Any business that delivers a product or service must keep track of their inventory in order to be profitable. For the MSP, this can be difficult because their primary resource is technician time. One of the problems is that MSP’s quite frequently have two types of customers: managed services and break/fix customers.
Managed services customers are billed a flat rate monthly, using technician resources in such a way that the less tech time used the more profitable the MSP becomes. They also have break/fix customers who are charged on a per hour basis. As you can imagine already, this makes it harder to manage “inventory” than just a company that sells widgets.
The break/fix model is closest to the widget company because it is a one-for-one relationship. For each widget sold, the company makes $X in revenue which translates to $Y in profit. In this scenario it is the same with technician time. The most common problem here is that widgets are sometimes lost or stolen. The same thing can be said for technician time. Therefore it is critical to have a system for tracking technician time against their jobs or tickets to make sure that billable time is not lost or, worse, stolen. Examples of data to be tracked includes:
– Average time spent per ticket
– Average time per ticket for each technician
– Technician availability (how much “inventory” is available/wasted)
– Profit by client (Revenue minus COGS)
The managed services model is different because profitability is based on using the least amount of resources to deliver a fixed price service. In this case the MSP must be able to track how much time or resources are used to deliver each service or they will not know what their profitability is. As an MSP you must be able to identify the following key performance indicators (KPI) in terms of “time” inventory.
– Average time spent per ticket (less is better)
– Average time per ticket for each technician (identify less profitable technicians)
– Time spent per month on each client and device (identify less profitable customers/devices)
– Profit by client or device (Revenue minus COGS)
– Technician availability (how much “inventory” is available/wasted)
As you can see, the data collected is almost the same but they have an inverse relationship to profitability based on which model the client falls into. This would not be so bad but like I mentioned before most MSP’s have both these types of clientele.
So how do you capture this data and therefore capture those dollars that are slipping through your fingers? Using ticketing software like ConnectSMART, MSP’s of all sizes can accurately track tickets and analyze this information using reports and exported data. This data can then be used to make decisions on when to hire more technicians (stock up on inventory) or when to reduce staff (decrease inventory). Insight like this can also tell you when it might be prudent to put your technicians “on sale” during slow times for short term project work or when to charge a premium because of their high demand. Simply put, it allows you to take advantage of the law of supply and demand by knowing where your business stands with its “inventory”.
In any service business your greatest resource is your people. With MSP’s this is even more accurate. You must have skilled technicians and as a business owner or manager you must teach them to manage that time, monitor it and hold them accountable. That time is quite literally the “widget” your business is selling and since it is unseen it is even easier to be lost or stolen than physical widgets. Tracking your key performance indicators with relation to technician time is critical and will help your business to survive economically lean times as well as take better advantage of opportunities when they arise.