How to Ensure Profitability of Your Managed Services Contract

MSP, MSP Tips

A managed services contract is a binding agreement between an MSP and its client. It outlines the services the MSP provides to its clients, along with the pricing and the service-level agreements (SLAs).

While most MSPs focus on the services, they miss out on leveraging the managed services contract to increase their profit margins, without which sustenance of their business would be unfeasible. 

So how do you ensure the profitability of your contract? 

Measure and Track the Services Provided 

The first step towards ensuring that your contract is profitable is to track the time spent working with your customers in your professional services automation (PSA) software. 

What cannot be tracked cannot be measured.  If you are still using spreadsheets, it is time to transition to efficient PSA software. Managing spreadsheets can be a humungous task leading to fragmented processes, missed deadlines and inaccurate invoices. 

If you are providing additional support to your clients for any ad hoc services, track the effort spent by your engineers. Bill the customer based on the contract terms and as per the resources consumed. 

Meet Your SLAs Regularly 

Honor your SLAs to avoid penalties. One of the flaws of MSP processes is not being able to track SLAs and addressing customer issues on time. 

Create an IT environment where any incident is tracked and re-mediated even before the customer is aware they have occurred.

Look for a PSA that provides help desk managers with real-time information about the status and progress of tickets and generals alerts along the way until the final resolution is complete. 

Select the Profitable Pricing Model 

Lower prices do not equate to more business. They only lead to employees spread too thin and a business that is barely getting by.

Evaluate your pricing strategy based on the needs of your customers.

Value-based pricing model, a strategy of setting prices primarily based on a consumer’s perceived value of a product, or service has been the most popular choice among our MSP Benchmark Survey Report respondents for at least four years. In the 2019 Kaseya MSP Benchmark Survey Report, about 38 percent of participants said that more than 50 percent of their revenue comes from a value-based pricing strategy. 

Ensure the Renewal of Your Managed Services Contract

Build trusted relationships with your customers. Acquiring a new client can cost five times more than retaining an existing client. Also, increasing customer retention by 5 percent can lead to an increase in profits of between 25 percent to 95 percent.

Have quarterly business reviews (QBRs) with your clients to demonstrate the value of your services. Use tools like Kaseya VSA that can show all backend fixes done by you that your client probably wouldn’t be aware of.

Kaseya VSA is a remote monitoring and management (RMM) solution that manages both your endpoints and infrastructure, enabling you to deliver better service and improve your team’s efficiency.

To learn more about Kaseya VSA, request a demo.

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