Forrester Wave Emerging Managed Security Service Providers Q1 2013
Financial Benchmarks for managed services providers
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Transcript of Financial Benchmarks for managed services providers
Welcome!Financial Management
Financial Management Keys to Unlock Your Business Potential
JOSH PETERSON CEO of Bering McKinley Engage with our clients through
Direct one on one consulting Peer Teams Workshops
Management Consulting to 1000’s IT Solution Providers over the last 10 years.
Provide training on all aspects of running an IT Firm
• Accounting• Service Delivery• Sales • Sales Management• PSA Implementation
• Over 500 ConnectWise deployments
Founding Partner of Bering McKinley
KEY 8: SERVICE DEPARTMENT GROSS PROFIT
55% Service Department Gross Profitability
Manage service salary expense to 33% of service revenue and you’re almost there!
Include all Service Revenue, no product sales.
Manage other service expenses RMM tools PSA tools Cell phone Mileage
Agreement Gross Profitability
Demand that your PSA provides this report for you and that it is accurate.
The VERY BEST Service Managers LIVE AND DIE by this report. The very best review this report weekly. It is used to set budgets and manage pricing.
KEY 7: AGREEMENT GROSS PROFITABILITY
Three Methods to Calculate EHR:
If your Effective Hourly Rate is not greater than your Hourly Rate then you have a problem. You're selling your agreements too low, you're putting too much time into your agreements, you're not remediating problems before turning up clients, or all of the above. My top MSP's have effective hourly rates double that of their rack rates. The rest are struggling to get to 80% of their rack rate.
KEY 6: EFFECTIVE HOURLY RATE
Dime on a Dollar
KEY 5: SALES & MARKETING BUDGET
10% of A/R
KEY 4: A/R AGING REPORT
Tells us that your clients do not respect your services. Over 90 days tells me you don’t respect your services
15 day terms
Send statements every month
Make collection phone calls
DSO
KEY 3: DAYS SALES OUTSTANDING
More importantly, how closely does DSO match your payment terms?
Here's the calculation: (Accounts Receivable/Total Credit Sales) X Number of Days in period measured.
Do this quarterly and pay attention to how this affects number 4.
Cash flow is king; insist that your clients adhere to your payment terms
Here's the calculation. You can do this on an annual basis, or quarterly basis, you can even look longer term if you're a really small company.
KEY 2: EMPLOYEE TURNOVER
KEY 1: EBITDA
Net Operating Profit – this is the PROFIT from the OPERATIONS of your company. This has nothing to do with how much money is in your pocket
10% Target Is MINIMUM
Evaluate financials in Accrual Mode, File taxes in Cash Mode No wives, husbands, dads, moms, sisters, cousins, brothers, uncles,
aunts, god parents, second cousins twice removed doing the books! Weekly financial meeting with bookkeeper; sign checks,
confirm deposits, collection calls to be made, bank balances. Invoicing occurs three times a month; twice for T & M, once
for recurring We send billing statements once a month.
• No excuses
Monthly P & L and Balance Sheet Meeting. • “I always look at my P & L” means nothing.
We download transactions from our banks and credit cards…• It’s 2015! No hand entering!
GUIDELINES FOR SUCCESS
?Q & A
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