As an MPS business, determining your sources of revenue is essential in helping you plan for the future. One way you can determine your biggest source of revenue is by analyzing your profit drivers.
Following a step-by-step method will allow you to understand all of your sources of income while also giving you the knowledge to make future changes to further boost your bottom line.
Create a List of Your Products and Services
The first step is to write down a list of all of your products and services. This list can be wide-ranging, or it may only focus on a few specific areas for your company. You can also update this list in the future to ensure it accurately reflects the business operations of your IT company.
Find the Average Length of Time to Complete These Products and Services
The next step is to understand the amount of time it takes to complete all of these products and services. You can easily create a point system to simplify the process, such as assigning one point for every hour spent on a task. Once you create a point system, the next stage is to begin time tracking each task and recording all of this information.
Figure Out the Number of Sales
Finding out the number of services sold is the next stage in developing a formula. These services can be wide-ranging for an MSP business, such as cybersecurity, network monitoring, employee training, or many other options. You will also need to write the price for each service and calculate the average revenue per sale. You can also break down this information on a weekly, monthly, or annual basis.
Perform Calculations
The final step is to multiply the average number of units sold by the price per unit to obtain the average revenue per sale. Dividing the average revenue per sale by average points will give you the average per point. All of this data makes it possible to know how much are you making each hour for the services and products that you offer. Understanding this information can help you make changes in the future to increase profit and maximizing efficiency for your business.
Closing Thoughts
Frequently performing these calculations is important in helping you manage the finances of your MSP business. All of this data can help you understand if you need to make any changes to the products or services that you offer. You may also need to change your pricing model to take into account all of this data. The workplace for IT service providers is always competitive, but using these profit drivers can give your business a much-needed edge over all of your competition.
