Handling hidden costs is a kind of business self-awareness. If an MSP can identify and manage these costs, you’ll know your business better. And that helps you set a course for managed services success.
Every MSP incurs hidden costs in the course of doing business. Let them get out of control, and you risk jeopardizing the business. The point isn’t to eliminate all of those costs, but to unearth them so you can figure out how to manage them more effectively.
Hidden costs are associated with everything you do, from turning on light switches to recruiting staff and delivering services to clients. They are the expenses that easily go unnoticed. For instance, how much time does your staff spend on a particular task? Do employees have too much downtime? Do you spend a large percentage of your week looking for candidates to fill vacant positions? If any of these applies to your current operation, you’re missing opportunities to tackle hidden costs.
In the break/fix model, staff utilization is always a challenge. When field engineers aren’t spending billable time at customer sites, what will they do? Just sit around? Bench-warming doesn’t bring in revenue, but it creates an unwanted expense.
Managed services make it easier to optimize staff utilization through task automation and remote management. The need to send technicians to customer sites is much lower. But that doesn’t necessarily translate to mastering staff utilization. Do your technicians have work to do when they aren’t busy managing or troubleshooting client systems? What about other departments? Do you have enough work for marketers and HR recruiters, or would you be better off outsourcing those functions to third parties?
Your biggest business costs are associated with service delivery. First, there’s staff time. If you charge set fees, it’s imperative that you take into account how much time employees spend on tasks that directly touch the customer.
For instance, it’s easy to overlook the time and effort employees put into managing customer data backups and making sure they’re working properly, or the patch management and software updates that are critical to preventing network breaches. If your techs are getting bogged down with any of these tasks, you need to do something about it.
If customers are causing the problem by insisting on running outdated or incompatible systems or failing to follow security and computing best practices, you need to charge them accordingly — or persuade them to invest accordingly in technology and user training. You cannot afford customers that cost you more than what they pay you.
Overhead expenses often are overlooked because we take certain costs for granted. How good of a job does anyone do of anticipating power, heating, and cooling costs when renting a building or calculating vehicle maintenance and insurance?
While you may have a good grip on how much the technology you use to run the business costs you, it’s easy to exclude basic overhead from that calculation. But hidden overhead costs can make a real difference in how much margin you collect. If you don’t account for them in what you charge customers, you can seriously hurt your profit potential.
Taking the next step
Overhead, staff utilization, and time management are the hidden cost biggies, but there’s more you can do. Successful MSPs automate repeatable tasks as much as possible. For example, professional services automation (PSA) tools can help you track tickets and remote monitoring and management (RMM) tools can help you manage your customers’ endpoints and track the performance of their managed services offerings, saving you both time and money. Furthermore, many managed services vendors also offer integrations with PSA and RMM tools that can help you to simplify operations, maximize efficiencies, and increase profitability.
And don’t forget documentation. If your staff wastes a lot of time trying to figure out how something is done, chances are you have shoddy documentation habits. Turning that around can make a world of difference in controlling hidden costs.
Handling hidden costs is a kind of business self-awareness. If you can identify and manage these costs, you’ll know your business better. And that helps you set a course for managed services success.
Neal Bradbury is Senior Director of Business Development for Intronis MSP Solutions by Barracuda, a provider of security and data protection solutions for managed services providers, where he is responsible for generating greater business value for the company’s MSP partner community and alliance partners.