What this episode covers: why many MSPs struggle with profitability—and how to fix it with pricing discipline, Agreement Gross Profit (AGP), Effective Hourly Rate (EHR), airtight time entry, and a balanced mix of recurring, hourly, and project work.
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Reality check. Fixed-fee agreements create predictable MRR only when the business mechanics are tight. Most misses come from pricing, labor management, and weak reporting—not from technical delivery.
Why it “sucks.” Without disciplined pricing, revenue tracking, and operational hygiene, even great teams underperform financially.
Operational discipline. Build agreements in your PSA to support accurate invoicing + actionable reporting. Many MSPs add BrightGauge, Cognition360, or MSPbots for clear AGP/EHR dashboards. Enforce perfect time entry; run daily dispatch reviews to confirm billables, statuses, and out-of-scope items.
Revenue mix that works. Rough guide: ~60% recurring, ~20% hourly (out-of-scope), ~20% projects. Hourly isn’t the enemy—it adds revenue, clarifies scope, and discourages over-delivery. Dedicated PMs protect gross profit and prevent scope creep.
Pricing & client comms. Price to your labor economics and demand profile, flag out-of-scope early (hourly or change order), and invoice with detailed tech notes to reduce disputes.
Exit-ready mindset. Clean books, healthy AGP/net profit, and documented processes increase valuation and keep you ready for unexpected opportunities.
“Managed services doesn’t fail because of tech—it fails when you don’t price, track, and manage the work like a business.”