What Are The Numbers Regarding Your Managed IT Services Diversification?

by ray stasieczko October 29, 2023

Knowing the math is paramount to managing behaviors.

All actors in the print industry diversifying into Managed IT Services should share more of the math!  

 I decided to create an example of just that. Those delivering Managed IT define the deliverable in many different ways. In my example, I outlined a fictitious service provider that is moving up-market to service more operationally mature clients. The service provider begins every engagement with a fee-based assessment.

 These numbers, while examples, are based on my experience in the industry and have been vetted by others delivering these services in 2023. There are many details to the IT services deliverable and within those details are costs; each provider has different costs. How a provider calculates and validates all their deliverables costs is paramount to their success (e.g., profit) from that deliverable.

 In this example I highlight the numbers a service provider onboarding up-market clients should know. The percentages of revenue splits are just an example.         

Our Example Print Dealers, Managed IT Services Deliverable produces $2.5 Million in annual revenues which is 20% of their total company revenues.

Of the $2.5 Million, 76% or $1.9 Million is reoccurring services.

48% or $912,000 of the reoccurring services is pass through billing which produces a 32% gross profit (e.g., Email, Backup, Cloud Hosting).

The 52% balance of the $1.9 Million reoccurring revenues or $988,000 is for our services and labor which produces a 47% Gross Profit.

The 24% or $600,000 balance of the $2.5 Million total Managed Services revenue is a combination of hardware, project, and fee-based assessment revenue.

The gross profit on hardware is 17%. This year-to-date, our example service provider has completed eight fee-based assessments at an average of $17,500 (70 hours @ $250/hour) for a total revenue of $140,000. Assessments were delivered at a 65% gross Profit. My Example MSP onboarded five new clients of the eight assessments with an average monthly reoccurring revenue (MRR) of $9,300, an increase of 20% MRR versus the clients we added last year.

Our new goal is to only to accept new contracts that generate at least $10,0000 in MRR.

Currently, the $1.9 Million reoccurring services breaks down to $158,333 per month (MRR). My Example MSP has 28 customers averaging $5,655 per month in services reoccurring revenue.    

It is only in the details where valuable conversation is born. Having a conversation that begins with “we are kicking ass in Managed IT,” or as Konica leaders like to say, “we are knocking it out of the park” is disingenuous at best.

When leaders infuse their story with hypothetical math or aggregated statistics based on a subset of managed services providers, it usually means they have no clue what their actual numbers are! Or they are completely upside-down and refuse to acknowledge their dysfunction.

Numbers verify the adjectives! People need to know their numbers to see the reality of their presumed success.

You can only drive behaviors if you have knowledge of the numbers.

So, when discussing your Managed IT Services Deliverable, make sure you can articulate the numbers to substantiate the adjectives.

Status quo is the killer of all that will be invented.  

Ray Stasieczko,

Host Of, The End Of The Day With Ray!

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