Why revenue is not important

These are interesting times to be an MSP. The amount of MSP channel specific offerings keeps increasing, it seems like the big channel organizations have fully embraced the MSP model and see the huge added value you bring to market. And they should, after all you are the ones who truly understand their offerings from a technical perspective and are capable of translating that functionality to your client’s needs and sell it.

Emphasis on revenue

What also interests me in that regard is the channel organization’s emphasis on revenue. Different vendors are asserting the importance of their focus on delivering new products, services and other offerings that ‘increase revenue for MSPs’. It almost looks to be a mission, where all activities that don’t create revenue for MSPs are considered to be of less importance.
This looks as a logical thing at first sight. If I would ask a room full of MSPs if they would like to increase their revenue, I can’t imagine that there would be many who wouldn’t want that. And for sure a promise of bringing new revenue will open doors for these vendors.

What extra revenue is worth

But actually I don’t believe extra revenue is worth a lot without being able to look on the delivery side as well. Because, e.g. adding a BDR solution to your portfolio will for sure increase your revenue. But if you have to spend an enormous amount of technician time each day to make sure those failed BDR replications get going again, you might have bought yourself a long-term problem.

What I’m saying, is that revenue is not important. A healthy profit is important.

A weakly funded back office

You can add all the services and products you like. But if you add it to a business where the back-office is not suited to support automated and consolidated billing plus proper time registration and allocation, you will never know if the fresh revenue is actually making you a profit.

If not, your business will lose long term value. From a valuation perspective, you would want to be able to diversify which services are generating profit and which ones don’t. So you need a system that will automatically tell you:

• A client’s pure MSP services consumption
• A client’s third party services consumption
• The time spent on a client or service
• Net hourly rate (Pure services revenue divided by spent time on that client)
• And a lot more that tells you what you’re up to

A PSA that allows you to have these metrics is vital to remain in control of your business.

Strengthening the fundament of your back office is the most important step to take before adopting additional offerings. Especially if these new offerings have a high cost price and promise you ‘zero labor’ delivery. Because you will only know if that is actually true when you start measuring.