Mind the Margin: The Financial Metrics That Decide Where Your MSP Goes Next

Most MSP owners know their revenue off the top of their head. Ask about effective hourly rate or true cost to serve and the room goes quiet. That gap is where profit hides, and in a tight year it separates the businesses that are coping from the ones quietly bleeding.

We get into the numbers that actually run an MSP: which clients are worth keeping, and whether you are building something a buyer would ever want to touch. In this episode, we’re talking to Kent Forster from IT Nation Evolve and Nick Moran from ConnectWise who ran their MSPs this way, and are advising other MSPs to do the same. They get into what they track, what it’s changed for them, and what it took to build the discipline.

  • Growth & Strategy
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Key Takeaways

1

Revenue Is the Number That Feels Good, Not the One That Matters

Nick spent 20 of his 30 years in business adding staff and adding revenue, and describes most of it as vanity numbers. The conversation that matters is what's left after costs, and for a lot of owners that shift only happens when someone else in the business starts asking whether a job actually made money.

2

The 50-50-30-20 Rule Gives You a Target to Aim At

Kent's simple breakdown of best in class: for every $100 of revenue, $50 goes to cost of goods, leaving $50 gross margin. Keep shared expenses under 30% of revenue and you land at 20% net profit. Service Leadership puts anything under 10% net in the bottom quartile, which they treat as an unprofitable business regardless of how busy you are.

3

Your Margin Ceiling Is Usually a Belief, Not a Limit

Both panellists ran businesses convinced that 8 to 10% was the best they could ever get on hardware. Benchmarking data shows the top quartile sitting at 22 to 25%. Kent's advice is not to reprice everything overnight, but to see what's possible, take it back to the team, and move it quarter by quarter.

4

You Can't Sell Your Way Out of an Unprofitable Business

The two mistakes Kent sees most: getting the data and then making no decision about it, and treating growth as the fix for a margin problem. If service gross margin is sitting at 34% when it should be 50%, another quarter of waiting is another six months of not making money. Fix profitability first, then grow.

5

Most Owners Are Underpaying Themselves and Don't Know It

Nick had 20 staff taking home more than he was. Culturally it felt right, but it isn't a healthy business and it was costing him and his family. Owner compensation is a benchmarked number too, and the reaction when owners see what they should be paying themselves at their size is one of the biggest shocks in the room.

Featured Panelists
Ben Town
Hosted Network
Kent Forster
IT Nation Evolve
Nick Moran
ConnectWise

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