the math and science of top msp profitability

© 2015 N-able Technologies, Inc. All rights reserved. 1

The math and science of top MSP

profitability


Webinar details

? REC

Length: 60min Questions welcome any time

Recording and slides available

next day


On today’s Webinar

Presented By:

Gary Pica

President, TruMethods

David Weeks

Channel Sales Manager, N-able


Giving service providers the insights we’ve gained from

working with over 5,500 MSPs

www.trumethods.com

The Math and Science of

top MSP profitability

© TruMethods, LLC. 2016 - All rights reserved.

www.trumethods.com

• There is a science to

generating higher MSP profit

margins

• Most MSP don’t understand the

simple math

MSP Science


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MSP Math and Science

1. MSP Pricing

2. Impact of client size

3. Measuring value through reactive time

© TruMethods, LLC. 2016 - All rights reserved

www.trumethods.com

Checkpoint

Average World Class

AISP < $100 $130-$160+

Average MRR < $2,000 $3,500+

Net Profit 10% 25%+

Leverage $100,000 $150,000+

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Copyright 2013 TruMethods, LLC

Leverage

• Relationship between an hour worked

and a dollar billed

• More revenue with less

EE’s

Pricing Guidelines

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Measuring Leverage

Average MSP World Class

Number of

Employees 10 10

Annual Service

Revenue 1,000,000 $1,500,000

Leverage $100,000 / EE $150,000 / EE

Unrealized Profitability = $500,000!


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Unrealized Profitability

What is your unrealized profitability?

Number of employees * $150,000

minus

Annual Service Revenue

=

Unrealized Profitability


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• How much should you charge for

your services?

• How much will clients pay?


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your managed services?

–What are you costs?

–What GM do you expect?


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• Pricing hourly services is easy

–Hourly rate

–Employee cost

–Utilization/effective rate


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• MSP pricing is more complex

–We charge a monthly fee

–We have tools and technology

–Several people and roles deliver

services

–We need a standard to measure costs

and profitability


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• All in seat price (AISP)

–Average price per seat

–Total MRR divided by total seats

supported

–$2,000/month for 20 seats=$100 AISP


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• What is your gross margin on the

$2,000/month client?

–You need to calculate your average

cost per seat

– If you don’t know your seat cost you

don’t know if your price is right


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Cost per Month per Seat

Support $9.38

Centralized Services $9.50

Network Administration $11.60

vCIO $6.31

Total: ~$36 / Month / Seat

Micro Picanomics


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Gross Margin:

AISPTotal Costper Seat

Gross Margin

Gross Margin %

$125 $36 $89 72%

Micro Picanomics


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What if your AISP is lower?


Gross Margin

Gross Margin %

$125 $36 $89 72%$100 $36 $64 64%$85 $36 $49 58%

Micro Picanomics


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What if cost per seat is higher?

Micro Picanomics


Gross Margin

Gross Margin %

$125 $46 $79 63%$100 $46 $54 54%$85 $46 $39 45%


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Not all costs are per seat

• Per seat costs

–Support desk

–Tools and technology


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• Per client costs

–vCIO

–Network Administration


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• One vCIO can manage 35-40

accounts

–35 X $1,500 MRR/client= $52,500 MRR

–35 X $3,500 MRR/client= $122,500 MRR


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• One Net Admin can manage 20

accounts

–20 X $1,500 MRR/clients= $30,000 MRR

–20 X $3,500 MRR/client= $70,000 MRR


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The impact of price

ExampleAvg.

Seats

Avg.

AISP

Avg.

MRR

MRR with

50 clientsSeats

Right

Customers-

Right price20 $140 $2,800 $140,000 1000

Right

Customers-

Wrong Price20 $95 $1,900 $95,000 1000


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your services?

• How much will clients pay?


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Value based pricing

• Technology based pricing: Value built on

features, tools and support

• Value based pricing: Value build on

business impact

• Ability to “reframe clients” by showing

the impact on the big costs in their

business


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Reframing process


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The MSP Value Stack

MSP

• Support

• Cloud services

• Professional services


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The MSP Value Stack

Budget

Strategy

Impact

Alignment

MSP


TruBusiness Partner

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TruBusiness Partner

• Technical to business relationship

• Business Strategy

• Business goals, challenges, risks,

vision, core values, competition,

competitive advantage, market position,

margins…

• Technical Alignment and Business

Impact are the foundation


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The Value Stack


World

Class

Impact

Alignment

MSP

• Time at the top of the

stack=value

• Reactive time is the

barrier

• Control reactive time

to control your value!

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Inventory

of

Time

© 2015 TruMethods, LLC. All rights reserved

www.trumethods.com

Finite amount of time

• Your technical time is inventory

• You have a finite amount of inventory

• Your inventory has no shelf life

• What percentage do you spend on reactive

support?

• How much time is left to spend at the top at

the stack?


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How your inventory is allocated

• How many tickets do you close in a month?

• How much time does it take to close?

• How much of your total available time is

reactive?


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Calculate RHEM

Tickets / Endpoint / Month

times

Average Resolution Time

equals

Reactive Hours / Endpoint / Month (RHEM)


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Example

A B C D

Tickets /

Endpoint / Mo.1 0.5 0.5 0.25

Avg. Resolution

Time1 hour 1 hour 0.5 hours 0.5 hours

RHEM 1 hour0.5 hours

(30 minutes)

0.25 hours

(15 minutes)

0.125 hours

(7.5 minutes)

Support

Resources6.25 3.1 1.55 0.78


• Endpoints supported: 1,000

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Inventory of time

Total available technical time minus

RHEM = time left at the top of the

stack?


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Hours per Delivery Area


0

200

400

600

800

1000

1200

1 hour RHEM .5 hours RHEM .25 hours RHEM .125 hours RHEM

Hours / Delivery Area (1,000 Endpoints)

Reactive Support Professional Services Centralized Services vCIO Network Administration

Company B Company C Company DCompany A

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Bold Statement

• You can control the amount of reactive service

requests generated from your clients!

• What is the science behind lowering RHEM?


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Lowering RHEM


• Using Automation to lower RHEM

–Review tickets and alerts monthly

–Look for recurring issues

–Use monitoring and automation

–Go beyond patch, spy, and spam


Managed Services PlatformRemote Services Technology

| Product Family

MSP AnywhereRemote access & support

MSP ManagerTicketing & billing

N-centralMonitor. Manage. Automate.

Connect in secondsCross platform

Support mobile devicesSession transfer

Session recordingPerformance dashboard

Ticket managementCustomer portal

Password managementTechnician scheduling

Customer billingAccounting integration

Device monitoringHealth & performance alerts

Drag & drop automationIntegrated patch, AV, backup

Integrated remote controlBusiness reports

$49 USD / monthper concurrent user

$49 USD / monthper concurrent user

Starting at

$499 USD /month

Unlimited sessions300 devices

Unlimited ticketsUnlimited billing

Monitor 100 devices freeFree business coaching


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The N-ABLE TECHNOLOGIES and N-CENTRAL marks are the exclusive property of N-able Technologies, Inc. and its affiliates, are registered with the U.S. Patent and Trademark Office andthe Canadian Intellectual Property Office, and may be registered or pending registration in other countries. All other N-able trademarks, service marks, and logos may be common law marks,registered or pending registration in the United States, Canada, or in other countries. All other trademarks mentioned herein are used for identification purposes only and may be or aretrademarks or registered trademarks of their respective companies.

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Lowering RHEM


• Using Technical Alignment lower RHEM

–Develop detailed standards

–Continuously align clients technology

–Dedicate resource to this network

admin role

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SupportCentralized

ServicesProfessional

ServicesNet

AdminvCIO

Super

Power!

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Network Administration vCIO

Unleash your Super Power

StandardsTechnicalAlignment

BusinessImpact

ClientStrategy


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Your client’salignment against

your standards

Your standards(Super Power)

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1. MSP Pricing: AISP

2. Impact of client size: Average MRR

3. Measuring value through reactive time:

RHEM


www.trumethods.com

Summary

• Target 70% GM on MSP revenue

• To command high prices you need a

value based pricing approach

• Lower RHEM and move up the value

stack


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The FormulaWon Program

• Lower RHEM and increase efficiencies

• Build a true competitive advantage

• Eliminate price as an objection

• Consistently build recurring revenue

• Dramatically increase profit margins

• Ready to achieve financial independence!

Why TruMethods?


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FormulaWon

Training

• Over 150 hours of role based content

• 2 Live Webinars / mo.

• Weekly Podcasts

Community

• Member Forums

• Ask TruMethods

• Schnizzfest

• Events

Tools

• myITprocess™

• SMART Numbers

• Business Plan Template

• Sales Playbooks


Results:• Complete Business Plan

• Gain Command of your SMART

Numbers

• Align packaging and pricing

with World Class standards

• Develop your Super Power

• Implement Sales Discipline

• Generate Leads

• Raise your expectations about

what’s possible

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The FormulaWon ProgramFueling MSP Growth

Growth Tracks is $399/month $349On boarding $1,500 NO CHARGE

Special Offer: Expires 7/22/16

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First 10 attendees who email:

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Subject line: Sign me up!

SPECIAL OFFER: Expires 7/22/16

TruMethods Promotion

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First 10 attendees who email:

[email protected]

Subject line: Sign me up!

SPECIAL OFFER: Expires 7/22/16

SIGN UP FOR A FREE TRIAL

N-ABLE.com

The N-ABLE TECHNOLOGIES and N-CENTRAL marks are the exclusive property of N-ableTechnologies, Inc. and its affiliates, are registered with the U.S. Patent and Trademark Officeand the Canadian Intellectual Property Office, and may be registered or pending registrationin other countries. All other N-able trademarks, service marks, and logos may be commonlaw marks, registered or pending registration in the United States, Canada, or in othercountries. All other trademarks mentioned herein are used for identification purposes onlyand may be or are trademarks or registered trademarks of their respective companies.

Questions




The N-ABLE TECHNOLOGIES and N-CENTRAL marks are the exclusive property of N-ableTechnologies, Inc. and its affiliates, are registered with the U.S. Patent and TrademarkOffice and the Canadian Intellectual Property Office, and may be registered or pendingregistration in other countries. All other N-able trademarks, service marks, and logos maybe common law marks, registered or pending registration in the United States, Canada, orin other countries. All other trademarks mentioned herein are used for identificationpurposes only and may be or are trademarks or registered trademarks of their respectivecompanies.