Revenue expansion is perhaps one of the most critical objectives for managed services firms. MSPs often push the sales process to secure new contracts and sell additional services to existing clients to meet revenue goals for the current month, quarter, or year.
While periodic rate increases undoubtedly provide a cash boost, IT services firms must continually expand the customer base to replace natural churn and avoid overreliance on a handful of companies.
Thankfully, MSPs have access to tools and reports to help put everything in perspective and set their business priorities.
Tracking metrics and KPIs (Key Performance Indicators) are the first steps towards running a data-driven business.
Key sales metrics help MSPs assess and enhance revenue growth plans and provide the insight your sales teams need to make tough decisions, such as walking away from unfavorable deals or holding firm on proposal negotiations.
Which sales metrics should MSPs be tracking? Here are some of the industry-specific KPIs that let IT owners benchmark their teams’ performance and identify potential improvement areas.
This metric measures the total income generated from an MSP’s ongoing services. This number starts the monthly service charges for each client and subtracts the cost of hardware and one-time or infrequently billed deliverables.
This metric measures the company’s financial health and value, a key indicator for suppliers, investors, and potential M&A partners.
The growth percentage of vetted sales opportunities month over month. This KPI measures the high end of your company’s pipeline development, those with the greatest potential who are most likely to convert to actual customers.
Calculate this metric by subtracting the number of qualified leads the previous month from the opportunities your team is working in the current month, then dividing by the number of qualified leads last month and multiplying by 100 to produce a percentage.
The percentage of customers team members meaningfully engage in discussions that end up signing a contract or making a purchase. This metric is measured by dividing the actual paying clients (or those who agree to a deal) by the number of prospects receiving quotes.
This metric measures the percentage of opportunities that the sales team converts to actual clients. The value of the lead and the salespeople's efforts can influence this number, so MSPs should regularly audit sales calls and work closely with marketing to validate the quality of their prospect lists and their people.
The margin derived from each client agreement. This is a critical calculation for the sales team and tracking measure for MSP owners who need to ensure the revenue generated from a contract provides a good return on their investments.
Allows providers to evaluate the worth of acquiring and retaining various customers. MSPs can use this KPI to assess the potential income from onboarding a new client, considering the cost of acquiring, onboarding, and retaining that business over the proposed contract's life.
An elaborate formula involving sales, marketing, and support expenses, this metric also incorporates the cost of goods and services to be delivered and any revenue that will accrue during that period.
Some MSPs use a five-year baseline to best approximate the long-term value of prospective clients.
Shows how well an MSP can increase its sales over a given period. This KPI is more useful if calculated more frequently, quarterly or monthly, so providers can identify and quickly address negative trends before they significantly affect operations and long-term cash flow.
The amount of revenue generated from the typical sale. MSPs frequently use this metric to set sales projections based on the funnel's qualified leads and their standard win rates.
Adding valued services and increasing rates should positively impact the average deal size – if those changes align with clients’ expectations and competitors' actions.
Tracks the number of additional products, services, or support programs a team sells to existing clients beyond the initial commitment.
MSPs often experience annual revenue increases from customers hiring additional workers (requiring more workstations, applications, and support). However, existing clients are usually more receptive to adopting new solutions and support options from people they know and trust, creating new opportunities for sales pros and account managers.
Evaluating Metrics is not a one-time deal. Be consistent in your metric measurements and more importantly tweak your sales pipeline and your process as you evaluate these numbers. Adjusting your sales plans and lead generation process will help you boost deal size, lead conversion, and revenue growth.
Keep an eye on negative trends that can affect your MRR and profitability, from declining deal sizes and close rates to drops in inbound lead velocity. If you want to automate this process, you can utilize a Sales Acceleration Platform like Zomentum to track activities and key indicators with industry benchmarking and sales automation in-built.