Insights: Revenue Opportunity & Engineer Utilization
Introduction
The MSPCFO Insights Report provides a streamlined way to identify actionable insights to enhance operational performance and drive profitability. This report focuses on two key areas:
1. Revenue Opportunity: Evaluating client agreements for overuse or underuse to inform pricing and risk management.
2. Engineer Utilization: Assessing how engineering time is allocated across clients to ensure optimal workforce efficiency.
Revenue Opportunity
This section highlights clients whose service usage and billing are misaligned. The analysis includes:
- Clients with a negative delta (in red), who are receiving more value than they are paying for --- indicating potential underpricing.
- Clients with a positive delta (in green), who are being billed more than the value of services consumed --- posing a potential retention risk.
Definitions
INVOICED - Labor revenue billed under managed services agreements over the past 3 months (excluding taxes and products).
SHADOW - The theoretical revenue that would have been earned if labor was billed at standard rates.
The time must be:
- billable
- covered by the managed services agreement
- have a non-zero billable rate.
DELTA = (INVOICED-SHADOW)
The top half of the chart spotlights in graphic and table format the clients who have the most significant impact on labor revenue -- both positive and negative. A negative delta (in red) shows the greatest loss of revenue over the past three months because the client is paying you less labor revenue dollars than the value of your engineer's work. The positive delta (in green) represents clients that are not utilizing as much time as the invoiced labor provides. These are profitable clients, but may be flight risks because they do not see the value of your service.
Note: A filter is applied for both the under-performing and the over-performing clients:
- Underperforming - For the largest negative deltas (left side of chart) - invoiced labor must be less than 80% of shadow billable
- Overperforming - For the largest positive deltas (right side of chart) - invoiced labor must be more than 50% above shadow billable
In addition to point-in-time analysis, the report examines delta trends over three consecutive 3-month periods. This approach allows MSPs to:
- Identify clients whose profitability is improving or declining.
- Make data-informed decisions on whether to reprice agreements or intervene with support strategies.
Client Examples
Example 1: Underperforming client who is worsening (yellow shading)
Client 2231 is using more support than what the agreement pricing accounts for. In the past three months, the invoiced labor is $24,451 and the shadow billable or value of the work is $41,402. The MSP delivered work that was over the labor revenue's value by $16,951.
By looking at the trending table, Client 2231 has been getting progressively worse over the past 9 months. Have they added users or equipment that has not been accounted for? Are they submitting very complex tickets or just too many tickets? Do they require very expensive engineers for their tickets? Now is the time to understand this client by digging deeper into the problems.
Example 2: Client Improving steadily (blue shading)
Client 2704 initially had a high negative delta, requiring heavy onboarding investment. In the most recent period, the client became profitable, suggesting onboarding efforts are yielding positive results.
Engineer Utilization
This section evaluates how effectively engineers use their available time. It includes only team members who logged at least 120 client-facing hours in the past three months.
Definitions
ROLE: The engineers assigned default work role in the PSA
AVAILABLE: Total hours the engineer is scheduled to work during the 3-month period, based on workdays and availability settings
LOGGED HOURS: Total hours the engineer recorded in the PSA
LOGGED %: Logged Hours /Available Hours
BILLABLE HOURS: Client-facing hours marked as billable
BILLABLE %: Billable Hours /Available Hours
High Logged % with low Billable % may suggest non-billable internal work or inefficiencies. Consistent low values may warrant coaching or role reassessment.
Engineer Examples:
The chart above reveals that most engineers are logging less than 75% of their available time. To ensure accurate performance tracking, all time worked --- whether client-billable or internal --- should be recorded consistently. Additionally, billable hours should ideally account for approximately 75% of an engineers available time. However, the current data shows that even the top-performing engineer, who logs 95% of their time, falls short of this target, indicating room for improvement in billable utilization across the team.
Conclusion
By combining revenue alignment analysis and workforce efficiency tracking, the MSPCFO Insights Report empowers MSPs to identify areas of risk, uncover opportunities for improved profitability, and drive operational excellence.
This report may lead to the following strategic actions:
Reprice Agreements
Evaluate whether current pricing accurately reflects the scope of work. Consider:
- Are the correct number of users or devices being billed?
- Is more work being performed than originally scoped in the agreement?
- Should some tasks be billed separately as overages or categorized as project work?
Reduce Overuse
Analyze service delivery for inefficiencies. Ask:
- Are certain tasks taking longer than expected?
- Is the assigned engineer level appropriate for the task complexity?
Reassign Engineer Time
Ensure labor is being used effectively. Review:
- Are engineers with the appropriate skill level assigned to the right tasks?
- Is work being escalated in a timely and efficient manner?
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