Performance-Driven Goals: Maximizing Profitability and Productivity for MSPs

This is part two in a three part series on goal setting for MSPs. If you haven’t already, please review part one which covered crafting clear and achievable goals, and check back for part three, future proofing your MSP through goal setting.

Running a successful Managed Service Provider (MSP) business isn’t just about delivering services—it’s about ensuring those services drive profitability and productivity. For MSPs, this balance is critical to long-term success. Setting performance-driven goals helps you optimize your operations, improve client satisfaction, and increase your bottom line. But to achieve this, your goals need to be clear, measurable, and aligned with your company’s strategic objectives.

In this blog, we’ll explore how MSPs can set performance-driven goals to maximize both profitability and productivity, ensuring your business not only survives but thrives in an increasingly competitive industry.

Why Performance-Driven Goals Matter for MSPs

Before diving into how to set performance-driven goals, it’s important to understand why they matter:

1. Operational Efficiency: Performance-driven goals help you streamline processes, improve service delivery, and reduce overhead costs.
2. Profitability: By optimizing performance, you can increase revenue through better service delivery and higher client retention while reducing costs.
3. Competitive Advantage: MSPs that consistently meet performance targets stand out in the marketplace, making it easier to attract and retain clients.
4. Employee Engagement: Clear, measurable goals can boost team morale by providing clarity and purpose, ultimately enhancing productivity.

Step 1: Align Goals with Business Objectives

The first step in setting performance-driven goals is aligning them with your broader business objectives. For MSPs, this often includes:

• Increasing Monthly Recurring Revenue (MRR)
• Improving service delivery efficiency
• Enhancing customer satisfaction and retention
• Reducing operational costs
• Expanding service offerings

Each goal you set should tie directly back to one or more of these objectives. For example, if your business objective is to increase MRR, you might set performance goals around upselling services to existing clients or improving your sales process to attract new clients.

Examples of Alignment:

• Business Objective: Increase MRR by 20% in the next 12 months.
• Performance-Driven Goal: Increase the average contract value by 15% by improving client onboarding and offering enhanced service packages.

Step 2: Identify Key Performance Indicators (KPIs)

To track the success of your goals, you need to define Key Performance Indicators (KPIs) that will help you measure progress. KPIs should be specific, measurable metrics that indicate whether or not you’re meeting your goals.

Common KPIs for MSPs:

• Client Acquisition Rate: The number of new clients acquired within a given period.
• Monthly Recurring Revenue (MRR): The predictable revenue generated from ongoing services.
• Client Retention Rate: The percentage of clients retained over a specified time.
• First Response Time (FRT): The average time it takes to respond to a client issue.
• Service Level Agreement (SLA) Compliance: The percentage of tickets resolved within the agreed-upon SLA.
• Ticket Resolution Time: The average time taken to resolve client issues.

By tracking these KPIs, you can monitor both performance and profitability. For example, reducing ticket resolution times will improve productivity, while increasing MRR through upselling will directly boost profitability.

Step 3: Use the SMART Framework for Goal Setting

Once you’ve identified your KPIs, the next step is to craft goals using the SMART framework:

• Specific: Your goals should be clear and well-defined.
• Measurable: You should be able to track progress using your KPIs.
• Achievable: The goal should be realistic based on your current resources and capacity.
• Relevant: The goal must align with your overall business objectives.
• Time-bound: There should be a clear deadline for achieving the goal.

Example of a SMART Goal:

• Goal: Increase client retention by 10% within the next 6 months by improving customer support response times and offering proactive service management.
• KPI: Track client retention rate, first response time, and customer satisfaction scores monthly.

Step 4: Focus on Profitability Through Operational Efficiency

Profitability often comes down to operational efficiency. For MSPs, inefficient processes lead to higher costs, lower productivity, and reduced client satisfaction. Setting performance-driven goals focused on improving operational efficiency can help you reduce costs while increasing profitability.

Key Areas to Target for Efficiency:

1. Ticket Management: Set goals to reduce ticket resolution time and improve first contact resolution rates. By automating routine tasks or using AI-driven ticketing systems, you can streamline workflows and free up technicians for more complex issues.
   • Goal Example: Reduce average ticket resolution time by 25% in the next quarter by implementing a new ticket triage system.
   • KPI: Measure the percentage of tickets resolved within SLA.
2. Automating Routine Tasks: Automation is key to improving efficiency. Identify routine, repetitive tasks that can be automated, such as patch management or monitoring. This reduces the workload on your technical team and lowers labor costs.
   • Goal Example: Automate 50% of routine tasks within the next 6 months to free up technician time for more high-value activities.
   • KPI: Track the percentage of tasks automated and measure the impact on technician productivity.
3. Service Desk Optimization: Your service desk is the heart of your MSP’s operations. Setting goals around optimizing service desk performance—such as improving response times or increasing the percentage of tickets resolved on the first call—can have a significant impact on both profitability and client satisfaction.
   • Goal Example: Increase first-contact resolution rate by 15% within 4 months through better training and streamlined escalation procedures.
   • KPI: Measure first-contact resolution rate and compare it against historical data.

Step 5: Increase Profitability Through Upselling and Cross-Selling

A key way MSPs can increase profitability is by maximizing the value of each client through upselling and cross-selling additional services. By expanding your service offerings and educating clients on the benefits of these services, you can increase MRR without necessarily acquiring new clients.

Strategies for Effective Upselling and Cross-Selling:

1. Client Education: Make sure your clients understand the full range of services you offer and the benefits of upgrading or adding additional services. This can be done through regular account reviews, email newsletters, or proactive outreach.
   • Goal Example: Increase upsell revenue by 10% over the next 6 months by conducting quarterly account reviews for all clients.
   • KPI: Measure the number of upsell opportunities closed and the increase in MRR.
2. Bundle Services: Create service bundles that offer better value to your clients. For example, bundling cloud services with cybersecurity solutions may make it easier for clients to see the value in upgrading.
   • Goal Example: Launch 3 new service bundles within the next 3 months and increase bundle adoption by 20%.
   • KPI: Track the adoption rate of new service bundles and the corresponding increase in MRR.
3. Offer Proactive Services: Clients are more likely to stay with an MSP that proactively prevents issues rather than just reacting to them. Offering proactive monitoring, maintenance, and cybersecurity services can enhance client loyalty and increase the average contract value.
   • Goal Example: Increase the number of clients using proactive monitoring services by 15% in 6 months.
   • KPI: Measure the percentage of clients adopting proactive services.

Step 6: Leverage Data and Analytics to Optimize Decision-Making

In today’s data-driven world, MSPs that don’t leverage data and analytics to make informed decisions are leaving money on the table. By tracking data from your KPIs, financial metrics, and service delivery, you can identify areas for improvement and set data-driven performance goals that directly impact profitability.

Ways to Leverage Data:

1. Client Profitability Analysis: Not all clients are equally profitable. Use data to analyze the profitability of each client, identifying those who consume more resources than others. This analysis can help you set goals around optimizing service delivery for these clients or revisiting pricing structures.
   • Goal Example: Increase profitability from underperforming clients by 10% in 6 months by adjusting service contracts or streamlining service delivery.
   • KPI: Measure client profitability on a quarterly basis and track changes.
2. Capacity Planning: Use historical data to predict future service demand and set goals around optimizing staffing levels, ensuring that you have enough technicians to handle peak workloads without overspending on labor.
   • Goal Example: Reduce overtime costs by 15% over the next 12 months through improved capacity planning.
   • KPI: Track overtime costs and staff utilization rates.
3. Client Satisfaction Metrics: Client satisfaction directly impacts retention and profitability. By tracking metrics such as Net Promoter Score (NPS) or customer satisfaction surveys, you can set performance-driven goals to improve client experience.
   • Goal Example: Improve customer satisfaction score by 10% within the next 6 months by implementing more personalized communication and faster issue resolution.
   • KPI: Measure NPS or client satisfaction score.

Step 7: Regularly Review and Adjust Goals

To maximize profitability and productivity, your goals should not be static. MSPs operate in a rapidly evolving industry, and client needs can change quickly. Regularly reviewing and adjusting your performance-driven goals ensures that you stay agile and can adapt to new challenges and opportunities.

Goal Review Cadence:

• Weekly Check-ins: Regularly review short-term progress and address any immediate roadblocks.
• Monthly Reviews: Assess overall performance against KPIs and adjust short-term goals as needed.
• Quarterly Reviews: Take a broader look at long-term goals and realign them with business objectives if necessary.

Adapt and Evolve:

As the technology landscape changes, so should your goals. For example, if you notice an increase in demand for cybersecurity services, consider adjusting your upselling and service delivery goals to capitalize on this trend.

Drive Profitability and Productivity with Performance-Driven Goals

For MSPs, setting performance-driven goals is essential to maximizing profitability and productivity. By aligning these goals with your business objectives, focusing on key performance metrics, and continuously optimizing operational efficiency, your MSP can achieve sustainable growth.

Remember, the key to success is not just setting goals but regularly reviewing and adjusting them to meet the ever-changing demands of the market. By leveraging data, improving operational efficiency, and focusing on upselling and client satisfaction, you can ensure that your MSP is positioned for long-term profitability and success.

How can BeeCastle help?

BeeCastle supports goal setting, tracking, and reporting, for your MSP. You can create custom goals with milestones, as well as platform managed goals that are automatically tracked and reported on.

BeeCastle is a secure cloud-based data analytics software platform designed specifically for Managed Service Providers that operates in 7 countries and supports integrations with M365, ConnectWise, AutoTask, Xero and HaloPSA.  BeeCastle specialises in helping MSPs drive efficiency and revenue through its 6 key data analytics. Sign up today at https://app.beecastle.com