How Your MSP Really Makes Money (And Why You Need to Tell Your Team)

Making money isn’t bad…

Do I have your attention?

Your MSP is full of challenges, so why do we add another challenge that creates some of the largest ambiguity in our business?

Hey Friends. This is Kyle, and today I've been tasked with putting words on paper to discuss why my most successful talk always produces the same reaction: "Oh, I knew that… but I didn’t know that."

Let me set the problem up; you run a business that delivers a service to your customers. Let’s start simple with something like landscaping. Your customers have a need of mowing their lawns and you have a team of individuals that can perform that service.

Great! But here’s the thing, your employees are OBSESSED with the lawnmowers they use and refuse to work with many types of grass.

THE BARRIERS WE CREATE

So, your phone rings, you answer it, someone asks you to mow their lawn on a bi-monthly basis, and you must tell them the following:

“Thank you for calling SpaceBalls the MSP we would be more than happy to help you with your landscaping needs. To proceed, we will need to do an assessment of your current lawn to see if it is jam-grass. If so, we'll need to replace your entire lawn with Perrier-grass.

Due to our team using superior lawn mowers, we will only support Perrier-grass and if this is NOT of interest to you, please call our inferior competitors.”

Now I know, this is quite aloof and dramatic, but I have seen this behavior hundreds of times at MSPs.

But why?

Well, your team FEELS overworked, undervalued, and has little sense of accomplishment in how they help the MSP your MSP achieve better business outcomes.

UNEARTHING THE TRUTH

Now I’m not here to talk about how you fix their overworked sentiment, but I am here to help you have the conversation on why things are the way they are.

Going back to my own MSP operations, for years we struggled with our teams (sometimes myself included), creating an onslaught of requirements and excuses on why we did business the way we did.

This could be how we entered data into our PSA (Yay timesheets!) or what prospects we entertain into buying the one product we allowed our sales team to sell.

But here is the hard truth:

What your MSP accepts as truth is the foundation that you build processes on top of; thus, the company you create.

Let me put it into other terms, if your employees do not understand the goals of your company or how a business affords itself to operate, they will only use what they do know to make suggestions: whether that be about data entry, ideal clients, your stack, etc.

And being this is the truth that they create (Timesheets are bad! Jam Grass is too hard to mow! Customers suck…) they will ALWAYS work against the desires of the owner.

THE EASY SOLUTION

So, if there is any solution, it is the truth…

Have you all heard of Simon Sinek’s book, “Start with Why”? I could pontificate all day on that read, but here is one major point: "People don't buy what you do; they buy why you do it. And what you do simply proves what you believe."

So what truth am I talking about!?!?

It’s that you’re afraid to talk about your business making money, which in all accord is the goal of a for-profit IT organization. (Do I even make the joke about MSPs running themselves like a NPO?)

So why are we so afraid of talking to our employees about the goals of our company? Why do we cloud our employee requirements in KPIs that have very little input into our MSP profitability?

Well, I have a thought…

Our businesses are (mostly) created by what Michael Gerber calls the ‘Accidental Entrepreneur.’ Basically, someone that has an idea, a need, maybe even the disinterest in having another boss.

So, what do they do? They go out on their own… They go out so that they can earn their own keep. Being able to know that your mind led you to a life where your livelihood is in your own hands feels FANTASTIC.

Well… Until you hit your limit… So, you have an opportunity to take on your tenth customer; you’re already working 40+ hours a week and you now can take on another…

Do you work more? Do you apologize to your wife and kids and say, “Hey, dad had this newfound freedom… but I’m gonna give that up in the quest for more money!”?

No…

You figure it out!

Your intuition leads you down the path of hiring an assistant, a junior to your expertise to help you carry the workload. But now that employee is cutting into your keep, so you need to go from 10 to 15 customers. You go to your 10 customers, get some referrals, and make that 15th customer happens.

But then you have the opportunity for the 16th…

And the process repeats itself until you get to 10, 15, 20 employees where just managing the quality, abilities, and people consume 40 hours in itself!

Congratulations, your consulting practice is now a service business.

But Kyle, you skipped the truth?

Well, this is a journey...one your employees SHOULD all be privy to. You see, the truth is in the narrative. As you get more customers and employees, you now create a subjective challenge that your employees' efficiency, quality, and behavior now lay between you and your healthy bottom line.

Basically, your employees now control your ability to make money.

…and that is terrifying!

So, if your employees don’t like you, or you don’t give them what they want (or think they want), you may NOT get what you want.

It’s an old Mexican standoff.

So that truth becomes next to impossible to share because it essentially feels like a selfish act to ask your employees to work harder so you can make more money.

But is this really the case?

THE REALITY

Some personal sharing, at this junction and time of writing, I have coached hundreds of MSPs of varying size and origins. From this experience, I speak because I can’t tell you the amount of times I caught myself teaching a large leadership team how to read a profit and loss statement.

But here is the magic, every single time you see minds explode.

But why?

The feedback I received time and time again would be how learning about profit, cash flow, and the cost of doing business at a deeper level would challenge every preconceived notion that they had prior to that annual planning meeting.

Or in another way, all the suggestions and feeling they had, that they used to make decisions prior, were proven contradictory to the actual goals of the company; sustainable MSP profitability. They were implementing processes and requirements that acted against the goals of the owner, who they genuinely liked and wanted to support.

We’ve all heard the old adage of ‘one apple spoiling the bunch’ and it’s the same in business. We allow a single employee, experience, or event to ripple across our organization for eternity!

But here is the thing, most of your employees' care about you as an owner and want the business to succeed.

THE SOLUTION

So, when we decided to really grow my MSP, one thing I realized early on is that every one of our employees needed the ability to know how an MSP makes money. They needed to understand how their timesheets impacted client profitability, payroll management, and the overall success of the MSP.

I kid you not, I created a mandate that in the first couple of weeks of a new employee's orientation that I have a training session where I taught them all how the sausage was made.

I had example P&Ls and PSA data so they could directly see how they were a pivotal part of our business succeeding, which directly affected their own livelihoods and workplace experience.

Now this took a lot of time, if I recall it was a 2-hour session because I’d end up tangenting and going off into some other topic. But I say this with udder certainty, it instantly created a new culture.

The culture became “how do we grow” or “how do we improve our profitability” and sometimes “why are we losing money on a client”; it allowed them to have agency in creating a real future at our organization where workload, pay scales, and career paths had a tangible outcome.

So, I write this with no surprise that, in Empath, my course New MSP Employee 101: The Essentials for Everyone is the highest performing course EVER as it’s something that a lot of employees have never been able to learn.

I did the heavy lifting for you :-)

Now for those curious on how this conversation goes, here is a general outline:

The history of our business
- A detailed account of WHY we started the MSP with transparency and vulnerability
Why we built an MSP?
- I went through the history of an MSP
What products we sell
- And the costs associated with each
How those products contribute to everyone’s roles
Where those revenues and costs landed on a P&L statement
- I had a mock P&L I commonly used with simple categories like MRR services, NRR products, MRR software, etc.
I related each line item to where they landed and how we could be in a tough situation if one number went up or down
- OR if an employee didn’t do their job

It was transparent, real, and showed from day one that every employee mattered and needed to help our organization win the game.

Now I can go into so much detail on what this presentation looked like, but for those of you that are NOT Empath subscribers, let me give you something.

Years ago, I had someone ask me to make this talk on YouTube and it now has thousands of views because, well, for those that have not discovered Empath, they require their employees to watch my video.

So here it is:

THE BOTTOMLINE

The math is simple: your labor is your biggest, most unpredictable cost. The only way to sustainably improve your MSP profitability isn't by cutting your tool stack, it's by making your people more efficient.

And that’s the whole ballgame.

Just telling your team to "be faster" is useless. You must give them the framework and the business context to understand why their efficiency matters to the health of the entire company.

That's exactly what Empath is built for. It’s the learning and accountability platform that turns this philosophy into a repeatable process. It’s where you can take the concepts from that video and build them into your onboarding, your 1:1s, and your company culture.

Ready to see what a team that thinks like owners can do for your P&L?

Start your 14-day free trial of Empath and see for yourself.