your support numbers may actually reveal that you’re operating at a loss. Knowing the size of your customers, their prospective revenue generation, and your involved costs is integral.
Proper metrics tracking indicates a detailed and accurate picture of the reality silhouetting your operations. Additionally, metrics help you set and achieve goals in a realistic way that is actionable. An expansion will be necessary for survival as your business continues forward. Knowing how to expand, when to expand, and which direction to expand toward being all things facilitated through proper metrics tracking. Alluded to earlier, here are several suggestions on what should be tracked:
- Average Size Of A Job, or “Deal”
- Average Lifetime Revenue Per Customer
- Average Cost Per Client
You’re going to have outlying trends, but as you progress forward, you’ll find a good number of your clients end up providing about the same amount of revenue. It’s important to know this number when you’re sourcing new clients, as well as seeking larger clients.
If you’re generally in the same spot, you’ll likely have trouble transcending it. When you’ve got the metrics, you will know where you stand and what you’ll need to do in order to court more lucrative customers. This metric can also help you determine where your business is doing well, and where there is room for improvement. As you collect data you can branch out and collect more, helping you determine whether a market change is necessary for expansion, or whether your MSP business needs to upgrade services.
Average Lifetime Revenue Per Customer
When you know this information, then the moment you bring a client aboard your operations you can plot out how much they’re likely to be worth for you over time. Sometimes this can help you to decide whether or not you keep a client. This number will additionally have some relation to the average deal size. Smaller deals will have a propensity to average smaller lifetime revenue, while larger deals will have larger lifetime revenue.
Granted, if you don’t want to run around liquidating clients, but you’ll find that sometimes it is more costly to keep them than not. If you have this number, it can help you get an idea of what will be lost in the event things don’t go as planned, as well as what you stand to gain if they go how you intended.
Average Operational Cost Per Client
Several things characterize this number. What kind of resources are necessary to meet client needs? What kind of manpower is involved? Are you running a break/fix model of operations, or are you running a fixed-rate model? If you’re running a fixed-rate model, then you’ve got to continuously monitor systems so you can stop problems before they begin. If you don’t, then something will crop up which results in a net loss for your company.
The break/fix model doesn’t have this issue, but it can be bad for clients at the expense of repair and/or replacement which results may not endear them to you. There are benefits and hazards to each, and you may transition between both modes of service delivery before your MSP hits an operational threshold of steady stability. Ensure Metrics Work For You in whatever you do, it’s integrally you don’t just collect the numbers and then do nothing with them. Metrics can be very useful as they paint a picture that is often too abstract to grasp otherwise. When you can crunch the numbers, it can help set your path, and additionally help you avoid clients or service delivery packages which may not be conducive to your business in the long run. Lastly, certain metrics are going to be unique to a given MSP business. A good rule of thumb is to identify where any statistics can be gathered and then put them into a good use.