Recently, Datto published an “eBook” on their recommended 10 PSA KPIs. The first KPI is Profitability. This is a great topic and one I am sure every Owner in their right mind is tracking.
The article is a great overview. For example, there are 234 words on the Profitability topic?
I know there is more to be said!
Now while the article gave some great advice, it was lacking the “How To.” Please, allow us to help.
A summary of summaries: Datto’s 1st KPI – Profitability article take-a-ways:
- Tracking where you are making or losing money by revenue stream, Customer, Contract, Service Level (SDB-C: Service by Service) is great.
- Realizing most of your profit comes from one Customer, or where the upsell opportunities are by identifying Customers who spend very little with you are not profitability topics, but instead Revenue.
- Understanding the underlying cost of providing Managed Services is critical to determining profitability and reiterates what we have been saying as Service Delivery experts for a long time.
- To look at ‘pending revenue by customer’ is also important – but is not a profitability topic. It is a Cash Flow topic (P.S. Cash Flow is more critical to keeping the doors open than about profitability, but to sustain the business – it takes both).
To get the eBook from Datto, feel free to download here.
Now let’s talk!
What they didn’t include in the Datto E-book…
As you know, selling more when running inefficiently just makes you busier; it doesn’t make you more money. Profitability is all about improving Service Delivery efficiencies. First, it starts with the Support Team, and as the MSP grows, it moves over to the Projects, with a little proactive maintenance thrown in the middle.
Most MSPs look to automation to drive efficiencies without realizing there are three levels of PSA automation:
- Workflow Rules
- Contract Exclusions
But before leaning on automation, organization is critical (followed by Customer Facing communications). You can see there is a lot more about MSP profitability that can be said, and we are happy to provide more on the 234 words already said.
Now, where do you start?
- What is the order of importance?
- More importantly, what is the order of the most bang for the buck?
- How can we progress without tripping over ourselves or creating unnecessary work?
We don’t know your specific situation of course, so in general, here is the best way to drive profitability via Service Delivery Improvements:
- Customer Requests segmentation: Not all tickets are created equal! Engaging on them with the same process, if we ever paused to think about it, does not make sense.
Here are some examples of the different types of requests we receive that require a different workflow than the rest:
- Critical: Requires an expedited Standard Operating Procedure (SOP)
- Non-Critical Incidents: Better known as “High”, “Medium”, & “Low” Break/Fix, and really the only thing our Customers care about – how soon are you going to “fix our stuff?” This is the area MSPs do very well in. They do so well, that this is the SOP a typical MSP uses for everything.
- Quick Hits: Yes, they are non-Incident Service Requests, but it takes less than an hour to complete, so we are going to treat them like an incident, in the interest of providing a great Customer Experience.
- Minor Service requests (less than 4 hours): Hey Tech, can you just fit this in? – Sure, why not!
- Major Service Request (4-8 hours): Hey Tech, can you just fit this in? – NO WAY, it will take me out of the Queue for more than half a day, it needs to be scheduled!!!
- Installations (8-16 hours): Hey Tech, can you fit this in? – NO WAY, not only does it need to be scheduled, I need Planning Time a day or two before starting the engagement!!!
- Projects: Hey Tech – STOP right there, don’t even ask.
- Recurring Tickets: or proactive Network Administration / vCIO discovery visits
- Service Coordinator Dashboards
- Dashboard #1: Managing all open tickets and knowing which ones need attention.
- Dashboard #2: When an SLA is about to be missed, who is available with the right skill set, or do we need to update the Customer?
- Dashboard #3: Used to monitor and maintain the Technician dashboard for them.
- Technician dashboard: Knowing what to work on next and being aware of everything they are responsible for.
- Email Processing: Fine-tuned to intake Customers’ requests while reducing the noise.
- Customer-Facing communications program: It is amazing how a consistent rhythm meeting the Customer’s information needs and expectations quiet the noise, grows the partnership, and drives Service Delivery efficiencies.
- Workflow Rules: of course, but not the best
- SLAs: Surprisingly, the best automation for driving profitability
- It is proactive rather than reactive live Workflow Rules
- It follows the Contractual Obligations in the MSAs
- It reports Support Team performance for both Incidents and Service Requests
- Contract Automation: While it’s not everything we need, it does free up 20% of every Salesperson’s time to focus on Sales (now, profitability and Revenue growth are two different things, but how would you like 20% topline growth while improving bottom-line profitability by 18% with a stroke of the pen? – together that is 21.6% in increased profit).
Pro-active Recurring Visits:
Call them Network Administration visits, or vCIO discovery visits, QBR information gathering, call them anything – just do them.
Gospel according to Steve: If you are taking on the liability to maintain a network, shouldn’t you have eyes on the network every month? At least for a few hours per month, and a robust, living document checklist? And oh, by the way, Customers will pay extra for this service.
Gospel according to Gary P: Send a guy out once in a while to look at your existing Customers network. 30% of the time, they will find something on the network that does not match your current standard build or is facing EoL – voila, you just scared up a Professional Services project at a 16% bump in Billable Hours Rate.
Note: Purchasing the software to support this effort and the labor that goes into it makes the program cost prohibitive unless you can upsell the Customer or reduce the amount of labor. MSPs that have done one or the other (or both) are raving fans of the TM community.
Final Note: Just spinning up the Recurring Visits program by itself does not increase efficiencies, and if not done correctly, introduces more Chaos into the Support Team and Customer Experience environments.
So, here is the right way to do this process:
- Map each visit so they do not overlap.
- Map them in a way to maximize project time.
- Schedule Recurring Visits first and up to a year in advance:
- Before project scheduling.
- Renew 90 days before the Final Due Date of the existing schedule.
- No more than a year, because (and I know this shocks you) things change.
- Determine how many hours per week and per day is needed to support Incidents and Service Requests.
- Block out enough time to cover all Incidents and Service Requests.
- Schedule projects in all of the remaining time.
- Note how far out the first Project is available.
My favorite subject. Life is good until projects show up.
“Managing projects is a totally different skillset, mindset, and process than any other work an MSP does. If all we did was manage projects, life would be easy.” -Stephen D. Buyze
We have written volumes on this subject. If you need to start managing projects, we recommend surfing our blog for articles on projects or downloading the Sales to Sales Engineering to Project Management workflow document.
Now there is an article on How to Increase Profitability for you! – I hope you enjoyed the read.