In this blog post, we will explore the key server monitoring metrics, explain their significance and provide best practices for leveraging these metrics to enhance your server management strategy. We will also highlight how Kaseya VSA, a powerful remote monitoring and management (RMM) solution, can help you monitor these server metrics, driving efficiency and ensuring security.

What are server monitoring metrics?

Server monitoring metrics are quantitative measures used to assess the performance, health and efficiency of servers. These metrics provide insights into various aspects of server operations, enabling IT professionals to detect and resolve issues proactively. Monitoring server metrics is essential in the cybersecurity landscape as it helps identify potential threats, optimize resource utilization and ensure that servers operate within acceptable performance parameters.

What are key server monitoring metrics?

Understanding the key server monitoring metrics is vital for maintaining optimal server performance. Here, we discuss the most critical metrics that every IT professional should monitor:

CPU utilization

CPU utilization measures the percentage of CPU capacity currently in use. High CPU utilization can indicate that the server is under heavy load, which may lead to performance issues or server crashes. Monitoring CPU utilization helps balance the load and plan for capacity upgrades.

Memory usage

Memory usage tracks the amount of RAM being used by applications and processes on the server. High memory usage can slow down server performance and cause applications to crash. Monitoring memory usage allows IT teams to identify memory leaks and optimize memory allocation.

Disk usage

Disk usage measures the amount of disk space being used. It is crucial to monitor disk usage to prevent storage from becoming a bottleneck. Running out of disk space can lead to application failures and data loss. Regular monitoring helps manage storage efficiently and plan for expansions.

Network traffic

Network traffic monitors the data sent and received by the server over the network. High network traffic can indicate potential issues, such as bandwidth saturation or distributed denial-of-service (DDoS) attacks. Monitoring network traffic helps in identifying unusual patterns and ensuring that the network bandwidth is sufficient for server operations.

Server response time

Server response time measures how quickly the server responds to requests. Slow response times can affect user experience and indicate underlying performance issues. Monitoring response time helps identify bottlenecks and optimize server performance.

Uptime and downtime

Uptime refers to the amount of time the server is operational, while downtime is the period when the server is unavailable. Monitoring uptime and downtime is crucial for maintaining service level agreements (SLAs) and ensuring business continuity. High uptime is a key indicator of reliable server performance.

Error rates

Error rates track the number of errors occurring in server operations. High error rates can indicate software bugs, configuration issues or hardware failures. Monitoring error rates helps in quickly identifying and resolving issues to maintain smooth server operations.

Server load

Server load measures the amount of work being handled by the server, including CPU, memory and disk usage combined. A high server load can lead to performance degradation. Monitoring server load helps in balancing the workload and planning for resource upgrades.

Security metrics

Security metrics include monitoring for failed login attempts, unauthorized access and malware detection. These metrics are essential for maintaining server security and protecting sensitive data from cyberthreats.

Application performance

Application performance metrics track the performance of applications running on the server. Monitoring these metrics helps in identifying issues specific to applications and ensuring they run efficiently.

Why is monitoring network traffic important for servers?

Monitoring network traffic is crucial for various reasons. It helps in identifying unusual traffic patterns that may indicate security breaches, such as DDoS attacks or data exfiltration attempts. By monitoring network traffic, IT professionals can also ensure that the server has adequate bandwidth to handle data transfers and can identify and resolve network congestion issues. Additionally, network traffic analysis helps optimize network performance and improve the overall user experience.

How is uptime calculated in server monitoring?

Uptime is calculated as the percentage of time the server is operational over a specific period. The formula for calculating uptime is:

For example, if a server was operational for 720 hours in a month and experienced 2 hours of downtime, the uptime would be:

High uptime is a critical metric for ensuring reliable server performance and maintaining SLAs.

What are the benefits of monitoring server metrics?

Monitoring server metrics offers various benefits, including:

• Proactive issue resolution: Monitoring server metrics enables IT teams to identify and resolve issues before they escalate into major problems. By addressing potential issues proactively, organizations can minimize downtime and ensure smooth operations.
• Optimized performance: Regularly monitoring server metrics helps in optimizing server performance. IT professionals can identify bottlenecks and make necessary adjustments to enhance the efficiency of server operations.
• Resource planning: Monitoring server metrics provides insights into resource utilization. This information is valuable for planning capacity upgrades and ensuring that servers have adequate resources to handle the workload.
• Enhanced security: Server metrics help identify potential threats and vulnerabilities. By monitoring these metrics, organizations can implement necessary security measures to protect servers from cyberattacks and unauthorized access.

Why is regular server monitoring necessary?

Regular server monitoring is essential for maintaining server health and performance. It helps detect issues early, optimize resource utilization and ensure that servers operate within acceptable performance parameters. Regular monitoring also helps maintain compliance with regulatory requirements and industry standards.

What security metrics should be monitored on servers?

Monitoring security metrics is crucial for protecting servers from cyberthreats. Here are some key security metrics that should be monitored:

Failed login attempts

Monitoring failed login attempts helps identify potential brute-force attacks. A high number of failed attempts can indicate unauthorized access attempts.

Unauthorized access

Tracking unauthorized access attempts helps identify security breaches. Monitoring access logs is essential to ensuring that only authorized personnel have access to the server.

Malware detection

Monitoring for malware helps identify and mitigate malware infections. Regular scans and monitoring can prevent malware from compromising server security.

Security patch status

Monitoring the status of security patches ensures that servers are up to date with the latest security updates. This helps in protecting servers from known vulnerabilities.

Firewall logs

Analyzing firewall logs helps identify potential security threats and unusual traffic patterns. Regular monitoring of firewall logs is essential for maintaining server security.

How can Kaseya VSA enhance your server monitoring and management?

Kaseya VSA is a comprehensive RMM solution designed to maximize your IT team’s efficiency, streamline operations and enhance service delivery across your IT landscape. It provides IT professionals with an extensive toolkit to ensure servers operate at peak performance, maintain security and minimize downtime. Here are some robust features of Kaseya VSA:

• Automated monitoring and alerts: Kaseya VSA automatically monitors critical server metrics such as CPU utilization, memory usage, disk space and network traffic. It provides real-time alerts for any anomalies or potential issues, allowing IT teams to address problems before they impact performance.
• Centralized dashboard: With Kaseya VSA, IT professionals can access a centralized dashboard that provides a comprehensive view of all monitored servers. This single-pane-of-glass view makes it easier to manage multiple servers, track performance metrics and identify issues quickly.
• Remote server management: Kaseya VSA offers robust remote management capabilities, enabling IT teams to manage and troubleshoot servers from anywhere. This feature is particularly beneficial for organizations with distributed IT environments, allowing them to maintain control over their servers without the need for on-site presence.
• Patch management: Keeping servers up to date with the latest security patches is crucial for maintaining security. Kaseya VSA automates the patch management process, ensuring that servers receive timely updates and are protected against known vulnerabilities.
• Detailed reporting and analytics: Kaseya VSA provides detailed reporting and analytics on server performance metrics. IT professionals can generate custom reports to analyze trends, identify performance bottlenecks and make informed decisions about resource allocation.

Kaseya VSA empowers IT professionals with the tools they need to effectively monitor, manage and secure their servers. To explore firsthand how Kaseya VSA can benefit your organization, get a 14-day free trial now.

Understanding and monitoring key server metrics helps proactively identify and resolve issues, optimize resource utilization and protect servers from cyberthreats. Kaseya VSA offers a comprehensive solution for server monitoring, providing IT professionals with the tools they need to manage server performance effectively. To explore the robust capabilities of the solution and learn more about network monitoring and visualization, download this Kaseya VSA product brief.

The post Key Server Monitoring Metrics for Measuring Performance appeared first on Kaseya.

There are several ways MSPs can effectively break into new verticals and expand their target market.  

Get involved with industry associations  

Joining industry associations allows you to learn more about the challenges of the industry you are targeting. For example, by joining a healthcare association and attending its meetings, you’ll better understand the unique needs of healthcare providers. I also encourage you to attend industry conferences and trade shows. Sit in on sessions, walk around the exhibit hall and network with as many people as possible. The more you immerse yourself within these communities and become an active participant, the less you’ll feel like you’re an outsider looking in. 

Become an expert in the target industries  

When you decide to market to a new vertical, go all in! Be sure to stay up to date on industry challenges and trends, pay attention to who the key players are and read what the analysts are saying. I suggest frequently reviewing the industry’s trade publications, registering for webinars hosted by industry experts and leveraging your network. Take in as much knowledge as possible of the industry you are targeting. 

Are you tailoring your offerings and messaging to the industries you’re targeting?  

Creating industry-specific offerings and messaging can go a long way. Think about the specific challenges the businesses in the industry you’re trying to break into are facing and the types of services they’ll need to make their business run more effectively. For example, what kind of government regulations must they comply with? If they’re healthcare providers, is HIPAA a factor? If so, what can you do to ensure they comply?  

In your marketing strategy, think about what messaging will attract customers to your services in one industry versus another. You want to be intentional with how you market to your prospects by tailoring your marketing messages based on their specific needs. 

Your MSP can diversify its customer base and extend the reach of its services by marketing to new industries. By joining industry associations, developing specialized knowledge about different sectors and tailoring solutions based on specific requirements, your MSP can create unique value propositions to help you stand out from competitors. With these strategies in place, you can capture more business from current customers and tap into new sources of revenue. 

The post Breaking Into New Industries: How to Diversify Your Customer Base appeared first on Kaseya.

While every month should ideally be Cybersecurity Awareness Month, October is a big month in the IT industry and every organization wants to leverage this time to win opportunities. You need to go all out with your marketing if you want to stay competitive and prevent your prospects from working with your rivals.

Do you have a plan?

Whatever marketing assets you come up with, make sure they focus on these three key areas:

• Explain why cybersecurity is essential specifically to your audience
• Use examples of recent events to demonstrate that threats are real and growing
• Provide practical steps small businesses can take NOW to protect their businesses

If this seems overwhelming to take in all at once, don’t worry. We’ve got your back over here at Powered Services Pro.

With our Cybersecurity Awareness Month marketing kit, you’ll make a lasting impression on your audience while educating them about the importance of cybersecurity and showing them how they can protect their business against today’s sophisticated threats.

Not sure what Powered Services Pro is all about? 

Powered Services Pro is a channel sales and marketing program that can take your MRR to the next level. We send you a comprehensive marketing bundle every month, but in October we’re really going all out. We’re covering every possible avenue that can lead to opportunities for our partners.

This month, receive a 32-piece marketing campaign comprising email templates, infographics, checklists, social media ads/videos, an eBook and a unique cybersecurity activity book by becoming a member of Powered Services Pro right now.

You can also sign up for our Done-4-U Social Posting Program and we’ll handle all your social media scheduling for you. You can easily build a consistent social presence using our scheduled monthly social posts. You even have the ability to co-brand our social ads and edit posts that are already planned for you.

Curious about what else we offer?

A marketing asset bundle isn’t where we stop supercharging your growth. Our monthly Pro kits always come with MSP enablement, which includes:

• A one-hour coaching session to prepare you to speak about this subject with your audience
• Dedicated 1:1 coaching
• A resource guide with additional collateral to bolster your campaign

As your partner, we offer you enough templates and coaching services to make sure you are completely equipped to inform and provide your audience with the right solutions.

Producing sales and marketing materials on your own can take months. Let us do that for you so you can concentrate on high-value activities that will increase your company’s revenue.

Your audience is counting on you during Cybersecurity Awareness Month. Don’t let your competitors save the day. Reach out to your Kaseya account manager to find out how you can get started with Powered Services Pro today.

The post How to Win More Business During Cybersecurity Awareness Month appeared first on Kaseya.

But first, let’s get a basic understanding of the differences between CapEx and OpEx since this is essential for anyone involved in financial decision making. CapEx and OpEx are treated very differently as far as accounting and taxation for the business are concerned.

What Does CapEx Mean?

CapEx, or capital expenditure, refers to one-time upfront costs incurred for assets that will be used in the future. A capital purchase shows up in the company balance sheet and depreciates in value over its lifetime. The business expects to derive value from the asset for a period of time longer than a single tax year.

Since the upfront cost could be substantial, budgeting for CapEx involves setting some money aside for these types of purchases. It usually also means that a more stringent process is required to be followed to get approvals on these purchases.

When it comes to taxation, CapEx deductions must be amortized over the lifetime of the asset.

What Does OpEx Mean?

OpEx refers to the day-to-day operational expenses that support the business. These typically include general and administrative expenses, employee wages, research and development, cost of goods sold (COGS), maintenance, repair costs, leases, etc.

Unlike CapEx, OpEx has no or low upfront costs and allows companies to spread their expenses over a period of time. Operational expenses are included in the income statement of the company for the period during which they are incurred. For tax purposes, OpEx purchases made in a single tax year can be fully deducted. There will be no amortization of these expenses since these items are fully consumed in the tax year.

CapEx and OpEx in IT

In IT, CapEx corresponds to the costs incurred for the purchase of infrastructure, such as hardware (e.g. servers) and equipment, that generally have a lifespan of two to 10 years, depending on the depreciation value. With a CapEx budget item, the business incurs the expense in the present and expects to generate profit in the future.

OpEx in IT includes costs for SaaS licenses, IaaS subscriptions, contract-based services, internet and utilities. Since OpEx corresponds to current costs, no future benefit to the business is accounted for in an OpEx model.

What IT Expenses Are Included in CapEx?

A few IT expenses that are included in CapEx are:

• IT infrastructure, which includes hardware and software asset purchase costs. In the case of software, this would apply to the traditional perpetual license model where you make a big upfront payment and you “own” the software forever.
• Asset upgrading costs, such as adding to the memory in the server.
• Patents, trademarks, copyrights (i.e, intangible assets).
• Buildings (e.g., data centers).

What IT Expenses Are Included in OpEx?

OpEx includes IT costs for:

• Cloud computing subscriptions (e.g., IaaS, SaaS or PaaS)
• Equipment leases
• Software maintenance (e.g., associated with a perpetual license) – typically annual costs
• Software subscriptions
• Utilities, telecom and internet services

CapEx vs. OpEx

Should You Use OpEx or CapEx?

Purchasing your IT hardware and incurring a capital expense gives you the advantage of greater control over those assets. However, it comes at the cost of high upfront charges and more complex accounting over the life of the assets. Also, purchasing equipment locks you into a certain level of capacity that is relatively hard to change.

The OpEx spending model is simpler, more flexible and potentially more economical. It generally requires less stringent budget approval and is easier to work with from an accounting perspective. Businesses can purchase cloud service subscriptions that provide a bigger portion of their IT infrastructure and have less to worry about when it comes to hardware maintenance and other costs. They can easily increase or decrease the capacity of the service as well. That’s why many companies prefer the OpEx model over the CapEx model for improved business agility, lower upfront costs and reduced management costs.

Deciding which spending model is best for your business in a given case will depend on a number of factors such as corporate policies, cash availability and your business goals.

Check out our 2021 IT Budgeting Checklist to develop an efficacious budget and secure funds for all your IT initiatives.

The post CapEx vs OpEx: What’s Best for IT Budgeting? appeared first on Kaseya.

While most MSPs focus on the services, they miss out on leveraging the managed services contract to increase their profit margins, without which sustenance of their business would be unfeasible. 

So how do you ensure the profitability of your contract? 

Measure and Track the Services Provided 

The first step towards ensuring that your contract is profitable is to track the time spent working with your customers in your professional services automation (PSA) software. 

What cannot be tracked cannot be measured.  If you are still using spreadsheets, it is time to transition to efficient PSA software. Managing spreadsheets can be a humungous task leading to fragmented processes, missed deadlines and inaccurate invoices. 

If you are providing additional support to your clients for any ad hoc services, track the effort spent by your engineers. Bill the customer based on the contract terms and as per the resources consumed. 

Meet Your SLAs Regularly 

Honor your SLAs to avoid penalties. One of the flaws of MSP processes is not being able to track SLAs and addressing customer issues on time. 

Create an IT environment where any incident is tracked and re-mediated even before the customer is aware they have occurred.

Look for a PSA that provides help desk managers with real-time information about the status and progress of tickets and generals alerts along the way until the final resolution is complete. 

Select the Profitable Pricing Model 

Lower prices do not equate to more business. They only lead to employees spread too thin and a business that is barely getting by.

Evaluate your pricing strategy based on the needs of your customers.

Value-based pricing model, a strategy of setting prices primarily based on a consumer’s perceived value of a product, or service has been the most popular choice among our MSP Benchmark Survey Report respondents for at least four years. In the 2019 Kaseya MSP Benchmark Survey Report, about 38 percent of participants said that more than 50 percent of their revenue comes from a value-based pricing strategy. 

Ensure the Renewal of Your Managed Services Contract

Build trusted relationships with your customers. Acquiring a new client can cost five times more than retaining an existing client. Also, increasing customer retention by 5 percent can lead to an increase in profits of between 25 percent to 95 percent.

Have quarterly business reviews (QBRs) with your clients to demonstrate the value of your services. Use tools like Kaseya VSA that can show all backend fixes done by you that your client probably wouldn’t be aware of.

Kaseya VSA is a remote monitoring and management (RMM) solution that manages both your endpoints and infrastructure, enabling you to deliver better service and improve your team’s efficiency.

To learn more about Kaseya VSA, request a demo.

The post How to Ensure Profitability of Your Managed Services Contract appeared first on Kaseya.

MSP consultancy Taylor Business Group (TBG) is focused on helping clients drive profit, and it has 10 metrics it says are the most important metrics to keep MSPs on track to achieve their goals. We took TBG’s 10 and added a dozen more metrics of our own.

It’s important to note that the first step to take before you start implementing any new metrics, is to ask what kind of company you own or work for. There are MSPs that are “lifestyle businesses.”  The owner knows and loves technology, enjoys working with a small close group of clients, makes a good living, and is perfectly happy running the business this way. In this case, the intense discipline of tight metric tracking may not be critical to this business’ success.

Metrics are made for growth-oriented businesses, argues TBG’s John Christophersen. These businesses are entrepreneurial, have a vision, believe in a high-horsepower sales engine, invest profits back into company development, and manage by numbers and metrics.

With that caveat out of the way, let’s look at the metrics, starting with A and ending in T.

1. Administrative Expense

Administration is critical, but doesn’t directly build the business the way sales and technical development can. As a result, these expenses should be controlled – and be less than 20% of revenue.

These expenses include administrative salaries, benefits, related taxes, internal IT costs, and building and office expenses.  While TBG doesn’t point this out directly, administrative expenses also include all IT systems which support the business, such as billing, CRM, finance, project management, etc.

On a related front, TBG stresses that MSPs should “eliminate or minimize all non-strategic costs!” And yes, the exclamation point came from TBG.

2. Agreement Profitability

This measures how much an MSP makes per client agreement.

3. Average Response Time

This key metric tracks how fast your techs respond to a problem.

4. Billing Resource Utilization

This is a bit like how partners in a law firm are judged – by billable hours. By measuring the ratio of billable- to wasted-hours, you can see how efficiently your staff is deployed. And by calculating their hourly rate, you can see how much money is lost when they are not working on billable jobs.

5. Client Contribution (CC)

This refers to how much an MSP earns from each client, less the cost of obtaining this revenue. The client revenue includes sales of products, fixed fees and services. The related costs include what the MSP spends to acquire the revenue (such as marketing and sales costs) and the labor costs of providing them.

6. Client Effective Rate (CER)

This metric measures how much you make from each client based on time spent servicing them. It is the monthly fixed fees you charge divided by how many hours you spent with that client. This will produce a revenue-per-hour result.

7. EBITDA

‘Earnings before Interest, Taxes, Depreciation and Amortization’ is a key measure if you are looking to sell your MSP operation. If your other vitals, such as Monthly Recurring Revenue (MRR), are good, you can, in some cases, expect a 10x multiple of your EBITDA when you sell your company.

8. First-Time Fix Percentage

This calculation measures the percentage of client problems that are resolved with only one contact to your help desk.  It can help you track the efficiency and training levels of your support technicians.

9. Product Margin

Product margin is, to quote Investopedia, “the difference between the cost of the good or service and the retail price; the greater the difference, the higher the margin.”

TBG also uses this basic definition, with ‘product sales revenue’ substituting for the ‘retail price.’

According to TBG, the number to shoot for is over 17.5% margin, with over 20% being preferred. Beyond that, TBG believes that the margin should be at least based in part on product, with some products needing a higher targeted margin than others.

However, calculating the true cost of goods sold can be the trickier for a services provider than a manufacturer. Include direct labor, any service delivery charges (such as transportation costs if there is any travel involved) and sales commissions. Don’t include overhead or operating expenses such as rent, utilities, or salaried positions not directly tied to delivering the service.

10. Hourly Service Rates

This metric is pretty self-explanatory. To use this as a measurement, the MSP should have a service organization structure, with clearly defined service organization structure. This involves clear job descriptions, well-thought-out career planning strategies, and “pre-defined compensation plans.”  Clarity on rates for different staff levels makes calculating this metric easier.

Meanwhile, your services rates should be what you charge before volume or other discounts are applied. That said, the hourly rate an MSP gets should be 4.5 times the “hourly burdened salary rate,” which includes taxes, supplies, insurance and other related worker costs.

11. Monthly Recurring Revenue (MRR)

This is a key measure for MSPs that refers to the most critical revenue stream — revenue you can count on each and every month. Healthy MSPs make the majority of their money this way.

12. Net Operating Income

TBG is a huge fan of Net Operating Income, which is a metric that pretty much sums up the current health of an MSP business.

Operating income is similar to EBITDA, except that EBITDA also considers amortization and depreciation. Net operating income is more commonly used because it is a bit easier to calculate than EBITDA.

According to TBG, your net operating income should be a least 10%. At the same time, TBG likesfor services to be more than 60% of total income. And when it comes to service revenue, Monthly Recurring Revenue (MRR) should be more than 60% of the total.

13. Outstanding Issues

How many issues are still unresolved on a weekly, monthly and quarterly basis? If the number is too high, you need better processes, more automation, or more employees.  In fact, keeping track of outstanding issues is one of the recommended ways to identify processes ripe for automation.

14. Revenue/Compensation (RpC)

This is a simple measure of employee productivity. Essentially, you divide the revenue from each employee by how much they make. Of course, not all employees are equally involved in driving revenue, but it can be a good measure of which employees are moving the company forward.

15. Sales Compensation

You should invest in sales and compensate properly, including offering a base salary, commission, and bonuses. At the same time, you shouldn’t spend more than a third of your gross profits on sales.

16. Sales Expense

Building on the topic of sales spending, TBG believes that no more than 10% of your total revenue should be spent on sales. That expense should be fully loaded with salary, commission, and bonuses. It should also include sales training expenses, advertising and marketing spending, and miscellaneous sales expenses.

17. Service Department Profitability

In general, you don’t want to spend more than 55% of your gross profits on service. Similar to Product Margin, you calculate this by adding up all your services revenues and subtracting the cost of goods sold – or cost of services sold.  Calculate the salary expense that is directly related to delivering services, training or travel expenses, sales commissions, and any transaction fees associated with annuity revenues. Again, overhead costs such as rent and utilities, and any salaried expenses not directly related to delivering services is not including in the cost of goods sold.

So, an MSP that received $1.2 million in services revenue and had $540K in expenses tied to delivering these services would reach a minimum of 55% gross profit on services.

MSPs must keep a close eye on pricing and expenses to make their goal.

18. Service Level Agreement (SLA) response times

This refers to how fast an MSP responds to service level performance issues.  Not actively managing this metric could result in an SLA penalty for the MSP. Even if you don’t support guaranteed SLAs, understanding response times is the first step toward improving processes and service delivery

19. Service Salaries

Service roles and titles can include help desk, NOC technicians and engineers, service managers, overall engineers and technicians, and service coordinators. The salaries of these staffers should be no more than a third of overall service revenues.

To make service efficient, TBG recommends clearly defining the structure of the service organization. This involves clear job descriptions, well-thought-out career planning strategies, and “pre-defined compensation plans.” The company also recommends hiring entry-level workers, and then promoting from within. By doing this, you can train new employees to your specific work processes (and not have to retrain technicians used to doing processes another way).  But, more importantly, by providing a career path – and actively promoting from within – you increase morale and employee retention rates.

20. Service Utilization

First, let’s define service utilization. According to TBG, it is the “percentage of service inventory time that is billable per technician.”

In this case, the MSP judges staff efficiency by calculating the ratio of billable- to wasted-hours. If you add in your tech’s hourly rate, you’ll discover how much money is lost when techs are not working on billable jobs.

21. SLA Compliance

This metric rates how well you satisfy your client SLAs and what (if any) penalties you incurred as a result of not meeting these SLAs.  Tracking this metric can provide insight into how well you are setting SLAs versus your business’ ability to meet them; whether some individual clients or services are more challenging in terms of meeting SLAs; or whether penalties incurred would be capital better invested in better systems, solutions and training programs.

22. Tickets Opened vs. Tickets Closed

This measures how efficient your organization is at resolving problems, and can also highlight areas where your team’s technical skills need improvement.

Looking to reduce your administrative expenses and increase efficiency?

Looking to reduce your administrative expenses and increase efficiency?  Request a demo of Kaseya BMS – a next-generation business management solution that was built specifically to help MSPs spend more time selling and delivering services, and less time on non-revenue-generating tasks like billing and project management.

The post 22 Critical Metrics and KPIs for MSPs appeared first on Kaseya.

In this piece we’ll assume your MSP business is up and running, so business planning isn’t so much about creating a new business as it is expanding one.

Before we get started, let’s start with a bold statement. The biggest mistake too many MSPS make?

They don’t have a business plan.

It’s that simple. Some MSPs want to hit the ground running. To them, the thought of spending precious time documenting mission statements and financial projections seems like time wasted. Who has time for planning when your day is filled with finding new clients, bringing up new services, and hiring a tech or two?

If that’s you, please reconsider. It doesn’t have to be all or nothing. In fact, the most important part of any plan isn’t how complete it is. The most important part is that a plan exists at all ― that you thought through and documented some basic aspects of your business:

Defining a Business Plan

Many experts think of the process as business plan first – what are you, what do you want to be – and then strategy – how are you going to use the resources at your disposal to make your business plan. Others, especially true startups take the opposite approach. They think on a high-level first, and dive into the details later.

TruMethods CEO Gary Pica has very defined views about business planning. “To create an MSP business plan that helps you achieve your growth goals, you have to evaluate where your company currently stands and where it’s been. Take a look at your MSP results and resources over the past few years,” Pica argued.

There are clearly gray areas and overlaps between a business plan and developing a high-level strategy. After all, your business plan wouldn’t be very much if you didn’t have a firm strategy, especially for longer range multi-year business plans.

While many think of quarterly plans, so-called 30/60/90 plans, business planning must have more depth than these short term largely financial views. Your plan defines the structure as to how you do business. And this includes detailing items such as finances, organizational structure, and of course, people.

For startups, the business plan details high-level strategy, and this document can be used to raise money to get your company underway.

In fact, your business plan and your strategic plan should be closely related – they should work as a team.

Business Planning Basics

Business plans, while often focused on finances, should also include detailed sections on operations, marketing, personnel and other issues.

In terms of operations, how exactly will you achieve your short- and longer-term goals? Do you have the right office space, enough people, and are you structured organizationally for the kind of growth you plan to achieve?

Before you can really define your marketing, you must consider what it is you are selling, and how that may change in the future. Then you can dive into the target market and how you plan to stand out versus your competitors, and what marketing tools and techniques you’ll use.

Finances often take the most time to develop, and they should not be given short shrift. First, you need an accurate view of past performance. This can help inform solid projects as to your future numbers.

3 Business Planning Must-Haves

1. Identify ideal clients. The first year you’re in business, you may want to take any client that breathes and is willing to pay you money. However, you need to identify your ideal client and make actionable plans to find prospects who match your criteria. Here are a few questions to get you started:

• What size company, both by revenue and employee count?
• Which industry or industries? Are compliance regulations a plus or a minus for you?
• Do they want cutting edge IT services, or do they want to do just enough to keep the business going?

1. Define business services scope. No MSP can be all things to all types of customers. You need to strategize on which services your market segment needs that you can offer and end up with a strong profit margin. Then be upfront with both prospects and clients on the services you deliver and how you deliver them. The best way to do this is to document the scope of your business services to minimize scope creep.

Of course you can take on clients who don’t fit the ideal model. But, with a plan, you are now making a conscious decision on a case-by-case basis. Taking on a non-ideal client is no longer something you do automatically because you don’t know any better. For example, perhaps you’ve decided to standardize on the infrastructure – including hardware, servers, desktop, edge devices, OSs, versioning – that you support. If a potential client has non-compliant infrastructure they are unwilling to change, you can still take on the client. However, you know how much of a premium to charge for managing non-standard systems so that you adequately cover the extra work and time required to manage them.

1. Establish business objectives. What milestones do you want to achieve over the next year or two. If you don’t want to think five years down the road, that’s fine. But you have to look ahead at least one to two years. How many clients do you want to have and at what type of margin? What actions do you need to do today to reach that goal?

Some of your objectives may be around life/work balance. Take those into consideration as well. You wanted to become an MSP for a reason. If you don’t clearly state your objectives, you may never achieve them.

Making the Right Exit

Many MSP owners can go along for five, ten, fifteen years before thinking about retirement. At the end of the day, there are only a few options – sell, merge, hand the business over, or shut down. Take some time to think these options through realistically, and identify which one you want to work toward. With your ultimate end goal in mind, you can develop your business to move forward toward that direction. Then, when an opportunity presents itself, you’re ready to evaluate it and conduct thorough due diligence.

Of course technology, market trends, and client needs all change quickly. In fact, your own business and personal objectives can just as quickly change. No plan stays current forever. So, review your plan at least annually, even if you review and decide no changes are needed.

Don’t let getting it perfect get in the way of getting it done. Even if your final document wouldn’t win any prizes as the most thorough “business plan” of all time, make sure you think through and write down the most important aspects of your business. That way, the small day-to-day decisions you make won’t inadvertently lead you down a path you never meant to go.

For more advice on exit strategies, let’s turn to a true expert. Philip Vorobeychik, Senior Associate at Insight Venture Partners, has been in the trenches ― on both the buying and selling sides. Vorobeychik has a checklist for improving your company’s appeal:

•  “Become fanatically customer centric
•  Ensure customer loyalty is to the business (not you)
•  Improve processes and improve again (and again)
•  Improve your depth of talent and retention rates
•  Improve your systems / know your business
•  Exit unprofitable businesses and customers”

Perhaps you are considering acquisitions to drive your company’s growth.  Here are some danger signs you should look for when evaluating a potential acquisition target, according to Vorobeychick:

•  “Misrepresentation of data (financial, etc.)
•  Obstruction
•  Declining revenues
•  Customer turnover
•  Risk concentration (key employee/customer)
•  Employee quality/morale”

How to Value Your MSP

Again, even if you aren’t looking for the exit for some time, it’s important as part of your ongoing business planning to have an idea of what your business is worth. MSPs can be tough to value, as they come in all shapes and sizes, and the markets they serve undergo constant and dramatic change. That means that while metrics have merit, they are not a hard and fast way of determining a definitive value. Instead, the value “is heavily dependent on the individual company’s revenue, margins, service mix, geography, quality of consultants, and many other factors,” argues Mergertech, an investment bank in its MSP Performance & Valuation Report.

“As a general rule of thumb, the most highly valued MSPs do not have a single client that makes up more than 12% of revenue with the top ten clients accounting for less than 40% of revenue,” the firm concludes.

Here are other metrics that help determine the health and value of your MSP operation:

• Revenue per employee — $250,000 is an ideal number
• Rate of growth – positive growth is a must, but there are limits to how fast a labor-intensive business can expand.
• Percentage of revenue based on services – you want services to represent the vast majority of your income
• Ability to retain top employees – your staff is core to your value. Too much turnover shows risk to future health of the business.

The Multiplier Effect

Multipliers, whether of sales or profits, are often used to set a price.   EBITDA is often the preferred multiplier to use for valuations. For instance, some experts claim that MSPs with their own hosting infrastructure and guaranteed revenue can sell for 10x EBITDA, while smaller MSPs with no real infrastructure and a small portion of recurring revenue will be offered half that – or less.

But EBITDA doesn’t tell the whole story, of course.  An MSP is as healthy as its service portfolio, with valuations tightly tied to recurring revenues growth.  If more than half of your revenues are recurring, generally speaking, you stand in good stead.

The way you run your business also matters. Just as you want to automate client’s infrastructure and IT operations, you want your own businesses processes to be automated so you are poised and ready for growth. Furthermore, the more that you are embedded into your clients’ business and perceived as a trusted advisor, versus just troubleshooting problems, the more value you have.

 Other Critical Business Plan Components

Every business plan is unique and every MSP business owner needs to find out for themselves what format works best for them. As mentioned earlier, the most important step is to have a business plan versus having the perfect business plan.

Here is a list of other items typically included in a actionable business plan.  Many of these items are addressed in more detail in later chapters in this guide.

Company Vision

Prepare for some soul-searching. Define your purpose—why you do what you do—as well as core values that guide the ‘how’ of your business. Then establish a 10-year net worth goal.

Long-Term Goals and Targets

Using a 3-year time frame, determine your company structure and sales goals in relation to your vision. Set priorities and check profit margins to make sure they’re in line with goals.

1-Year Plan

With targets in place, develop a 1-year plan for sales goals and priorities that are aligned with your vision.

Quarterly Action Plan

It’s time for implementation—the most important part of a business plan and also where the most mistakes are made. Think about quarterly goals in terms of sales, revenue, and new clients. Create a to-do list to move toward your goals. But also make a ‘to-don’t’ list, so that resources are not stretched too thin.

Once you learn how to focus on the most important action items every quarter, dramatic business success will follow.

Gary suggests you’re on your way to being a world-class MSP when you can answer ‘yes’ to these questions:

1. Do you have a current business plan that includes a target and vision?
2. Do you have a quarterly action plan?
3. Is every team member accountable for results?
4. Do you schedule one day per quarter for strategic planning?

Pricing

Once you know your services (including break/fix, reselling hardware or software, managed services, etc.), you need to establish what you will charge for these services.  Some may best be charged per user, per device, or as a blanket set-price charge.  Even for ongoing services, you will need to consider setup fees.

When considering pricing, certainly consider what similar services are being offered in your market (whether geo- or industry-based).  However, Kaseya’s annual MSP Pricing Survey indicates that MSPs that know – and can communicate – the value they deliver command higher prices than MSPs who only consider the cost of delivering services.

Margins

You need to understand the target margins you need to achieve your overall business and personal goals. Make sure that you take plenty of time to research the products and services you are going to sell, and work out exactly how much you have to pay to deliver – including supplier, personnel and technology costs.  Your suppliers and technology vendors are critical for your success, so make sure you choose vendors who will act as true partners.  The technology solutions that are the basis for your managed services need to be easy to use, making your staff more productive and efficient, your clients more satisfied and loyal, and your margins comfortable and constantly improving.

Branding

Branding is all about defining who you are and doing so in a way that is compelling to clients. Let’s take a moment to walk through some high level basics of how to market and brand your MSP business.

Your company really should have an identity – an image – that projects the value of who you are and what you offer. Not everyone has a catchy name like Google they can brand around. The more importance issue is that clients view you as competent, professional and forward-thinking.

Your brand should also reflect your company culture, and your culture should represent your brand in a disciplined way. This could include, for instance, a certain style of dress reflecting whether you are more geek or pure business.

It also may involve deciding whether you have a single visible leader or promote a team approach.

Finally, your written materials, web site and blogs should all be done in a particular that reflects the feel of the company.

Personnel and Organizational Structure

After your customers, the most important part of your business is your staff. These are the people who will interact with your most valued possession – your customers.

They are also responsible for the quality of the services you deliver. This means you need to make sure you can afford the right type of people to suit your business. This is of course always a personal choice, and comes down to how you want to run your business.

There are a number of different aspects to the right kind of personnel, from their personal disposition to their location. For the purposes of the MSP Business plan, we are most concerned with the roles that they fill, and the amount that will be required to find the right person.

By thinking clearly about the roles you need to fill in the business, you can then work out how much you will need to allow for each of these positions. There are three main areas MSPs need to focus on to meet the needs of the business, remote services, onsite service and management/sales.

Business Plan Reassessment

Your business plan is not a once in a lifetime creation or an annual endeavor. It should be regularly revisited. And that is the advice of none other than MSP guru Gary Pica, president of the TruMethods. Pica argued the importance of mid-year business plan reviews. This all starts with looking back at how you fared last year, and whether key goals were met. Pica suggests taking a deep look at:

• “Revenue
• Gross margins
• New monthly recurring revenue sales
• Churn
• Average AISP (all-in seat price)
• Average monthly recurring revenue”

Based on this, you can then modify your plans. “Are you on track to meet the goals you set at the beginning of the year? Or, if you’re just creating a business plan now, are you in a position to meet those objectives? If not, you need to right the ship. There are two adjustments you could make: The first is to your goals, and the second is to your performance,” Pica argued. “On the other hand, an inability to reach your goals could be due to the fact that you’re just not operating efficiently enough. Are you wasting time on IT tickets? Are you not generating enough monthly recurring revenue? When facing issues like these, focus your efforts on improving performance. If your sales are lagging, invest more resources in your sales team. Determine where improvements could be made and push your team to make them.”

Remember, a business plan isn’t created so that it can sit on your shelf as an action item you crossed off your list.  It’s a powerful instrument to help you keep you, your business, and your employees all on track to achieve your short- and long-term goals.

Want more insight on strategic planning, setting business goals, and hitting the right metrics?  Download your free copy of A Winning Hand: 21 Cards to Play for Total MSP Success.

The post MSP Business Planning for Business Growth appeared first on Kaseya.

Many times MSPs focus on short-term financial and business planning, which are often done in quarterly and annual increments, rather than taking the time to create a longer-term strategy.  Having a higher-level view of where you want your business to go often makes the shorter-term decisions easier.  Knowing your destination greatly increases the chances that you will end up where you want to be.

This section will outline critical elements of a high-level strategy, including:

• Exit strategies
• Verticals
• Growth Expectations
• Technology and Vendor Choice
• Mergers and Acquisitions
• Cloud Technology and Services

So what is a High-Level Strategic Roadmap?

Entrepreneurs are free to run their businesses their way, and as such can choose how to approach building a high-level strategy. For the purposes of this piece, we’ll define what we mean by a high-level strategy and a roadmap that supports it.

A strategic roadmap is a document that defines, at both a high and lower level, what your company is all about and can help establish a plan. The means by which the roadmap as executed is in large part found in the business plan. The business plan is really the structure on which strategic goals are pursued, and tends to be kept more active with recent financials and other details.

Your strategic roadmap needs be detailed enough that is offers true value, and realizable waypoints. That is why this map is all about action – what do you have to do to achieve specific results, who is responsible for what, and when the work needs to be complete.

In order to keep your strategy relevant, your strategic roadmap should be modified to account for important issues and events, such as a major shift in the market, dramatic new technologies, changes in the competitive landscape, a new product or service you need to promote and sell, or a financial disruption.

The Ultimate Conclusion: Start with the End in Mind

Before diving into technology, service strategy and other issues, MSPs must first deal with the elephant in the room. What is the prime reason for creating the business, and the ultimate plan?

After you pour your heart and soul into the business, what do you want to accomplish? What is the end game?  For many MSPs, it is selling the company, even if that event is 10 or 15 years away.

Getting your company ready to sell takes a tremendous amount of discipline – and, in fact, this rigor is of benefit whether you ultimately sell or not.

Rick Murphy, CEO of Cogent Growth Partners which helps MSPs find acquisitions, says it is never too early to get your company ready to sell. “Most business owners don’t think about their exit plan until it’s too late to do anything about it, and they unknowingly miss all of the benefits that can come from having the plan in place from day one. While it might seem outlandish to be contemplating an exit while your business is young, professional investors know you don’t invest unless you understand how you are going to exit, and small business owners can benefit from this thinking,” Murphy argues.

“Most IT firms operate under the mistaken impression that liquidity only comes when one sells and retires. That is simply not the case. Liquidity can and should be coming from the business continuously, flowing more and ebbing occasionally over the life of the business, through to an eventual exit.“

Murphy continues, defining the exit strategy as “the blueprint for balancing ‘investment’ in organic growth, while maximizing day-to-day profitability, thus creating consistent liquidity and business value, every day.”

Verticals

This guide contains a whole chapter on whether to go vertical and, if so, which markets make most sense. Verticals are a great way to increase revenue, and because you are offering specialized expertise, dramatically reduce churn.

Here some issues to consider. What kind of businesses are around you? Are you in an agricultural community, an area with lots of medical facilities, or operate near a financial district? Or maybe you are surrounded by colleges and other educational institutions.

Also ask:

• What do you know?
• Are there any verticals you are passionate about?
• How much competition is going after the verticals you are considering?

Growth Strategy

Not every MSP needs to shoot for the stars. You might want a small lifestyle business that suits your passion for technology and taking close care of a small number of customers.

Other MPS want to be a strong local player with high growth, while others have regional, national or even global ambition. Whatever your choice, it helps drive your execution plans such as depth of marketing, office space and hiring.

Technology and Vendor Choice

An MSP is only as good as they technology they use. If your solutions don’t offer top-level service delivery, you can’t support a large and growing base of customers, and what you are able to support is handled poorly. Having scalable tools such as a next-generation RMM, and having these solutions purpose-built for MSPs, is critical.

These solutions, including your PSA, must not just be best of breed, but also easily integrate with the other solutions in your technology stack.  The good news is that you’re no longer between a rock and a hard place when choosing between best of breed solutions or a closed integrated solution suite.

Simon Griffiths from Flowgear points out, “Integration has become easier, more cost effective, quicker to implement, and more flexible. Because of this, the advantages that integrated suites used to have no longer apply.” You can both select the solutions with the capabilities that best fits your needs AND deploy these capabilities in an integrated way with your other solutions by selecting vendors who cultivate a robust and open technology ecosystem.”

That means choosing a vendor that is committed to the MSP market, develops next generation tools for service providers, and is always looking for the next revenue-generating innovation.   The only constant thing in business for an MSP is change – make sure you are selecting vendors who will partner with you today and in the future, delivering new solutions to enable you to leverage this change into new services and revenue streams.

Mergers and Acquisitions

There are a few reasons acquisition or mergers may be part of your high level strategy:

• Acquiring an MSP (or multiple providers) is no longer just about buying a client list. Today, acquisitions are focused more on quickly expanding your service portfolio and/or your geographic footprint.

• A merger with another MSP accomplishes many of the same net results as an acquisition. However, in mergers, there needs to be even more focus on bringing the right people and expertise together.

At first glance, acquisitions can seem the most expensive way to expand an MSP’s services portfolio.  However, many MSPs calculate that, in the long run, it’s the lower-cost option once they consider several ‘hidden’ costs of developing new services from scratch.  Creating the right service, choosing the best technology, training staff, pricing and marketing the service – all of these may go right the first time out the gate.  However, much more likely, there will costly iterations before everything is working smoothly.  And in that time, another MSP may have swooped in and taken the market from you.

A merger with a complementary partner may be the way to get the best of both worlds, by addressing the capital requirements for an acquisition, and by providing a speedier time-to-market than organic growth. Deciding which route to take depends, as always, on the business and market factors your individual MSP faces, such as the competitive landscape, capital flexibility, internal staff experience, etc.

The Cloud

Small- and medium-sized companies are increasingly following their enterprise-class peers in leveraging cloud services to improve business performance.  Their internal IT groups view the cloud as a strategic enabler, allowing them to offload routine, repetitive tasks, scale at will, and focus their efforts on innovative IT projects to improve customer and end-user experience.

Kaseya’s recent IT Operations Survey underscores this transition – with cloud services being the most popular services either currently in use or being considered by small and medium-sized business (SMBs) over the next twelve months. Companies of all sizes – from less than 50 employees to up to 5,000 – are leveraging cloud services.

So, the opportunity is clear. The question is how to make the most of these market changes for your MSP.  Based on the conversations with MSPs who are scaling up their cloud services, here are the 5 steps that MSPs sometimes skip – to their great sorrow.

Cloud Tip: Do Your Research: Rate Your MSP

Rigorously evaluate how prepared your existing organization is to fully support any cloud service offering – from migration (or adoption) through monitoring, management, configuration, security, compliance, backup, support, upgrades, etc.

Unless you’ve adequately thought through the entire lifecycle of support, you can’t fully select the best go-to-market approach (including technology and pricing model) that will ensure a profitable service offering in the long run.

Cloud Tip: Walk Before You Run

This tip does not translate into starting small. If you decide the best cloud service your MSP should offer is full-service private cloud hosting – go for it! But you should decide the best first step – and then take just that step.

For the love of all that is good and holy, don’t take a scattershot approach – starting this service, and then pivoting to another – the MSP equivalent of throwing everything against the wall and seeing which service sticks.

Or equally mistakenly, offering the service that your loudest customer is clamoring for.

Without a complete understanding of how a new service impacts your entire organization, an investigation into systems and solutions that empower your staff to provide world-class cloud services, and a clear-sighted understanding of the revenue or cost impact of these new services on your organization, you could much more easily jump into an unsuccessful (and profit negative) services engagement.

Cloud Tip: But Get Ready for the Road Ahead

However, just because you should proceed deliberately with your journey, doesn’t mean that you don’t consider future needs as you consider your options.

While you may know exactly the capabilities your MSP needs today – both in terms of managing your business and offering services to your clients – the landscape is changing too quickly for you to only consider your current requirements. You need to make sure that you don’t regret today’s IT decisions tomorrow.

For others, they want a life-style business that they will transfer to a business partner or child upon retirement.  Still others dream of creating a larger regional, or even international, business that grows via acquisition.

Of course, you may change your mind over the years – maybe many times over.  However, it’s still critical that you articulate your ultimate goals for your business before you put together the other elements of your strategy.

Want more insight on strategic planning, setting business goals, and hitting the right metrics?  Download your free copy of A Winning Hand: 21 Cards to Play for Total MSP Success.

The post Formulating the Right High-Level Strategy appeared first on Kaseya.

Mastering Master Service Agreements

Many MSPs prefer a Master Services Agreement (MSA), which is a more detailed style of contract. Because MSAs tend to be highly technical, some half of these contracts are prepared without help from an attorney, according to the MSP Alliance. The main issue is the cost of legal counsel.  However, MSPs sometimes believe these MSAs are good to go because the MSP professionals who wrote them understand their business and technology.

But a good MSA also covers many legal issues not normally dealt with in simpler contracts – which is another reason legal oversight is critical.  These legal issues are far beyond purview of MSP staffers.  Consequently, whether it’s a simple contract or a richer Master Services Agreement, a lawyer and an experienced accountant should take a deep look at the documents before any signatures are placed.

In addition, MSAs and Service Level Agreements (SLAs) don’t just help the relationship run more smoothly ─ they can be a key part of the sales process. That’s because they should detail for the clients the precise value they will obtain from your services as well as your commitment to deliver them.

Contracts such as MSAs are also a key way to build and sustain revenue, and increase the value of your business. “The contracts an MSP has with its customers represent the primary component of the business’ value. The reason the contracts are so vital is the value of the business is determined by some multiple of the monthly recurring revenues,” wrote attorney Robert J. Scott in A Legal Guide to Managed Services. “Strong monthly recurring revenues generated under sound contracts are the key ingredient of business valuation.”

Scott & Scott detailed key items that should be in the MSA’s Statement of Services, including:

• Term of Agreement
• Holiday Availability
• Proprietary Rights
• Intellectual Property Rights
• Independent Contractor
• Client Covenants
• Insurance
• Taxes
• Non-Solicitation
• Warranties
• Limitations of Liability
• Termination of the Agreement
• Integration Clauses

Here is one example of a provision that could or should be in your MSA, according to the law firm:

MSP will provide the following services:

• Perform necessary remediation steps associated with the daily alerts and tickets
• Prepare and implement a maintenance checklist.
• Make recommendations based on weekly reports
• Review and maintain all network related documentation
• Review monitoring scripts/tools required for daily review and make recommendations for improvements

The Importance of a Rigorous SLA

SLAs are the other key contract an MSP may have with a client. Because the MSP is committing to a particular level of service, and penalties are attached, these contracts should, obviously, be well thought out.

Partner advocacy organization CompTIA agrees. “One of the most contentious issues in managed services is availability. No matter what you think the verbal agreement was, don’t be surprised if the customer later develops a different understanding about your availability. Maybe they’ll want 24/7 support, or have unrealistic expectations about response and resolution times,” CompTIA explained. The only answer is a contract that clearly establishes SLAs and protects both parties.

Meanwhile, here is a quick legal SLA checklist from Robert J. Scott:

“There are a number of ways to calculate a service level for purposes of an SLA. Successful availability provisions will include:

• The definition of availability, including any exclusions
• The time period that will be used to measure availability (e.g., monthly, quarterly, etc.)
• The method in which the availability will be calculated, and what, if any computers will be excluded from the calculation of availability
• The percentage of availability the MSP is promising
• Consequences for availability failures
• If monetary credits are available for availability failures, the method by which the credit will be calculated and the maximum credit available for the applicable time period”

May the “Force Majeure” Be With You

Projects are not always 100% predictable. You could make a good faith effort to complete a project, and have the effort delayed through no fault of your own. This, in legal terms, is called “force majeure” and if your contract has this provision, you should still be paid for the work despite the unforeseen delay. Of course, the best approach is to keep the client in the loop –they probably want the work done at least as much as you.

Protecting Your Intellectual Property

You may not realize just how much of your intellectual property ends up in clients’ hands. It may be as simple as scripts to drive automation, or larger pieces of software your team has developed. Some of these items could, or may already, be patented.

To protect this, the contract should specify that that intellectual property belongs to you, and you alone.

Protecting Confidentiality and Trade Secrets

The same protection is critical for trade secrets such as pricing, discounts, SLA terms, warranties, and special technologies. Your contract should include a non-disclosure clause to protect these secrets. And since fair is fair, you should consider a similar clause protecting client confidentiality if asked.

CompTIA Lends a Hand

CompTIA has significant resources to help service providers with contracts, with some free and others, such as contract templates, available to registered or premium members.

 The partner organization also has a useful free overview of why you should use contracts (many MSPs don’t and usually come to rue that decision) and the basics of how to go about it in How Written Contracts can Help your Business.

CompTIA argues that contracts are essential protection for MSPs, and should be dispensed with only in limited circumstances – such as ultra-simple engagements. Partly, this is because of the implied contract in doing work for another party. “Most people believe there is no contract if they didn’t sign something. But there is. It is called an oral agreement and they are just as enforceable as written ones. The problem is you won’t necessarily be the person deciding what the terms of an oral contract are if there is a dispute. A judge or jury will do that for you. The question is:  do you really want to accept that risk?” the group asked.

Another issue is that if you don’t craft a contract, your customer may do so anyway in the form of a PO. “You may have been in the position of agreeing to provide services to a customer, and shortly thereafter the customer sends you a purchase order. You turn it over and notice a full page of legal terms on the back,” CompTIA mused. “You now have a written contract whether you wanted one or not. It’s highly unlikely the terms on the PO are to your advantage. They were drafted from the customer’s perspective. But if you had a written agreement it wouldn’t be an issue.”

Such a contract, crafted by you and representing your interests, can negate and void the items listed in legalese on the client PO.

A contract should not be one-sided. Instead, it should treat clients with respect, spelling out what you are responsible for, where those responsibilities end and do so in a multifaceted way.

Here are some areas CompTIA suggests your contracts cover.

• “If you install software how long is it expected to function?
• If you do break/fix work, how long will the equipment remain up and running?
• What level of service are you guaranteeing? Are you promising absolute perfection, or merely that the work will be in accord with generally accepted IT standards?
• What happens if the customer starts doing things that you feel should void the warranty? For example, what about customers who decide to tinker with software or hardware you installed, and wind up making a problem worse?”

How to Say Goodbye

Breakups can come from either side, and either way you want to be protected. Sometimes you are the one to call it quits, and you want to make sure there are no negative repercussions. Your contract should specify under what circumstances you can break it. Maybe the client is slow in writing checks or refuses to pay, implements their own conflicting technology, or has employee behavior that works against your efforts. Or perhaps they demand work that isn’t called for in the contract.

On the hand, you also need to be protected if the client breaks the contract. They may back out before the duration of the contract is complete, and you are holding costs related to the entire duration. Or maybe you started a major project, made investments, and the contract was broken before the services were rendered and paid for.

Here CompTIA weighs in. “You’ve just booked new business. Say you have to make some up-front investments before you can begin the work. Maybe you need to buy equipment or perhaps license new software. Maybe you need to hire additional help, or get some additional training. What if you make these investments, and then receive a call from the customer stating he’s decided to go with another provider. You can’t demand payment for the work because you didn’t do it yet,” the organization argued. “What are your options? Without a written contract there are not many. A written contract will specify what expenses you are entitled to be compensated for. More importantly, a written contract gives the road rules for how, why, and when a party is allowed to back out of a deal.”

Don’t Make These Mistakes

Gary Pica, an MSP veteran and leading pundit, has been through countless client engagements, and highlights mistakes you must avoid. The first is setting the wrong price. “If you incorrectly price and package your services, there are going to be negative ramifications for your employees and the client you’ve just signed. You may over-promise on what your employees can actually deliver, or you could end up in a situation where the client isn’t getting the level of service they were expecting,” Pica, president of TruMethods, an MSP consultancy, wrote.

Pica also believes that less is more. “Transparency is key to avoiding future lawsuits that may arise from broken MSP business agreements. The longer and more complicated your agreement is, the less your client is going to trust you. Don’t create a 10-page agreement that deals with a variety of items that will never happen or that you can’t control,” Pica argued.

While Pica advises a bit of brevity, don’t take this too far. “Sometimes an agreement covers a lot but misses a few critical items for protecting your MSP. The most important role of a business agreement is to safeguard your MSP from liability in the event that things go wrong, so including a liability clause is essential. Protecting your employees is also important, so it’s a good idea to formulate a non-compete clause. Start with the most important items to protect you and your business,” Pica wrote.

Which Brings Us Back to the Beginning

I started this blog by highlighting how essential contracts are to the ongoing health of your MSP.  Crafted well, contracts are the building blocks for successful, ongoing business engagements with your growing list of clients.  Clear, well-documented expectations on both sides mitigate confusion on service levels, and point to solutions when problems, inevitably, arise.

Contracts are not the place to scrimp – make sure your contracts, MSAs and SLAs are carefully thought out, and fully vetted by legal and financial counsel.

If you’re interested in other building blocks for a successful MSP, check out Kaseya’s whitepaper, “Your Roadmap in an MSP 2.0 World.”

The post How to Craft Contracts, SLAs and Master Services Agreements for MSPs appeared first on Kaseya.