What every MSP needs to know to increase efficiency.
In the MSP business, being able to grow and increase profits often boils down to one word: efficiency. With greater efficiency, you gain more availability for revenue-generating activities and can serve more clients in less time and with fewer resources. Essentially, it means you’re working smarter rather than harder. But efficiency means more than just going faster. While there are several areas to streamline and improve, one of the core requirements is that it becomes a mindset throughout your company. Think about your technicians, for example. They are often lost in managing tickets as opposed to considering the organization’s larger mission and goals. Approaching efficiency as a mindset, for example, creates a more streamlined work process, and empowers your teams to identify efficiency opportunities in their own roles. Ultimately, implementing efficiency as a mindset can help your teams become more efficient, happier, and better at their jobs.
The three core efficiency pillars every MSP needs to know
With a new efficiency mindset throughout the company, there are three main pillars of efficiency where you can yield significant savings.
1. Increase your sales efficiency
Sales efficiency refers to the speed of your sales cycle, the processes your team follow to complete sales, and your ability to retain clients. If you’re not retaining your clients, your sales teams are constantly having to generate new business just to keep the lights on, leaving the opportunity to maintain, let alone increase, profits a distant consideration.
Customer service and support
One conundrum MSPs often run up against is the expectation that their market offers a wide range of services to meet the needs of clients. It creates a challenge for technical support: more lines of service and solutions can drain profitability and customer satisfaction. To put it simply, you’re requiring too many domains of expertise from your team and spreading them out too thin.
With staffing limitations, it’s not feasible to successfully handle all the support on your own. That’s why Pax8 created our 24/7 support team, to alleviate the burden on our partners by doing the heavy lifting of technical support. With more than 90 certifications in-hand and 98.5% fully automated provisioning, our team is solving 85% of requests in-house and working directly with vendors to resolve what we cannot.
Maintaining customer retention
For 43% of MSPs, retention is a primary measure of success. Yet, roughly two-thirds of MSPs struggle to maintain profitability, having to deal with unexpected issues at any moment, which adds strain to customer relationships. Prioritizing retention also means prioritizing customer satisfaction.
One way to ameliorate this issue is through self-help provisioning, where your clients can directly add or remove users on cloud platforms. To your clients, it will seem they are doing this with you, their IT provider. But with automated provisioning, the distributor handles processing licensing and order subscriptions, so your team can work on the higher priority tickets.
Your solution stack is only as strong as your ability to support it. In some cases, your team’s bandwidth is the issue. In other situations, it’s a matter of not having the expertise on your team and relying on vendor support, which can be a frustrating time sink. It’s best to not have to escalate to the vendor, or at the very least, have a distributor who can resolve it or will escalate it on your behalf.
2. Administrative efficiency
Disorganized spreadsheets. Direct billing with manual invoice generation. Missed account updates. Human billing errors that can wipe out the client profit margin for a month with the (incorrect) key-in of a digit. The truth is that billing can get complex and overwhelming. It takes away more time and energy than most people realize.
How to save two weeks a year
Proper billing is crucial, and yet it can also be time-consuming. Outdated manual billing processes are not the path to efficiency. This recent Forrester report shows that Pax8-enabled partners were able to simplify billing by leveraging a single platform and its automation features. Account managers saved as much as 55.4% of their time, which they had previously spent managing billing. It also enabled the recapturing of revenues that were previously left unbilled because of human error.
Before implementing this form of automation, interviewees utilized spreadsheets from distributors and direct vendors for client billing. Using spreadsheets meant that it took account managers two full days each month to bill for most cloud services, and these processes could consume as much as two weeks when billing for cloud platform usage.
Additional automation tools
Because automation is critical when it comes to efficiency, here are two other tools that we recommend:
- Professional services automation (PSA) tools to automate routine tasks, like billing, reporting, and scheduling. In particular, the proven PSA integrations from Pax8 can simplify the complexity of cloud management. With this automated approach, account managers can capture changes in licensing costs, saving as much as 55% of their time. MSPs can also consolidate account billing for clients across all services managed. Automation can even enable the recapture of lost revenue previously unbilled because of human error.
- Remote monitoring and management (RMM) supports management of client devices and services, and helps administrators automate standard managed IT functions, improve visibility into client machines, respond to threats, and streamline tasks.
Learn about the top 6 operational mistakes MSPs make.
3. Service efficiency
Service is one of the most valuable places to improve efficiency, especially when you factor in your labor use and processes. Before spending the time and resources hiring another technician, a few internal adjustments might achieve the same results, or even better ones.
Streamline customer onboarding
The right onboarding creates a solid foundation for the services you provide and helps to nurture good relationships with your clients. Done right, clients will know what to expect from your services and how best to utilize them, making early interactions smooth and successful. Onboarding also helps inform the way clients use MSP products and services, so they don’t end up wasting resources in mismanagement.
Automation can be a big game changer for MSPs with client onboarding. Look for a distributor that offers automated onboarding and self-service provisioning, streamlining onboarding and reducing the workload for your team.
Self-service SaaS (software-as-a-service) platforms
Self-service platforms include features such as:
- Streamlined onboarding and offboarding processes
- Automatic documentation and auditing of systems
- Optimal security
With self-service management, you reduce time spent on manual tasks, optimize IT operations, and allocate resources more efficiently. Not only does this result in significant cost savings, but it also eliminates hidden costs associated with ad-hoc fixes and forgotten maintenance requests.
Ensure your stack is scalable
You want a scalable solution stack to make onboarding and support smoother and less time-consuming. The solution stack should be standardized to grow as you do. The more solutions you try to support, the more costly support becomes and the more expertise you require your team to have, which costs you more in return. It’s a recipe for inefficiency and low profit margins.
Learn how to master stack standardization.
In addition to a scalable stack, you need to have processes and procedures that are repeatable at each stage of growth. At smaller companies, a lot of information is siloed, as everyone in the company is in a “doing” role. As you grow, these processes need to be documented so that the company continues to be successful.
Hire, retain, and optimize talent
Hiring is only half the battle. The primary side effect of quick staff turnover rates is that you’ll spend more time hiring and training new employees, which results in sunken costs, redundant work, and lag times as teams get up to speed.
The question then becomes: How are you optimizing your workforce? Employees that are given the right amount of work, given autonomy to complete their work, and feel supported are much more likely to stay than those who feel micromanaged, overworked, and underappreciated. Employees who stay offer a wealth of legacy knowledge and can upskill and train other team members. Give them the resources and opportunities they need to improve and thrive.
Productive labor utilization
Labor is your secret weapon to realize efficiencies through the principle called “multiple of wages.” Where most MSPs have a mixed-service offering that includes break/fix, project-based work, and recurring revenue services, an optimal multiple of wages ratio is 2.8. That means for every $100,000 of their service costs, you should be earning $280,000 in service revenue. If that’s not happening for you, visit Pax8 Academy and sign up for On-Demand, Instructor-Led, or 1:1 Business Coaching courses that examine ways to advance your business’s efficiencies. Not only will your customers notice the change, but your bottom line will, too.
Efficiency on flat-fee agreements
Flat-fee agreements are another area where you can impact meaningful change by creating more efficiency. You want to deliver $800 worth of service (at your normal billing rates) for every $1,000 you collect on a fixed fee. The more you can standardize your solutions, operating procedures, tools, and how you do business, the easier this becomes. Remember: you want your lowest-cost resources to undertake predictable, repeatable tasks.
Pax8 can help assess your MSPs scalability by calculating a scalability score using these 10 metrics:
- Leadership team development
- Strategy and culture
- Acting with urgency
- Revenue generation
- Directed communication
- Financial literacy
- Process improvement
- Working with data
- Simplify to multiply
How does your MSP rank? Whether you scored a 10 or a 95, there is always room for improvement (and most especially for those with the lower double-digit scores). Gain even more critical insights to improve efficiency and gross margin through the on-demand course, “4 Levers of Gross Margin,” available to Pax8 partners.
On-demand training to support heightened operational efficiency
When efficiency is at the core of your business, you build a strong business foundation for long-term success. Create that mindset of efficiency in all areas of your business by taking advantage of easy wins like automated billing, PSA (professional services automation) integrations, customer support, automated provisioning, and standardized solution stacks, and you’ll see more opportunities for business growth.
One effortless way to accelerate ahead of your competition: the On-Demand Learning resources in Pax8 Academy, available exclusively to our partners. From on-demand, self-directed learning courses to one-on-one, do-it-with-you coaching, Pax8 Academy will propel you, and your business, forward.