Where Did My Margin Go?

Imagine a hypothetical MSP. This MSP has been in business for a few years and their managed services practice is starting to make sense. The company had a decent book of business, a good compliment of tools, and a qualified staff. In all, this hypothetical MSP company has all the outward trappings of a solid managed services organization. It even has a website that says all the right things. It's only missing one thing: margin!

In thousands of MSPs I've worked with over the years, achieving and maintaining an acceptable service margin can be very elusive. The best way I can describe it is like getting behind the wheel of a very nice sports car that hasn't been used in a long time; in order to get it to operate normally, you need to do a little work on it first. Here are a few areas where I've seen MSPs lose margin.

1) No Process. It only takes a few minutes to see that MSPs who have a new way of doing the same things again and again will never achieve significant margin. A good MSP practice must have a process for every repeatable thing it does within its service portfolio; from the mundane to the complex. Processes make everyone a lot happier, including your clients.

2) Documentation. When I tell MSPs you need a process, they all say ok, we have that. When you tell them to document, they look at it as homework and tend to push it off. Documentation does not have to be that difficult. First, start by jotting down a few notes on how you do a particular task, like de-fragging a hard drive. Write those things down and place them under "Hard Drive Maintenance." Then, when you want to add to that task, it's already there and you're only modifying an existing process for doing something. Next, move on to setting up a new user, and so on, and so on.

Documentation scares people because they typically look at the end result and think they need to write a huge manual for their company. Not so. Just start slowly and methodically, and pretty soon you'll have a pretty good handle on things.

3) SLA Review. Obviously, you will blow through your margin if you don't pay attention to the service agreements you have in place with your clients. Case in point; MSP has a clear agreement stating that if the client environment changes and breaks due to another 3rd party contractor hired by the client, the MSP is not responsible and can charge for fixing that problem. This is actually a very typical situation for MSPs. Client hires a contractor, contractor makes a change on the network, something breaks, and client calls MSP asking them to fix it. Completely unfair in my opinion.