The Golden Metric for an MSP

I want to talk about the golden metric for MSP management. At Stride, we call it the win4all ratio.

The win4all ratio says: We want to make our clients successful, and we want to deliver them a great service at a fair value. The win for all part of it is to make sure that we’re able to be profitable while we’re delivering delivering that great service at a good value.

There’s a way that we can measure that that I call the golden metric. And the golden metric looks something like this for your managed service customers specifically:

1. Take the numerator as your MRR, your monthly recurring revenue
   
   and you divide that by:
   
   
2. The shadow bill rate (what would I be billing you if I was billing you on an hourly basis at my bill rate for the level of engineer for the level of individual that would be servicing you.)

Shadow bill rate is not my term. I’ve heard it from some other notable industry experts like Larry Cobrin at MSP CFO. 

Here is an example.  If I’m charging you $5,000 a month MRR but my shadow bill rate is $10,000 (say it’s 100 hours times $100 An hour effectively), then my win4all ratio is 0.5. That’s a problem.

And that signals an opportunity. Here’s how:

1.  It’s an opportunity to use data with the client to clear context to get in sync.
2. It’s an opportunity to look at that and say, “Hmm, why might that be happening?
   • Did we price it incorrectly?
   • Do we have a broken process on our side?
   • Is there something on the client side? That’s increasing our costs?

The goal is to consistently measure the Win4All and have it be greater than 1.0.