The document is a guide to MSPCFO's methodology for analyzing profitability and agreement pricing in managed service provider businesses by understanding how MSPCFO divides revenue into product and labor components. The guide explains the methodology in the following way:

1. Components Table: The Components table is crucial for many of MSPCFO’s reports, providing insights into profitability and agreement pricing by differentiating between labor and product revenue in fixed fee agreements. ​
2. Methodology: MSPCFO’s methodology uses data from the MSP’s PSA and applies universal assumptions (Min COGS %, Minimum Markup Amount, Cutoff Price Amount) to determine the split in monthly revenue between labor and product. ​
3. Labor and Product Revenue: The methodology calculates labor revenue as the difference between total revenue and product revenue, with product revenue determined using the unit cost and margin percentage. ​
4. Accuracy of Data: The accuracy of the data in the PSA is critical for the methodology’s calculations. ​ Outdated or missing product costs can affect the distribution of revenue between labor and product, impacting the reports. ​
5. Health Checks: MSPCFO health checks can identify gaps in data and provide guidance on how to correct them, ensuring the data used in MSPCFO is accurate and up-to-date. ​

Click on the link below to download a PDF of the guide: