Get Your Managed Services Act Together!
By Jay McCall
This MSP made four changes to its business model, which led to an almost immediate 600 percent improvement in profitability plus double-digit revenue growth.
As Hilltop Consultants prepares to celebrate its 10-year anniversary, Founder and President Jim Turner reflects on the struggles he’s gone through to get the company where it is today. “If you look back more than three years ago, you would find periods where the business operated more like a hobby — making just enough money to make payroll,” he says. In 2010, Turner’s business made a major turnaround after hiring a director of operations who helped him look beyond his top-line business activities. “It’s easy for MSPs [managed services providers] to fall into the trap of thinking that a customer paying $2,500 a month for managed services is $2,500 toward the business’ bottom line,” he says.
“After we started investigating some of our customers and contracts more closely, we discovered that, after factoring in our software licensing, hardware, and labor costs, we were actually $500 in the hole each month for some of our customers.” After the MSP started paying closer attention to its profit margins, it made several changes to its business model during the next 12 months, which dramatically improved its revenue and profitability. Many VARs and MSPs could apply Hilltop’s business decisions to their own practices.