“Yo Adrian” - Finally, an MSP Service Manager’s #1 Responsibility – Profitability
What you’ll read about in this article:
This series is starting to feel a little Rocky
Service Manager’s Responsibility #1: Profitability!
Before we begin, a quick series recap
3 KPIs that track Service Delivery impacts
Resource Utilization has a huge influence
What a “Best in Class” MSP looks like
How Can a Service Manager transform into a Profitability-Driving Pro?
Continuing to improve to the next level
Welcome to your new Profitability improvement journey
Back in 1976, a movie called “Rocky” starring Sylvester Stallone, came out about a boxer and his fight for respect. Remember that?
1979’s Rocky II featured that famous training montage where Rocky runs up all the steps of the Philadelphia Museum of Art with the crowd cheering. Rocky III gave us Survivor’s “Eye of the Tiger.”
Each movie seemed to end, only for Rocky IV, V, Rocky Balboa, Creed, Creed II, and Creed III to come out. I imagine you have started to think this article series will be a little like that.
Not to fear. We have been talking about the Service Manager’s #2 and #3 responsibilities seemingly forever. But today, at last, we turn our attention to the #1 Responsibility: Profitability.
We start by looking at the Advanced Resource Utilization report.
Being the smart readers you are, I imagine you are now wanting to remind me that we have already covered that report in Rocky III…err…I mean, the Service Manager’s #3 responsibility, Tech Performance. Yes, that is true, but there we were looking from a Coaching/Mentoring perspective and leveraging the report to improve Tech performance.
Now we are going to look at the same report, but from the Owner’s perspective, Profitability.
As a recap, here is the journey that we are on:
A Service Manager is responsible for:
Holding the Service Coordinator accountable for doing their job as expected
Holding the Techs accountable for doing their job as expected
Holding the Team accountable to meet profitability expectations
Resource Utilization above 80%.
SLA Performance above:
Triage – 97%
Tech Engagement – 95%
Completion – 90%
Reactive Hours per Endpoint per Month to less than 1 hour of work for every 4 Endpoints.
Your Service Manager should be taking ownership of these three things. If they are not, you need to fire them (or at least get them some guidance on their Role and Responsibilities).
“WOW,” I imagine you are saying, “That’s a tall order.”
Yes, it is. But – if a Service Manager did step up and take responsibility for these three things, my goodness, the Service Delivery would:
Meet expectations.
Maximize profitability.
Provide a Zen work-environment.
Knock out the competition by the 3rd round.
Exactly our Point!
Profitability: the #1 Focus of the Service Manager
From an Owners point of view (which I suggest is the view a Service Manager needs to take in order to keep their job), Profitability is the #1 focus/responsibility of the Service Manager. Based on LEAN Processes, the three KPIs that track Service Delivery impacts to the bottom-Line or Profitability are:
Inventory => Billable Hours or Resource Utilization of Available Hours.
Throughput => SLA or Mean Time to Resolve (SLA w/o wait states) Performance.
Efficiency => Reactive Hours per Endpoint per Month.
From an impact of Profit perspective, Resource Utilization has the biggest influence and is the one that is easiest to track and improve.
Every 1% improvement improves profitability by $3,100 per Tech per Year. There are 2,080 working hours in a US Full-Time Employee year. So, 1% of that is 20.8 hours. With the average Standard Role Rate in the US being $150 per hour, a 1% increase in billable hours per Tech per Year is 20.8 * $150 or $3,120.
Hey MSP Owners, Go Sell Something…
To recoup these now available / non-wasted billable hours, the Owner needs to go sell something. This could include offering additional Managed Service support in the form of MRR or additional Professional Services Project hours. The key point here is that these additional hours can be sold without hiring a Tech or increasing costs – it is pure profit.
Now, if Fred V from Kaseya is right (as we covered this in the last movie, err, article), Techs are only productive 50% of the time. Based on the 190+ FREE No-Obligation PSA Configuration Evaluations we have provided to MSPs worldwide, we concur with Fred V’s statement.
What “Best in Class” MSPs Look Like
On the other end of the continuum, the “Best in Class” MSPs (comprising approximately 5% of the industry, again, based on the 190+ FREE No-Obligation PSA Configuration Evaluations we have provided to MSPs worldwide) are running between 80-84% Resource Utilization. This is a difference of at least 30% or $93,600 per Tech per Year in additional profits – WHAT A COMPETITIVE ADVANTAGE.
Advanced Global’s Service Delivery Foundational Program has been delivering amazing results since the fall of 2019. Every Client in 2022 and 2023 experienced at least a 10% Resource Utilization improvement within only 8-12 weeks. This is the reason why we say Resource Utilization “has the biggest impact and is the one that is easiest to track and improve.”
How Can a Service Manager Become a Profitability-Driving Pro?
So, what does it take for a Service Manager to focus on and drive Profitability improvements via Resource Utilization? Based on Advanced Global’s experience and real-world know-how, the answer is in the following steps:
Leverage more of the Autotask software ensuring it works for you, not against you by reconfiguring the PSAutomation.
Coach/Mentor the Techs to follow proven processes and hold them accountable.
Monitor and Maintain in a Continuous Improvement program.
Reconfiguring Autotask takes around four months to complete. Not because of all the changes, but because of all the mindset and deeply held habits that need to be reengineered. The program delivers a 10% improvement. The basic steps involved are:
Making sure the Techs know what to work on next:
Categorize all Client Requests
Prioritize all worklists
Organize their day so they are aware of everything they are responsible for
Streamlining the Time Entry process making it easy for the Techs to complete the Time Entries
Embracing a Real-Time Time Entry culture:
Answer: What is in it for the Tech?
Part of the Engagement
Hold the Techs Accountable
Mandate classic movie education (just kidding, but Matt says if you sign up, he’ll be happy to recommend some great movies telling the stories of the MSP life or even spend an hour with your techs showing his Star Wars based IT security presentation).
Following these steps will get you 1/3 of the potential improvement - or $32K of the $96K per Tech per Year.
What does it take to continue improving to the next level?
Good question. The Coaching/Mentoring of proven processes for the Techs takes about 3 months and delivers another 10% improvement. The steps involved are:
Hold the Service Coordinator accountable.
Hold the Techs accountable.
You guessed it…focus on Profits.
From there, monitoring Service Coordinator, Techs, and Team performance and maintaining their performance through spot coaching dials the Resource Utilization KPI into the Best-in-Class range of 80 – 84%.
Hopefully, all of this makes sense to you. The reality is that many of you simply don’t have the time and resources to implement these changes on your own. I know what that means: you will decide to just keep slogging away until you burn out.
It’s important to remember that when you own or run an MSP, you are on a journey. So, ask yourself these questions today:
Will your journey end after just one movie or will it have many sequels?
Will you grind it out by yourself?
Or will you run up those steps to your own theme song - with our team and your Clients cheering you on your way to glory?
Welcome to the beginning of your new Profitability improvement journey. This journey starts with Advanced Global’s FREE No-Obligation PSA Configuration Evaluation. What is it costing you NOT to begin today? Hint: 600 USD per Tech per Week.
The elephant in the room:
Who is Advanced Global, and why should we listen to them?
Advanced Global MSP Coaching is the Autotask Service Delivery Authority.
We Guide MSPs to use more of the Autotask Software to drive Operational Improvements.
The first step is a FREE No Obligation PSA Configuration Evaluation
Get started today. Waiting is costing you $600 per Tech per Week, and we can help you recoup that loss, Guaranteed or your Money Back. For more information, email us at info@AGMSPCoaching.com