How can a piece of software increase your cash flow and profits? To be honest, it is not the software; it is the automation of processes that the software facilitates. Regardless of your business you must have processes in place and make them workable in order to succeed and scale. Unfortunately humans are prone to distraction and must sometimes be given a framework for getting mundane tasks done.
It is those mundane tasks however that often insure that ideas, time and talent are translated into revenue. For the managed service provider (MSP) or break/fix business these mundane tasks usually revolve around their professional service automation (PSA) software. The MSP space is a little different from your standard business in that even though we have two basic models of operation, rarely is either all of one and none of the other. Almost every MSP I know has some break/fix or project work and most break/fix companies also have some type of recurring revenue.
There are many advantages to the managed services model for the MSP as well as the customer. It normalizes and regulates cash flow for both making revenue predictable and dependable. One of the greatest dangers for the MSP with the managed services model is not tracking cost per covered device. Your service desk software should allow you to generate reports to see devices that exceed thresholds for time spent managing those devices. This way devices that are eating into profits should be able to be removed from management and replaced. In addition to profitability by device, profitability by client must be considered as well. These analytics are important because they should drive your pricing model and if overlooked they can dramatically reduce profit. In addition to tracking profitability, MSPs still do project work and that project work, in terms of time and materials, must be effectively tracked for billing.
Another important aspect of the managed services model is that if you are doing a good job, the only interaction that you might have with your client on a monthly basis is their invoice. A good service desk will allow you to automate monthly emailed reports that provide the customer with a virtual “stack of paper” to show all of the incidents you have resolved for them during the month.
There are many MSP's who still have a good number of break/fix customers. Time spent on those customers must be accurately captured in order to secure the revenue generated. Also, materials used during the remediation of a problem or project must also be tracked so as to accurately bill for them. Through the proper use of a ticketing system that is integrated with an accounting package for billing, these time and cost entries can be automatically moved onto an invoice for the customer with detailed line items.
One step beyond the time and materials capture/analysis is the invoicing process. Until you turn the ideas, time and talent into revenue you have a hobby and not a business. When you grow beyond yourself and have employees, cash flow becomes a necessity rather than a "nice to have". I remember when I first started out when I would invoice once per month. It was OK if I missed a paycheck or it was delayed for a week or so. Until I had employees, they have this nagging need to get paid on time. When I finally got my processes to the point where we could invoice once a week I saw a dramatic decrease in the turn-around time for receivables. Without this change in velocity of cash flow I would not have sustained weekly payroll at times. I found some interesting things when I sent more invoices more often.
Another part of invoicing that my service desk helped with dramatically was invoicing questions. By capturing detailed information and putting that information on my invoices, there were significantly less questions about invoices which caused less "friction" in getting paid. Also, on a psychological level, invoices with more detail get paid faster because they are typically approved faster.
Everything needs food to grow. Businesses are no exception. Without consistent, positive cash flow your business will not evolve and grow. As a business owner who has made the mistake, wanting to serve the customer above all else (a noble concept), I made the realization that just like the oxygen mask on an airplane, you cannot help anyone else until after you make sure you are going to be around to do so. In order to scale your business you must have processes and software to automate those processes to duplicate yourself and move your business to the next level. Your service desk is the central framework for making sure you are collecting customer incidents, processing them efficiently and then ultimately turning that work into revenue, allowing you to work on growing the business rather than just working in it.
Eric Anthony is director of customer experience at SolarWinds MSP. Before joining SolarWinds, Eric ran his own managed service provider business for over six years.
You can follow Eric on Twitter® at @EricAnthonyMSP
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