Last time we determined how to calculate the full burden for our billable employees. So how do MSPs take this formula and determine the profitability of their service desk? Let's work through this together. First you'll need to understand how to calculate full burden of your billable staff. Once you understand this, it is actually pretty simple to calculate profitability of your service desk and its staff.
Let's say you have 25 Managed Services Agreements averaging $3,000 each for a gross invoice amount of $75,000 per month.
Next let's assume you have 3 service desk technicians whose full hourly burden is $132.31/hr.
Finally let's estimate that for the last billable month, your service desk technicians spent 150 hours managing service desk requests and proactively patching, updating and optimizing your clients' endpoints.
Let's summarize:
- Monthly Managed Services Billing = $75,000
- Service Desk Full Hourly Burden (3 x $132.31/hr) = $396.93/hr.
- Hours of service delivered last billable month = 150
Now let's do the math. Multiply the hours of service delivered during the last billable month by your service desk's full hourly burden to determine your full labor burden for the service desk for the month:
150 x $396.93 = $59,539.50
Now determine your margin. Use a quick online calculator like Algebrahelp.com's here (you'll need Java installed to run it - where was this site when I was in school!) to discover that $75,000 is 25.97% greater than $59,539.50, so you've made an ok, if not terrific margin:
Margin = 25.97%
If this is your true profit from your service desk, you've got some work to do in reducing costs and increasing efficiencies, as best-in-class MSPs are realizing upwards of 60% margin on their deliverables!
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Erick Simpson
MSP University
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