20 KPIs MSPs should be tracking

Posted:
11/03/2023
| By:
April Taylor

When looking to grow and scale your managed service provider (MSP) business, it’s best to develop a strategy that is guided by data and monitoring trends over time. Ten times out of ten, data-driven decisions will outperform choices based on intuition or gut instinct.

That said, choosing the right MSP KPIs (key performance indicators) to monitor is crucial if you want to:

  • Drive accelerated performance 
  • Maximize your profit potential
  • Increase operational maturity

But all metrics aren’t created equal. So, how do you determine what your key performance indicators (KPIs) are?

KPIs MSPs need to focus on

It all starts with establishing what success looks like for your company. Once that’s defined, you can build KPIs that can then be used to measure your company’s success. But be careful not to fall into the trap of measuring too many metrics or confusing objectives and key results (OKRs) vs. KPIs.

There are three areas of managed service provider metrics you’ll need to optimize to effectively manage your business: profitability, productivity, and client-based. Here are 20 managed services KPIs you can consider to help narrow your focus to those that will move the needle in these three important areas of your MSP business.                                                      

Profitability KPIs

1. Cost of goods sold (COGS) 

To understand how much profit your company is bringing in, you must first understand the cost of delivering your services. COGS considers the total cost of manufacturing your product and services, including labor, material, and service and delivery expenses. This metric can drive important decisions, such as MSP pricing strategies. In a services business, tracking your tech’s time closely can help you more accurately calculate COGS. 

How to measure: To calculate, sum up your labor, material, service, and delivery costs.

2. Recurring revenue rate

Often calculated as monthly recurring revenue (MRR), this metric represents the value a business generates through subscription services, renewals, and recurring contract services. This number is often measured weekly, monthly, quarterly, or annually. Tracking this KPI helps you more accurately predict your revenues and make future projections based on hard data. 

How to measure: To calculate, sum all recurring payments for the current month.

3. Gross profitability 

This is a must-track metric for any business. Knowing your gross profitability helps you determine how well you’re balancing production and labor costs with pricing and service delivery. For more information on profitability benchmarks and trends, check out our 2023 Annual IT Solution Provider Industry Profitability Report.

How to measure: To calculate, subtract your COGS from your total revenue. 

4. Average revenue per user (ARPU) 

This KPI helps you understand how much revenue each customer or subscriber of your service generates. Knowing this data helps you realize the value of adding or losing a customer. 

How to measure: To calculate, divide your total revenue by your total number of subscribers.

5. Client contribution

Client contribution is a key MSP KPI as it demonstrates the value that each customer generates and helps determine how to grow your business. It can also help you weed out those unprofitable clients that it may not make sense to do business with anymore. This metric should reflect both the total dollar amount generated by each client and the cost of providing services to those clients.

How to measure: To calculate, Subtract COGS per customer from revenue per customer.

6. Earnings before interest, taxes, depreciation, and amortization (EBITDA) 

A company’s earnings before interest, taxes, depreciation, and amortization are subtracted is another metric that all businesses should track. This KPI gives insight into a company’s operational profitability. Businesses often use this number to compare how they are doing against other organizations in the market. This differs from Gross Profitability because it helps measure operational efficiency rather than just profit. 

For more information on how you can improve with this particular metric, check out our webinar, The Secret to Achieving 20%+ EBITDA.

How to measure: To calculate, subtract expenses (excluding interest, taxes, depreciation, and amortization) from revenue. 

7. Sales performance

Sales have always been the backbone of every business, including TSPs, serving as a way to secure new clients and grow revenue. In an ideal world, every salesperson would meet their quota every month or quarter without having to monitor their performance. While we might not live in that world, tracking the right sales metrics can help you get to a version of it.

Right from the beginning, tracking your sales opportunities will allow you to get a ballpark figure of how many new clients you’ll have coming in and ensuring your sales reps have enough people to reach out to. Along with the number of sales opportunities, you’ll want to keep an eye on how old the opportunity is. The more you track this, the better you can recognize patterns to prioritize opportunities, which can lead to increasing your close rate.

One specific KPI to keep tabs on is your quote-to-close ratio. This is the average number of quotes sent out before one is closed. Knowing your quote-to-close ratio will help you find potential issues with your quotes, including price, timing, or other factors.

You can easily track these and other sales KPIs with ConnectWise PSA and ConnectWise CPQ integrations in BrightGauge. You can use this information to refine your sales process so your sales team gets the best results. When your sales team succeeds, your business succeeds.

How to measure: Sales CTAs can be measured in different ways. One of the most effective ways is to use the quote-to-close ratio we mentioned before. This helps capture potential flaws that might turn potentially interested customers away during the sales process. Another pre-contact metric to look at is the amount of clicks your CTA receives versus how many clicks turn into sales, known as conversions. Conversions directly affect your business more, as they turn into revenue. Other clicks could come from any number of sources and may skew your KPI numbers. 

8. Product margin 

Product margin is the amount of profit you make on the sale of your product or service. This metric spans across industries and doesn’t just apply to MSP or IT businesses. However, it’s one of the critical MSP KPIs because it’s a benchmark of business health. 

This metric gives you an inside look at how much you spend to create, market, and sell your product or service. Calculating this number can show you a lot about your business. It can tell MSPs which services are the most profitable, where you may be spending too much on advertising, which products or services to abandon, and which ones to double down on. 

How to measure: To calculate, sum your overall expenses and sales revenue for a particular time frame (the last month, week, quarter, year, etc.). Subtract expenses from revenue and divide that number by the number of units sold or client accounts. This will give you a granular, per-item, or per-client margin. 

Productivity KPIs 

9. Average resolution time 

Clients today expect fast service. They don’t want to wait for a new password or to be locked out of their computer for long periods. Unsurprisingly, average resolution time greatly affects their satisfaction with your MSP’s service. By monitoring and working to improve your average resolution time, you can keep customer satisfaction high and free up more time to take on new clients — or identify opportunities to improve resolution times. It’s also worth noting that client service level agreements (SLAs) often include a benchmark for average resolution time, so tracking this KPI is essential for many MSPs. 

How to measure: To calculate, take the total resolution time for all tickets and divide by the number of tickets that have been closed.  

10. Average first response time 

This is the average amount of time it takes a customer to receive the first response from your staff after contacting support. This is an important service desk KPI for MSPs to see how their agents are performing. They can also monitor this metric to see how implementing new procedures affects their response time. Naturally, the goal is to consistently drive this number down.

How to measure: To calculate, sum the total response time for a given timeframe and divide by the number of tickets for that same timeframe. 

11. First contact resolution rate 

 In addition to overall speed, customers only want to ask for help once. The more they need to follow up for assistance, the more annoyed they become. That’s why tracking the percentage of client issues resolved after one inquiry can help gauge your team’s efficiency and workload. It can also determine which of your techs may need additional training and support.

How to measure: To calculate, take the total number of issues resolved on first contact and divide by the total number of issues received.

12. Resource/agent utilization rate

For MSPs, your number one expense will always be human resources. It’s important to staff and train top talent, but it’s equally important to make sure your workers are using their time wisely. Assessing your resource utilization rate will help you see how much of your employees’ time is spent on revenue-generating activities vs. tasks that don’t positively affect your bottom line. 

How to measure: To calculate, take the total number of utilized hours and divide by the total number of hours. Then, multiply by 100 to reach percentage format

13. Opened/closed tickets ratio

This is the ratio of the number of opened:closed tickets in a given timeframe – it could be a day, week, month, quarter, or year. If this ratio is positive, it means you’re not adequately troubleshooting client issues, or your customer base is growing too rapidly.

MSPs need to know this KPI because it tells your level of service. If you see a positive ratio, you may need to revisit your staff's troubleshooting process or examine your help desk. Seeing more opened tickets than closed is a good indicator that your business is experiencing health issues that must be addressed. 

How to measure: Sum the number of opened and closed tickets each day. Subtract for the difference.

14. Aggregate service desk performance 

It’s one thing to secure new clients through your sales process. It’s another for your service team to match what your sales team sold and retain clients through quality service delivery. If employees constantly say they’re swamped, it can be difficult to know if the team is less productive or if you need to hire another employee without concrete metrics to back it up.

Fortunately, there are service performance metrics that can help answer some of these questions. First, it makes sense to evaluate the types of tickets coming in against how long it takes the tickets to be closed. Are there any trends here? Are routine tickets taking too long to complete? By closely analyzing these factors, you can identify opportunities to streamline or automate some of these processes.

Speaking of tickets, servers or workstations with outdated software or patches routinely result in higher ticket volume. KPI dashboards make it easy to understand and see the progress of certain service metrics over a specific time. A Managing to Zero dashboard lets you see a variety of service KPIs, including unassigned tickets, high-priority tickets, offline servers, and enables you to work with your service team to get those numbers down to zero by the end of each day or week. You can also filter the dashboard to show individual techs to ensure everyone is on the same page and working toward a shared goal.

How to measure: Viewing data from your entire service desk workflow can be overwhelming. Savvy MSPs rely on their dashboard to aggregate and display this data in a way that’s visually appealing, and easy to understand. Lean on technology and tools to “sift through the noise” and get down to the numbers and statistics that truly count for your business. 

15. Employee satisfaction 

Bringing clients onboard can be a resource-intensive process. Your goal is to streamline the process as much as possible, making it an enjoyable experience for both your clients and employees.

You should routinely explore any bottlenecks in your company processes and examine your library of tools. The onboarding process may implement every tool available, or there could be opportunities to introduce new tools or platforms. You may also discover opportunities for automation. 

The onboarding process is your customer’s first interaction with your business. As you grow, you’ll also be conducting multiple onboardings at the same time. Making the process easy for your team to show that your business is organized and will simplify scaling.

How to measure: Regularly solicit feedback from your employees to see where and how you can improve the process.

Client-based KPIs 

16. Satisfaction rating

Keeping customers happy is one of the cornerstones of any successful business, as retaining existing customers costs significantly less than constantly pursuing new ones. Reviews and testimonials from satisfied customers can also be a powerful marketing tool. 

How to measure: Regularly survey your clients with something like the Net Promoter Score (NPS) survey, which asks how likely they are to recommend your services to a friend or colleague. Tools like SmileBack can also make it easier to collect, organize, and analyze client feedback.

Use the following equation to calculate your NPS score: (Total score of surveys / Total possible points) = Satisfaction rating. 

17. Customer churn rate 

Client turnover can create serious headaches for MSPs looking to increase profitability, not to mention its negative effect on employee morale. Also known as attrition or turnover rate, customer churn rate is another critical metric for monitoring your clients’ health and satisfaction. For subscription-based companies, working to keep your churn rate low is essential to maintaining consistent profitability. 

How to measure: To calculate, take the number of customers at the beginning of a certain time period (day, week, month, etc.). Then, subtract the final customer number at the end of that same time period. Divide this number by the number of customers at the beginning of that time period and you will have your customer churn rate.

18. SLA compliance rate

SLAs define a performance standard by specifying metrics used to measure service quality and defining penalties that will occur if a certain threshold is not met. Keeping track of SLA compliance will help you maintain customer satisfaction and reduce turnover by consistently living up to (and exceeding) those expectations.

How to measure: To calculate, take the number of tickets that meet the SLA and divide by the total number of tickets. Multiply by 100 to reach percentage format.  

19. Customer lifetime value

Repeat customers are great for business. Gauging customer lifetime value helps your organization consider the long-term value of repeat business instead of focusing on short-term wins and transactions. Used in conjunction with customer acquisition cost, this KPI also allows the relative value of different customers to be compared.

How to measure: To calculate, take the average revenue per customer and multiply by the average length of contract. You could also find customer lifetime value by taking the average revenue per customer and dividing by churn rate. 

20. Customer efficiency

This metric measures the revenue you generate from each client. It factors in the amount of profit they’re worth to your business and the amount of time spent serving them. 

How to measure: Take the fees you make from them (whether monthly, fixed fees, or one-time charges) and divide by how much time is spent with that client. 

Is there such a thing as a bad KPI?

The short answer is yes. There are KPIs that, if you track them, can get you in trouble in your business. 

You should stay away from tracking any KPIs you can manipulate easily. Your team members can easily inflate or deflate these numbers to show company performance in a better light. 

MSPs can also get in trouble following the wrong metric of an important part of their business. When looking at KPIs, there is a tendency to look at the most visible rather than what’s most relevant. For example, an MSP may look at the total revenue they’re bringing in and not dig deeper to examine the true profitability of those services. 

The above list of 20 KPIs contains solid metrics that can’t be manipulated to track your business's true pulse. But, if that’s too much information, you can start with our eBook, 4 Essential KPIs for IT Solutions Providers

Solutions for MSP KPI tracking 

Knowing the proper MSP KPIs to track is only the beginning. To keep your business on track, you need to track them accurately and leverage that data into actionable insights and instructions.

Many companies look to hire an expensive business management consultant or spend a lot of time compiling information about their performance. You can save a lot of time and even more money with the right tools. ConnectWise PSAConnectWise Automate, ConnectWise RMMConnectWise CPQ and Smileback all allow you to collect, manage, and use MSP metrics to see how your business is functioning – ultimately improving your service quality and financial strategy.

To compile and organize this data so you can see how you are meeting these KPIs, BrightGauge, a ConnectWise solution, creates business intelligence dashboards you can customize to meet your needs. Sign up for a business management demo today, and let us help you with crucial business tasks like improving cash flow, enhancing the customer experience, or tracking customer loyalty. 

FAQs

It’s important to focus on KPIs that are truly moving the needle in your business. Take a step back and look at your business from a bird’s eye view. What are the stages a customer passes through – from the time they contact you until the time you’ve closed their ticket? You may also want to look at your business as a whole. Think about what your goals are, what stage of growth you’re in, and any indicators of business health. It’s also helpful to focus on a few important KPIs rather than overwhelming yourself with a bunch of data points.

Some common MSP KPIs are:

  • Average resolution time
  • Average first response time
  • First contact resolution rate
  • Opened/closed ticket ratio
  • Aggregate service desk performance
  • Monthly recurring revenue (MRR)
  • Agent satisfaction
  • Client efficiency rate
  • Customer lifetime value
  • SLA compliance rate

MSP KPIs can improve the performance of your business by giving you a data-driven approach. You’ll no longer try to grow your business on gut feelings and whims. MSP KPIs allow you to set goals, reach them, and continue to scale.

MSPs should explore ConnectWise business management packages to home in their KPIs. These packages will help identify the KPIs MSPs should be tracking in their business and enable them to track them accurately – converting them into actionable insights.