The single greatest indicator of your success in MSP Management is your ability to move the numbers on your profit and loss report. Managing staff, making sure clients are happy, and building a safe and engaging environment for employees is important; however, the ability to see a number on the profit and loss statement (e.g. gross margin) and through management intention move that number to a desired figure is the best indicator of success in all the other areas. The problem is many MSP owners don’t think that way nor run their business in that manner. They focus on the wrong priorities with dire consequences.
MSP Management: Managing by Numbers
The success of your MSP is a direct result of your intention. It is rare that an MSP grows into a large organization without intentional planning and effective execution. Assuming you set annual goals, where do you start that process? Best in class MSP management starts with the budget that most closely reflects their strategy. They review their previous year, determine what they want to achieve and then build purposeful plans around reaching the goals they have set for the year. Is your gross margin too small? Make a goal to increase it! Is your revenue flat for the last year? Make a goal to increase it!
Need help with strategy? Good business planning starts with perspective! Check out Ian’s post from Richardson and Richardson “Business Planning Starts with Perspective.”
While execution may be a more complicated beast, planning is quite simple. Determine what you want to achieve and make it a goal. Here are a few tips to help you be a true msp manager and move the numbers in your organization.
Start with Realistic Goals
The first step is to set your goals. Don’t make the mistake of setting unachievable goals. If you had 1.5 million in revenue last year, don’t set your goal at 5 million because it is unlikely your organization could even take in that much business without the wheels falling off, much less execute a sales plan that would generate it. The industry standard is about 10% organic growth per year so that is a good start. If you are already doing 10% per year, you might want to stretch it to 20%.
Remember, as you set goals, you will need to be mindful of the cost. You cannot just set a goal and not execute a plan to achieve it. Think about what it will cost you to invest in marketing or sales if your plan is to grow by X% over the next year. A goal of reducing expenses by 10%, increasing revenue by 20%, and increasing margins by 20% may seem like a dream, but the execution necessary to get there may be capital intensive. Start reasonable with just a few goals each year that can be accomplished with the budget you have developed.
Good MSP management should include two to three financial goals that you can accomplish for the year, along with other non-financial goals. This may be something like “roll out incentive plan for employees” or “move to a new office.” As you think about your financial goals, ask yourself, “what must be done in the next twelve months for us to reach these goals.” You may need to hire a marketing firm, or add a salesperson to your staff. The non-financial goals will indirectly help you meet your financial goals. While some of the goals may not help you meet your financial goals, most of them should be designed that way!
Build the Plan
Once your goals are set for the year it is time to build a plan. You should have 3-7 goals for the year. Any more than that is highly optimistic. For most small businesses, this is the number of goals that can be accomplished each year. Larger teams may find they can include a few more but it is more important to achieve them all than to pick a bunch and only get a few done.
For each goal that you have outlined you need to develop a plan to get there. If your goal is to increase gross margin by 10%. Do the math. How much is that in dollars. If you are an MSP, look at MRR and determine how you can either raise the monthly recurring revenue or lower costs. Maybe you decide to promote from within rather than hire top talent from the marketplace, saving you some labor dollars. Maybe you decide to swap one product for another cheaper product. Alternatively, you could need a price increase. Whatever you decide to do, make sure the math works and that the plan is written and assigned ownership to one of your leaders to get it done.
Once your plans are done, they become your priorities. Many people choose to break these into quarterly accomplishments since 90 days is typically enough time to execute a plan. Even if the plan may take all year, it is a good idea to break it into four different phases so you can track progress and ensure completion.
Moving the Numbers
If you have set good goals based on your desired financial outcomes, and then created plans that align with your goals, and execute those plans for the entire year, you will achieve the results you were after. This is true MSP management and the highest and best indicator of your ability to run a business. It is not the flashy organization, or the one that writes the most blogs or has the most webinars that gets the distinction of best-in-class in their industry. The one that uses the resources and tools at their disposal to move the numbers the way they want them to go are the true msp managers and will build a legacy.
If you need assistance in your organization moving the numbers, contact us here at RedVine Operations and we walk you through the process to make your organization everything you dream it can be.