MSP April 2020 Revenues: Financial Results Analyzed
How did MSP businesses truly perform in April 2020 amid the coronavirus pandemic and associated economic fallout? MSPCFO, a business intelligence software provider, aggregated and analyzed its customer data to pinpoint these MSP revenue trends.
April 2020 Monthly Recurring Revenue: When looking at all monthly recurring revenue (MRR, product and labor) in April 2020 vs. the monthly average of January through March, MSPCFO says:
- 74% of MSPCFO’s clients saw revenue either grow or decline by less than 2%; and
- 54% actually saw recurring revenue increase.
MSPCFO’s Interpretation of the MRR Data: Many clients did see a big hit to revenue and a lot of that seems to be industry specific, but most clients either saw a minimal negative impact to MRR or grew, MSPCFO CEO Larry Cobrin says.
April 2020 Project Revenues: When looking at the same time periods, project hours told a different story
- 70% saw a decrease of 2% or more
And looking at transactional product sales
- 67% saw a decrease of 2% or more
MSPCFO’s interpretation of the project data: Project work and product sales took quite a hit. Hopefully, this is just a deferral to later months, Cobrin notes.
MSP Financial Planning: Next Steps
Meanwhile, key industry sources are urging MSPs to fine-tune their businesses for the long haul. Among the areas of concern: Many MSPs are leveraging PPP (Paycheck Protection Loans) to maintain existing financial models, but the wiser strategy would involve fine-tuning profitability and cost models, according to Arlin Sorensen, VP of ecosystem evangelism at ConnectWise.
If the U.S. economy heads into a recession, MSPs and VARs will need to brace for some hard realities. For instance, MSP monthly recurring revenue (MRR) typically falls about 20 percent during recessions, and VAR product revenues drop about 45 percent during recessions, according to historic data from Service Leadership Inc.
Service Leadership is not in the business of predicting recessions, but the consulting firm is urging IT solutions providers to take three proactive steps:
- Re-forecast your business — for each month — through the end of 2020.
- Include a best-case, mid-case and worst-case forecast scenario for each month of 2020.
- From there, develop a financial plan that ensures your business can remain profitable in each scenario (best-, mid- and worse-case) in every month of 2020.
Special thanks to MSPCFO CEO Larry Cobrin and Service Leadership CEO Paul Dippell for the various data points above.