ChannelTrends: Get the Advanced Financial Skills Needed to Grow an MSP Business

The biggest obstacle those building new businesses or practices face is not their creation and launch. No, the most daunting issue new business owners struggle with is how to manage and perfect their back office operations. Upfront costs and planned expenses are much easier to project on paper than when the doors are open and the organization is in full swing.That’s especially true in a managed services business. Few IT professionals have the financial and general management training or experien ...
The biggest obstacle those building new businesses or practices face is not their creation and launch. No, the most daunting issue new business owners struggle with is how to manage and perfect their back office operations. Upfront costs and planned expenses are much easier to project on paper than when the doors are open and the organization is in full swing.

That’s especially true in a managed services business. Few IT professionals have the financial and general management training or experience to build and direct their own company. Many acquire those skills on the fly or hire people with those capabilities, while others ally themselves with mentors or partners. Such a partnership was part of what drove the early success of Apple, with Steve Jobs handling the entrepreneurial side of the ledger and Steve Wozniak adding the engineering genius. Few companies find that level of success; nevertheless, they need their financial and management pieces in place.

Finding an employee or partner who can add the right complementary skills isn’t easy or cheap, so entrepreneurs often attempt to develop their own abilities to compensate. In effect, they become generalists in their own organization with a limited amount of time available for completing each of the many tasks on their agenda each day. Managed services can be a great solution for those looking to simplify their operations (at least pertaining to the delivery model), but it also presents a host of financial issues that require continuous attention and meticulous practices. Even when recurring revenue projections and anticipated expenses for an MSP business may seem clear cut, financial management planning can be difficult.

While managed services organizations typically benefit from a steady stream of increasing income (number of clients, seats, services, etc.), they also see a continued rise in expectations. In order to meet SLAs and other service-related obligations, MSPs have to ensure that their team is not only well staffed, but also properly trained and up to each challenge presented. Careful cash management and long-term hiring plans are a prerequisite, allowing providers to effectively support their growth projections. With a solid financial and management strategy in place, MSPs can increase their workload.

The same financial basics apply to every business. When gross margins are increased and expense levels are maintained or reduced, profits rise or fall accordingly. That’s why successful MSPs employ industry best practices to ensure that their companies’ short- and long-term viability remains strong. When providers adhere closely to recommended accounting and management standards, they are less likely to make the same mistakes that others have made before and more prepared to weather adversity.

Those basic business values are cornerstones to the MSP Partners Trustmark. The “Management & Finance” section of this business accreditation forces each applicant to evaluate many aspects of their organization, including their financial, business, human resources and risk management capabilities. MSPs who successfully complete the Trustmark must show that they follow certain prescribed practices and, through the application process, may discover better procedures to implement in their own organization. The management and finance sections of the accreditation include:

  • Financial management systems.

  • Credit limit policies.

  • Internal financial reviews.

  • Non-disclosure agreements.

  • Insurance policies.

  • Security policies.

  • Laws and regulations.

  • Employee management policy.

  • Business planning.

  • Service delivery measurement.


Are you following the best available financial practices in your managed services business? If not, download the free MSP Partners Trustmark Quick Start Guide or consider obtaining the Trustmark.

Brian Sherman is founder of Tech Success Communications, specializing in editorial content and consulting for the IT channel. His previous roles include chief editor at Business Solutions magazine and industry alliances director with Autotask. Contact Brian at Bsherman@techsuccesscommunications.com.

Email us at blogeditor@comptia.org for inquiries related to contributed articles, link building and other web content needs.

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