Projects are critical to MSP’s overall revenue mix. A solid revenue mix for a modern and healthy MSP is... (drum roll):
- 40% Recurring
- 30% Project
- 30% Hourly
That might seem counterintuitive to most MSPs as we all want a massive bucket of recurring revenue. We want that too!
Sadly, even today, many MSPs don’t understand their Agreement Gross Profit (AGP) margin. When we dig into AGP on many Managed Services Agreements, we find they are not nearly as profitable as anticipated.
3 Project Indicators of Health & Profitability for MSPs
Projects are a large part of the solution. Here are 3 important reasons why projects are imperative to a healthy MSP:
- Projects indicate how well we are forecasting and refreshing our client’s hardware.
- Projects indicate how well your technical team is identifying out-of-scope work from your managed services agreements.
- Projects indicate how well the sales department is bringing in net new business. Onboarding projects and remediation projects are typically where MSPs start with any new client.
Those same people who are not managing their agreements and are not selling projects and managing asset replacements end up spending more time fixing old equipment - it's a downward spiral.
The inverse is true - think a car dealership with an amazing sales team and mostly does warranty service on their client's new cars - way easier. This reason alone makes MSP Projects THE MOST IMPORTANT of the 3 buckets to get correct.
As you get better at identifying and selling projects, you will see that percentage of revenue ratio begin to move. Don’t be alarmed; it’s a good thing!
About the Author & Bering McKinley
Having 20 years in the industry and working with hundreds of MSP owners, Josh is the owner of Bering McKinley Consulting Services. His team helps MSPs helps break down the excuses and falsehoods that keep success at bay, delivering a formula that has been implemented thousands of times for IT company success. The BMK consultant-guided programs combine IT business, financial principles, sales expertise, and service management know-how, helping MPS reach achievable targets. Discover a guided path to growing your business.
Josh Peterson, CEO & Founder