The Encyclopedia of MSP Measurement

The famous business book “Managing by Measuring,” by Mark T. Czarnecki, praises the virtues of tracking operations and making decisions based on what you can learn from measurements. Smart MSPs do the same thing, and use many metrics to drive strategies and shorter-term tactics.

These metrics and Key Performance Indicators (KPI) define how well the organization is doing, and are critical to assessing your company’s value.

There are so many available metrics, that you can waste a lot of valuable time trying track them all. Instead choose the metrics that fit your company, and track those closely. We bring you 15 of our favorites.

Agreement Profitability: This measures how much an MSP makes per client agreement.

Average Response Time:  This key metric tracks how fast your techs respond to a problem.

Billing Resource Utilization: This is a bit like how partners in a law firm are judged – by billable hours. By measuring the ratio of billable- to wasted-hours, you can see how efficiently your staff is deployed. And by calculating their hourly rate, you can see how much money is lost when they are not working on billable jobs.

Client Contribution (CC): This refers to how much an MSP earns from each client, less the cost of obtaining this revenue. The client revenue includes sales of products, fixed fees and services. The related costs include what the MSP spends to acquire the revenue (such as marketing and sales costs) and the labor costs of providing them.

Client Effective Rate (CER): This metric measures how much you make from each client based on time spent servicing them. It is the monthly fixed fees you charge divided by how many hours you spent with that client. This will produce a revenue-per-hour result.

EBITDA: ‘Earnings Before Interest, Taxes, Depreciation and Amortization’ is a key measure if you are looking to sell your MSP operation. If your other vitals, such as Monthly Recurring Revenue (MRR), are good, you can expect in some cases a 10x multiple of your EBITDA when you sell your company.

First-Time Fix Percentage: Measuring the percentage of client problems that are resolved with only one contact to your help desk can track  the efficiency and training of your support technicians.

MRR (monthly recurring revenue): This is a key measure for MSPs that refers to the most critical revenue stream — what you can count on each and every month. Healthy MSPs make the majority of their money this way.

Outstanding Issues: How many issues are still unresolved? If the number is too high, you need better processes, more automation, or more employees.  In fact, keeping track of outstanding issues is one of recommended ways to identify processes ripe for automation. To learn more about how how to identify the best processes for automation, check out this Kaseya blog item.

Revenue/Compensation (RpC): This is a simple measure of employee productivity. Essentially, you divide the revenue from each employee by how much they make. Of course, not all employees are equally involved in driving revenue, but it can be a good measure of which employees are moving the company forward.

Service Level Agreement (SLA) response times: This refers to how fast an MSP responds to service level performance issues.  Not actively managing this metric could result in an SLA penalty for the MSP. Even if you don’t support guaranteed SLAs, understanding response times is the first step toward improving processes and service delivery.

SLA Compliance: How well do satisfy your SLAs and what penalties have you had to incur as a result of not meeting SLAs?

Tickets Opened vs. Tickets Closed: This measures how efficient your organization is at resolving problems, and can also highlight areas where your team’s technical skills need improvement.

A big part of MSP success is getting the numbers right, since this means the most important number – the price you charge – will also be right. Learn what your peers are doing by downloading our 2016 Global MSP Pricing Survey.

Posted by Doug Barney
Doug Barney was the founding editor of Redmond Magazine, Redmond Channel Partner, Redmond Developer News and Virtualization Review. Doug also served as Executive Editor of Network World, Editor in Chief of AmigaWorld, and Editor in Chief of Network Computing.
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