MSP Pricing Tips | Determining Optimal Margins for IT Managed Services. Presented by Kaseya and MSP University. March 2012.

1. MSP Pricing Tips:
Determining Optimal Margins
for your Service Offerings
March 20, 2012

2. Agenda
• Introductions
• Our sponsor
• Our MSP pricing expert – MSP University
– How to define – and calculate – labor cost
– How to define – and calculate – overhead
cost
– How to use these data to optimize profits
– How to use these data to grow your business
• Recap
• Q&A
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3. Our Speakers
Erick Simpson
Vice President & Co-Founder
MSP University
Alex Brandt
Director
Kaseya
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4. Complete the poll/survey and
you may win!

5. About Kaseya Patented
#7,827,547
#7,620,707
#7,895,320
• Enterprise-class IT systems management for everybody
• Value Proposition
– A single Kaseya user can proactively manage 1,000s of automated
IT systems and network tasks in the same amount of time
required by a team of technicians using other techniques
• Key Facts
– Founded 2000
– Privately held, no debt, no external capital requirements
– 33 offices worldwide in 20 countries with 450+ employees
• 12,000+ customers
• Millions and millions of assets managed
– Patented IT service delivery process & remote IT management
process
• 24 patents pending
– Common Criteria (EAL2+) certified and FIPS 140-2 security
compliant
– ITIL v3 compliant
5

6. The Kaseya Solution for Automated
Managed Services
• Comprehensive
– Automates all systems
management tasks
– Expert RMM via Kaseya Live
Connect & ITIL SD
– Integration friendly (PSA)
– Scalable and flexible
• Uncomplicated
– One lightweight agent
– Cross platform
– Thousands of pre-built
scripts
– Easy to install & use via a www.kaseya.com/solutions.aspx
single management console
• Affordable
– On-premise or cloud
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7. MSP Benefits via Kaseya
60%+ use
Kaseya
• Higher revenue
– Integration gives you more services to offer
• Higher profit
– Integration means fewer techs per managed
machine and cloud means pay as you go & grow
• Better service delivery
– Automation provides standardization, which
means faster responses with less errors
• Better control
– Integration means it all ties together so you can
actually see everything you need
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8. With respect to your pricing
model, are you satisfied with your
current margins?
1. No, and I don’t really know what my
true margin is
2. No, but Im not sure how to improve
my margin
3. Yes, but Im concerned that my
margin may decrease over time
4. Yes, and Im not worried about any
changes to my margin

9. Organization’s Full Burden
• Calculate billable staff’s Total Labor Burden
• Calculate organization’s Total Overhead
Burden
• Add values to determine Full Burden
• Divide these by number of billable staff (use
Full Time equivalent [FTE])
• Account for productivity
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10. Hourly Labor Burden
The yearly amount of all labor costs (including costs above and
beyond gross compensation)
• Total Compensation • Sick Leave
• FICA • PTO
• FUTA • Vacation
• SUTA • Holiday
• Disability • Profit Share/Pension/401k
• Workers' Comp • Retirement
• Healthcare • Additional Bonus

11. Labor Burden Example
• Scenario – 3 billable staff
• Total Labor Burden = $150,000 yearly
$150,000 2080 hrs. 3 $24.04/hr
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12. Hourly Overhead Burden
The yearly amount of all company overhead costs (including
indirect labor costs)
• Total Non-Billable Staff • Water & Sewage
(indirect labor costs) • Rent
• G/L Insurance
• Equipment and Maintenance
• Picnics, Parties
• Clothing
• Tool/Gas/Vehicle
• Company Meetings • Telecom
• Training/Education • Office Supplies
• Cell/Mobile/Internet • Postage
• Vehicle Fuel/Maint./Insurance • Cleaning & Maintenance
• Electricity • Bank Charges
• Gas • Payroll Taxes
• Heating Fuel Oil • Property Taxes

13. Overhead Burden Example
• Scenario – 4 non-billable staff (not relevant)
• Total Overhead Burden = $200,000 yearly
• Divide by BILLABLE people (or FTE)
$200,000 2080 hrs. 3 $32.05/hr
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14. Full Hourly Burden
• Add billable staff’s hourly Labor Burden to
organization’s hourly Overhead Burden
$24.04 $32.05 $56.09/hr
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15. What About Productivity?
• 2080 hours assumes no vacations, sick days,
holidays, training days, etc.
• Use chart below to estimate your TRUE cost
based on ACTUAL billable hours:
• Simple Formula:
– All Expenses/productive hours/billable FTE
Productivity (actual/possible) 50% 60% 65% 75% 85% 100%
True cost per
productive hour $112.18 $93.48 $86.29 $74.79 $65.99 $56.09
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16. Service Desk Profitability
• Calculate organization’s Full Burden
• Determine monthly Managed Services billing
• Calculate total labor hours delivered against
all Managed Services Agreements by billable
staff
• Calculate Total Cost Of Service Delivery (TCSD)
• Do the math to determine margin and
profitability!
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17. The Math
• Scenario – 25 Managed Services Agreements @
$3,000 each/mo = $75,000 recurring
• 3 Service Desk staff with Full Burden of
$74.79/hr (use overall productivity, 75% here)
• Last month’s labor against Agreements = 150 hrs
150 hrs $74.79 $11,218
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18. Calculating the Margin
• Determine the percentage of profit by
calculating the difference between what was
billed against your TCSD
$75,000 $11,218 $66,587 89%
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19. Let’s Dive Deeper
• 3 Service Delivery Staff Realized 150hrs
out of 480hrs (40x4x3) on Service Desk
Against Managed Services Agreements
–Leaving a balance of 330hrs
–At 75% utilization, that leaves about
247hrs
• Let’s apply those hours evenly to T&M and
Projects and see what happens
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20. Blended Billing
• Managed Services Billing
150hrs $75,000
• T&M Billing for the Month
123hrs $75/hr $9,225
• Project Billing for the Month
123hrs $125/hr $15,375
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21. Blended Cost
• Managed Services Billing
150hrs $74.79/hr $11,218
• T&M Billing for the Month
123hrs $74.79/hr $9,199
• Project Billing for the Month
123hrs $74.79/hr $9,199
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22. Total Total Cost Profit
Billing
$99,600 $29,615 $69,985
Blended Margin
$69,985 $99,600 70%
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23. Once You Know Your Full Burden
You can target your desired labor margin
• Select conservative productivity
– 75% here ($74.79)
• Goal: 50% Margin on Labor
– Add 50% to Full Burden hourly rate
$74.79 50% $112.18/hr
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24. Attend a Boot Camp
Focus Areas Structured Training and Networking
• Marketing • Reduce operational costs,
– Lead generation, branding and improve efficiencies,
awareness
accelerate sales and increase
• Sales the value of each sale
– Increasing sales velocity and
effectiveness • International Presence
• Service Delivery • 3 Things to Implement
– Improving sales engineering,
project management and service • General and break-out
desk efficiencies sessions
• Operations • Testing and Certificates of
– Leadership, financial acumen,
pricing, agreements, talent Completion
management and vendor • Peer and Vendor Networking
relationships
• Solutions • Live and On-Demand
www.mspu.us/bootcamps

25. Next Steps
• Attend Atlanta Boot Camp virtually – courtesy of Kaseya
www.mspu.us/livebootcamp
• Learn more about MSP University
www.mspu.us
• For a free live product demo:
www.kaseya.com/demo
• For a free trial:
www.kaseya.com/freetrial
• To speak with us:
www.kaseya.com/contactme
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/KaseyaFan /kaseya @kaseyacorp