MSP Key Performance Indicators: Which KPIs Your Business Should Measure
Using data is a huge part of managing a business, but it can be hard to know where to start!
We recently listened to an awesome podcast where Richard Tubb spoke to Todd Kane, an MSP consultant who is an expert at helping MSP businesses measure and grow their success. If you’re looking to improve the KPIs you measure and your ability to track growth, here are some of our favorite takeaways from the talk. We’ve only scratched the surface, so make sure to listen to the whole thing right here!
“Taking the surface problem and looking deeper”
MSPs might initially come to Todd with what he calls a surface problem. They might say “I don’t use my tools or technology very well” but Todd finds the problems are often more systemic and rooted in something else, such as culture or management framework. He likes to help MSPs to be more intentional about their business. While they might have joined the industry as a technician, a simple IT fix-it guy, they sometimes feel out of their depth when that turns into a more substantial business. One size fits all advice can be helpful, but it isn’t personal enough to give them the real answers for how they should approach their problems. Modeling someone else won’t always fix your specific issue.
When you’re thinking about what to measure, remember that MSPs go through different growth problems, and the answers change from point to point. Consider that what got you here won’t necessarily get you to the next stage of business growth.
“Start with SLAs”
A regular problem for MSPs when it comes to measurements is a lack of Service Level Agreements. MSPs think about SLAs as a purely customer-focused metric, and worry about being tied down by them, but actually an SLA can answer a lot of internal questions for your business. Understanding how long the lifecycle of a ticket is the first step for you to understand your average time to acknowledgement and your average time to resolution. Todd says customers often don’t agree with this data when he tracks it, and this usually means that systems aren’t working well, and there can be process improvements.
SLAs can be a lot more than a guarantee for the client that issues will get dealt with quickly, it’s about measuring your efficiency internally and seeing how effective processes are. Once you’re proud of these numbers you can make them loud and clear to the customer and make some promises and guarantees, but first you need to see these numbers internally and get visibility over what you’re doing.
“Measure by metrics not by gut feeling”
While it’s ok to muscle your way through and rely somewhat on gut feeling, at some point you need to be able to marry up that subjective feeling with an objective measure. Sometimes MSPs are worried about following metrics like CSAT (customer satisfaction scores) because they don’t want to know the answer, but this is really just sticking your head in the sand!
Once you have hundreds of tickets coming through a day, you can’t be reading every ticket to see if customers are happy, you need to start collecting data that streamlines this process for you. Dashboarding and reports can make it a lot easier to get a single view of the metrics that matter, from open tickets to CSAT or NPS. If you can narrow this down by department, then as a manager you can step in if you see that problems are arising, and catch issues before they reach the customers. You don’t want to be saying “ticket closures were awful this week” in hindsight, you want to be saying “ticket closures are trending downwards today, I’m going to go find out why.”
Why revenue metrics are not the only metric you should measure
Todd recommends that you should measure between 3-5 metrics for each department. If you go a lot past this, you can end up with too many data points and it’s hard to manage how one impacts another and you can quickly get overwhelmed. Once you know what you’re measuring, think “What are the industry benchmarks?” “What does this metric tell me about my business?”
Depending on what you’re trying to achieve, there are always going to be different KPIs to measure. Todd called revenue a vanity metric, and called out how it doesn’t actually matter that much. While measuring revenue will help you to see the money you’re making, it actually won’t tell you much about whether you’re managing your business profitably or productively after costs.
Instead, metrics you can look at when it comes to service delivery include:
- Average time to acknowledgement and average time to resolution as discussed above.
- Kill rate, which will reflect the number of tickets closed vs opened.
- CSAT, to make sure your clients are happy with their experience.
- Aged tickets, which are those which have been open a long time, vs stale tickets – the ones that are unmanaged or unmonitored.
- Expensive tickets. We love how Todd mentioned isolating tickets that take more than 4-6 hours to complete. This either means that you’ve encountered a huge knarly problem, or otherwise that you’ve missed an upsell opportunity. If a ticket is taking 4+ hours to solve, the chances are this shouldn’t be included in the package, and it’s a paid opportunity.
As well as the service delivery metrics, there are some financial metrics to measure too which will serve you a lot better then revenue alone. These include:
- Gross margin on service delivery, which is a number that shows you the profit you’re making on technicians and service, outside of overheads. Passing this number down to the managers can help them to streamline the way they work.
- Cost per client, are you overcharging your customer and are they happy with the service they are receiving? Similarly, do you have unprofitable MSP clients or barely profitable ones? They might be paying you a lot per month – but if they are costing more, you’re doing something wrong.
- EBITA, which stands for Earnings before interest, taxes, and amortization. This will tell you how much free cash flow the business has.
- Customer and employee churn. It’s impossible to grow a profitable business if you’re continually onboarding new clients and employees or losing money from existing customer revenue and the soft costs of constant new hires.