Introducing the Powermeter for MSPs

What I love so much about the MSP community is that it has excellent structures to help MSP owners understand how they are executing relative to their peers. 

• Coaching firms like ConnectStrat guide leaders to create a business based on a proven framework. 
• Pax8 Academy coaches clients to optimize operating processes.
• FocusPlanit helps optimize the setup of the PSA for best-in-class implementations. 
• MSPCFO provides an application to help MSPs manage client level profitability via labor efficiency and utilization. 
• Service Leadership Incorporated (SLI) (now owned by ConnectWise) has been a pioneer in benchmarking as well as facilitating the Evolve Peer Groups. They have also created a really effective scale to help MSPs determine their operational maturity level (OML). 

I have not seen another industry with so many support structures in place designed to help business leaders achieve their goals for their clients, their teams, and their dreams. I reinforced this point after my most recent attendance at IT Nation in November. 

But something is missing, and it’s been gnawing at me…

There is one area that I consistently see underrepresented, and it’s a critical part of the chassis of MSP success. It’s the heartbeat, the pulse of the machine. It is the energy that flows into the organization and the investments that flow out of the organization. What we’re talking about here is how MSPs organize, track and utilize their financial data to make strategic business decisions. 

Too often we see MSPs that do the bare minimum to get data into their financial statements and then miss the power that comes from harnessing that data for action. It’s not a judgment: If you don’t know what’s possible then you don’t really even know there is a problem. 

So to address this, we leveraged our Powermeter to create the Powermeter for MSPs. The Powermeter for MSPs is a scale that helps MSP business owners assess how you are processing, accessing and using financial data to be the most confident business leader you can be. To further support MSPs, we have attempted to map the Powermeter for MSPs to SLI’s Operational Maturity Levels so that MSPs can use that as a relative guide. 

What is the Powermeter for MSPs?

The Powermeter is a scale that allows an MSP to assess the particular state they are in relative to their financial management processes. There are four states on the Powermeter: Passive, Perceptive, Proficient, and Powerful. 

Who doesn’t want to be powerful?

What are the Powermeter for MSP’s Operating States?

Here is a breakdown for you to assess for yourself where you are on the Powermeter. 

PASSIVE
MOST COMMON WITH SLI’S OPERATIONAL MATURITY LEVELS 1 AND 2 (BEGINNING AND EMERGING)

When you are PASSIVE, you don’t have data to make decisions so you are driven primarily by your gut. Here is what passive looks like:

• Financials are not consistently closed monthly.
• Your accounting is cash-based so you don’t know your inherent company profitability.
• You don’t share your financial data with others because it’s not accurate or actionable.
• You make decisions about investments based on what you think you “should” do—but the decision is not based on data.
• You don’t have any documented processes for your back office, which makes you vulnerable to losing the person who oversees it.
• You are not leveraging data visualization for glanceable views on key efficiency and financial metrics.
• Your chart of accounts isn’t laid out to tell you anything about your margins at a service line level.
• You have no budget or forecast process in place.
• Your accounting is being performed by someone that has very little experience.
• You feel: nervous.

PERCEPTIVE
MOST COMMON WITH SLI’S OPERATIONAL MATURITY LEVELS 2 AND 3 (EMERGING AND SCALING)

When you’re in a PERCEPTIVE state, you have a sense of what you need. You have surface data that is giving your financial information, but can’t answer the “why” questions. Here is what perceptiveness looks like:

• You are getting monthly financials, but don’t know the key questions to ask.
• You have an accounting partner, but your relationship with them is transactional instead of strategic.
• You use accrual-based accounting and can see your intrinsic profitability.
• You ask questions to get underneath the data, but the supporting detail is hard to access.
• You have added automation to sync from your PSA to the financial system in order to avoid human error when entering data.
• You have put some visual reporting in place but it’s common to say, “We have it but I don’t trust the data.”
• You have a clean chart of accounts, but your allocations aren’t painting a useful picture.
• Your time tracking is not used to evaluate client level financial analysis.
• You have some documented processes, but they are rarely referenced.
• You have a budget in place, but it is top down (e.g., we want to grow 15% next year).
• You feel: anxious but excited.

Most MSPs are either in a passive or perceptive state. The range of SLI Operational Maturity Levels are typically 1, 2, and 3 (Beginning, Emerging, and Scaling).

Eventually, some cross the chasm to…

PROFICIENT
MOST COMMON WITH SLI’S OPERATIONAL MATURITY LEVELS 3 AND 4 (SCALING AND OPTIMIZING)

When you’re PROFICIENT, you have your core data dashboards and your team is starting to evaluate the data for decision making. 

WARNING: It’s easy to slip back into a PERCEPTIVE state from here, because your systems are still pretty manual and require a decent amount of work before they’ll be truly data-driven. Here is what proficiency looks like:

• You are meeting monthly with your accounting team and reviewing the data.
• You have good processes in place, but it’s easy to slip back into bad habits.
• Teams are tracking time, but you’re not calculating agreement efficiency rates to determine client level profit effectiveness.
• You are increasingly confident in being able to use data in client conversations.
• You have implemented visualization software (e.g., Brightgauge) but don’t use the output to build action plans and measure performance against them.
• Data is shared more liberally with your team so they can help drive decision making.
• You have a budget in place, but the tracking to actuals is spotty and you’re not re-forecasting.
• You feel: calm and clear.

Being proficient is great—but it’s still not where you truly want to be. You want to be POWERFUL.

POWERFUL
MOST COMMON WITH SLI’S OPERATIONAL MATURITY LEVELS 3+, 4 AND 5 (SCALING, OPTIMIZING AND INNOVATING)

Becoming POWERFUL is…

• The pathway to working on your business (vs. in your business).
• Gaining enough confidence in your data that you can be a coach and guide others because you have the facts.
• Feeling informed enough to make good data driven decisions.
• Knowing where you stand in building equity value and wealth in your business. 

When you’re POWERFUL, you get the data you need when you need it. You have the ability to drill down into it to ask smarter questions about your business. Here is what power looks like:

• You have access and insight into customer level profitability and act on that data.
• You use well-designed financial processes to identify/improve breakdowns.
• You have a budget in place and consistently measure it against actuals.
• You are re-forecasting on a quarterly basis.
• You meet consistently with your accounting team and create action plans (with owners and due dates).
• Your data visualization helps answer questions quickly so you can spend more time planning and less time trying to root cause.
• You integrate data into your client conversations to course correct as necessary.
• You use data to drive strategic investment and customer acquisition decisions.
• You have accurate access to key metrics like::
  • Agreement effectiveness
  • Loaded cost per hour
  • All in seat price
  • Technician utilization
  • Kill rate
• You feel: powerful and decisive.

How Does the Powermeter for MSPs Map to the Operational Maturity Levels (OML) From Service Leadership Inc. (SLI)?

Below is a visual for thinking about the Powermeter for MSPs in relation to the Operational Maturity Levels laid out by Service Leadership Incorporated (SLI), an industry-recognized scale for MSPs. 

You will notice that Powerful is not reserved for the best performing MSPs. MSPs can achieve power while they are in Scaling mode (level 3). In fact, achieving Powerful while in Scaling mode will likely accelerate the velocity to levels 4 and 5. These are not hard and fast categorizations but will help you assess how to prioritize moving up the Powermeter scale relative to your OML. 

Note: The more transparent parts of the range represent a lower percentage of those MSP OMLs in that stage of the Powermeter for MSPs scale. 

Where are you on the Powermeter for MSPs? What is it costing you?

Where do you stand on the Powermeter? Take the free assessment to find out.

Are you where you want to be? Where are the gaps? What is it costing you? 

When you’re on the low end of the Powermeter, you are sacrificing growth, cash flow, culture, and…confidence. Here is how developing toward Powerful helps:

1. Growth: You can accelerate growth when you know the types of clients that are most profitable. You know your pricing scheme and whether there is room to drive it higher without losing prospects. Your team sees the same data that you do, so they can be part of ideating on opportunities for acceleration. You have goals!
2. Cash Flow: You are improving your profitability at a customer level. You better analyze your overhead and know what is required to support your growth. You understand your cash conversion cycle and how to shorten it and collect cash faster so you can invest.
3. Culture: Cultures of transparency create connectedness to a cause. When employees feel that the foundation of the building is solid, they are more confident in driving their area of responsibility without fear.
4. Confidence: Confidence is a state of mind that comes with a knowledge that, while there is always room to improve, the core function of finance is sound and operating without anxious oversight. That confidence gives the business leader more mental space to focus on growth.

If you’re not able to create an environment where financial data can be captured, disseminated, analyzed, and acted upon, there is a leadership vacuum in place. When you cross the gap into Proficiency and Powerful, you’ll see disproportionate value in growth, culture, cash flow, and confidence. 

So how do you get to be Powerful?

First, the most important thing is to celebrate where you are. You see it. You know it. We have served hundreds of clients over many years and consistently see clients fall into these areas of the scale. Often, there isn’t even an awareness that a concept of a Powerful state could exist. For many, living in the state of Perception feels like the mountaintop—but it’s a false summit. There is more room to grow and we’re committed to supporting you in getting there.

“I had no idea that I had so much more room to develop and make strategic use of my financial data in driving my culture and my bottom line,” said one MSP CEO.

Stride bookkeeping/accounting and CFO Advisory services are designed to help our MSP clients move up on the scale or (if you’ll please allow the pun) to stride ahead (no more puns, I promise). Our methodology is purpose-built for MSP power, to help CEOs harness data to make better business decisions while increasing their confidence that they can stay focused on getting into their genius zone and driving growth. 

Here is how we do it:

1. Full back office day to day team with redundancy. Stride becomes your accounting team, giving you full access to a client success manager and support team that is managing transaction inflows across invoicing, accounts payable, payroll, cash, and expense reconciliations, regulatory and compliance, and full financial reporting.
2. Process design for root cause analysis. We document your processes so you know who is doing what and how it’s getting done. When a breakdown exists, we swarm it, root cause it, and solve it systemically.
3. Systems implementation and automation. We implement the right systems and the right automation to give you confidence in your data and ability to scale. For example, we use Mobius to ensure that our clients’ data syncs seamlessly (and accurately) from ConnectWise Manage to QB Online. 
4. More than bookkeeping, business intelligence. We implement business intelligence reporting via Stride Vista for our clients so they can see trend financial data to drive strategic conversations. We have full integrations with QuickBooks Online and supporting spreadsheets and are now integrating PSA data into that reporting.
5. Analysis and strategy. We provide two tiers of financial review to look at how the business has performed compared to trend and to look at how the business is projected to perform based on forecasts we help you build through our CFO Advisory Services.

To learn more about how we help our clients at Stride move up the scale to a place of power, reach out and let’s discuss. We’re here to support your power.