In this article 6 sections
Run the business from data
Morgan Aspinall, Product Manager at HaloPSA, hosts this scaleUP episode with Darren Strong, founder of Scalable. Mit Patel, founder and former owner of London MSP Netstar, joins them as the guest. The subject is using data and KPIs to track progress against the long-term plan.
Darren opens with a pattern he sees in high-performing MSPs. They run the business from data that reaches every department and individual, so people know what good looks like in their role. Less is more. Some MSPs have so many dashboards that it takes days to read them before anyone decides anything.
Best in class starts with the finances
For Darren it all comes back to finance. Revenue and costs need to sit in the right buckets so they can be compared with best in class. The term comes from Service Leadership, run by Paul Dippell, where MSPs submit their P&L in a set format and the top-quartile performers are averaged. Top performing means growing revenue and profitability together, with the operational maturity to build an asset.
His benchmark for managed services is a 51% service gross margin, after hard costs such as tool licences and the fully burdened cost of the engineers. An MSP that falls short should check its data, then delivery efficiency and tool costs. He also challenges pricing set to match the MSP next door. Instead, work out the cost of delivery, add the 51% and make that the retail price.
Measure the right thing
Darren says every KPI needs a why: what it does for the business and what is in it for the person. Mit agrees, and adds that you have to measure the right thing. His example is CSAT. People tend to respond only when they are very happy or very unhappy, so the score says little. In his old business they tracked the response rate instead, because the more people respond, the more likely they are to be happy.
Darren warns that any single target creates behaviour. Ask an engineer to close 12 tickets a day and they may stop caring whether the problem is fixed. He prefers a small set of numbers that cascade from the business plan to the front line. Mit cites Patrick Lencioni’s book on the three signs of a miserable job. One sign, as he puts it, is not knowing at the end of the day whether you have done a good job.
Avoiding KPI chaos
Mit describes a limit of 15 KPIs per department, with one number at leadership level. Any more and “you just end up in your KPI chaos”. The 15 are then clarified as the key KPIs at senior leadership level, each one fed by numbers inside its department. Mit made department leads type their number into a spreadsheet by hand, so they had to think about it and explain any movement. Darren adds a “manage to zero” dashboard that shows only deviation from target.
On finance, Mit watched MRR, debtor days and cash flow. Once direct debits and automated reminders brought debtor days under control, the number stopped moving, so it came off the dashboard. Darren sorts clients into 4 profitability tiers. The least profitable lose discounts and get reviewed, leading to small, regular price changes rather than a 10% to 12% rise every few years.
Act on it or drop it
Morgan holds that any number can be acted on, because best-in-class figures come from real-world data. Darren’s caveat is that the KPI must sit with someone who can change it. Mit recalls department meetings that showed the same numbers month after month, and board packs of 160 pages that took 3 days to produce.
Closing advice from Darren: structure the PSA so the data is accurate. Mit: measure 15 things or fewer, and make sure you can discuss each one. Morgan: track data that is actionable and owned by the right person.
Common questions
What service gross margin counts as best in class?
Darren puts it at 51% for managed services, based on Service Leadership’s top-quartile data, after tool and labour costs.
Why can a CSAT score mislead?
Mit’s experience is that people mostly respond when very happy or very unhappy. Mit’s old business tracked the response rate instead.
How many KPIs should an MSP track?
15 or fewer at senior leadership level, each fed by numbers inside its department. Mit’s closing advice is to measure 15 things or fewer.
What should you do with a KPI that never changes?
Remove it. Mit’s debtor days stayed low once direct debits and automated reminders were in place, so the number was replaced with one the team could act on.
What is the Assurix Trustmark?
The live trustmark for MSPs. Assurix independently assesses 59 controls: 40 security controls aligned to NCSC CAF 4.0 and 19 operational controls built for MSPs. Live-measured controls are checked every six hours and the rest on a set cycle. An Assurix assessor signs off. A failure left unfixed for 30 days suspends the Trustmark publicly.
