MSP Basics: How Will You Earn Revenue

When most people start a business, they take all the work that they can get. Which gets income flowing. But over time, this thinking can catch up to you as you try to trim down all of the offerings and target a market. The best thing you can do for yourself and your business (even if you have been in business for a while) is to STOP and define how the business will make money.

 

Often times a new MSP owner will answer the question “What are you doing to make money?” with “Fix computers and managed services”. Which is great, but also vague.

The answer ought to be a defined list of categories you utilize to earn revenue for your business.

In most cases, the MSP will have the following profit centers (and the owners may or may not even realize it)

 

-          Managed Services – These are full managed service contracts whereby you are providing RMM and support for a flat monthly fee that escalates per user.

-          Projects – These are fixed fee engagements performed for clients that have defined scopes, billing milestones and defined dates for tasks to start and end. Usually involves a project manager and weekly updates with the client to track the project’s progress.

-          T/M Services – These are open billing agreements whereby you perform work for an hourly rate at a set increment.

-          Hardware – Are you going to resell hardware? If so, that is another profit center for the business.

-          SAAS Products/Subscriptions – These are services (usually purchased from a reseller or distributor) that are software based in the cloud. A prime example would be Microsoft 365 products purchased via Pax8 or similar distributor (sherweb is another common one)

-          Professional Services (consulting) – Some MSP’s offer pure consultative services like evaluations for M/A or compliance audits. Ideally, these might be project based engagements, but you can also separately categorize them such that you can set differing bill rates for these types of services.

-          Cable Services or other Divisions – Some MSP’s have cable contractors in house, so they provide low voltage services. Or perhaps you sell voice over IP or other types of business centric services. These should also be clearly defined as additional profit centers so you know what the business sells.

 

As you define these profit centers, it becomes obvious that you provide several services that can be profit centers for the business.

As you prepare to launch your MSP (or get clarity on your current MSP’s revenue models) review your service offerings. What categories can you define ?

Create a list of profit centers for your business. This will provide:

-          Ability to segment revenue tracking by profit center (find what is your most profitable category)

-          Target marketing based on category (pull “levers” of programs designed to market specific parts of these categories to create revenue)

-          Focus your attention on the core services your business wants to deliver (as the saying goes – you cannot get to San Diego if you are driving to Arizona)

-          Provides guidance on what types of partners might help you with the marketing of your business.

-          Provides content guidance for marketing materials

If you need help or advice setting up profit centers, reach out for a free coaching session, we are here to help:

Book a consultation

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