Picanomics: The New MSP Math

© 2015 N-able Technologies, Inc. All rights reserved. 1

PicanomicsThe New Math of

Managed Services


Webinar details

? REC

Length: 60min Questions welcome any time

Recording and slides available

next day


On today’s Webinar

Presented By:

Gary Pica

President, TruMethods

Mike Cullen

VP Worldwide Sales and Business strategy, N-able


Giving service providers the insights we’ve gained from

working with over 5,500 MSPs

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What if 25% of your total

revenue was in the bank

after all expenses and

owners salary?

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• Efficiency increases profits

• Leverage measures efficiency

• Leverage is service revenue/EE

Leverage


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Measuring Leverage

Average MSP World Class

Number of

Employees 10 10

Annual Service

Revenue 1,000,000 $1,500,000

Leverage $100,000 / EE $150,000 / EE

Unrealized Profitability = $500,000!


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• Relate service delivery roles to revenue

(Macro)

• Average cost per seat vs average AISP

(Micro)

• Highlight the 3 central numbers

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Picanomics

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World Class

is a beautiful, simple

math problem


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Our industry makes the math

complex

• Balance sheets

• Income statements

• Labor loaded Gross Margin

• SLA’s

• EBITDA


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Three simple numbers

1. Avg. AISP

2. Avg. MRR

3. RHEM


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Checkpoint

Average World Class

AISP < $100 $125-$160+

Average MRR < $2,000 $3,500+

RHEM 1 hour < 15 minutes

Net Profit 10% 25%+


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• You want higher profit margins but you drive

leverage

– You want more service revenue per employee

– You need to relate each employee to a role (s)

– Relate each role to revenue

– Understand the leverage factors for each role


Macro Picanomics

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5 Service delivery areas

Professional Services

Centralized Services

Net Admin vCIO Support


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Leverage Guidelines

Professional Services 1 per 17k+ / month NRR

Centralized Services 1 per 5,000+ endpoints

Network Administration 1 per 50k+ in MRR

vCIO 1 per 100k+ in MRR

Support Desk 1 per 50k+ in MRR


Macro Picanomics

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• Professional Services (NRR):

1 per $17k+ / month NRR

• Levers

• Utilization

• Hourly rate


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Professional Services Example

Company A

• Hourly rate: $125

• Utilization: 85%

$17k Month NRR per

Resource

Company B

• Hourly rate: $150

• Utilization: 90%

$22k Month NRR per

Resource


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• 1 per 5,000+ endpoints

• Levers

– Leverage increases with scale

– Assume all alerts are sent to reactive support

– Consider tool cost in our micro math



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Network Administration

• 1 per $50k+ MRR

• Levers• Number of Accounts Managed

• Average MRR


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Network Admin Example

Company A

• Average MRR: $2,000

• Accounts managed: 20

$40k MRR per vCIO

Company B


• Accounts Managed: 23

$62k MRR per vCIO


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vCIO

• 1 per $80k+ MRR

• Levers

• Number of accounts

• Average MRR


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vCIO Example

Company A


• Accounts managed: 40

$80k MRR per vCIO

Company B


• Accounts Managed: 45

$121k MRR per vCIO


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- Hourly Rate

- Utilization

- # of Clients

- Avg. MRR

- # of Clients

- Avg. MRR

- Endpoints

- AISP

- AISP

- Reactive

Time / EP.

Fixed Fixed FixedFixed Variable


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Support

• 1 per $50k+ MRR

• Levers

• Average AISP

• RHEM


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Calculate RHEM

Tickets / Endpoint / Month

times

Average Resolution Time

equals

Reactive Hours / Endpoint / Month (RHEM)


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Example

A B C D

Tickets /

Endpoint / Mo.1 0.5 0.5 0.25

Avg. Resolution

Time1 hour 1 hour 0.5 hours 0.5 hours

RHEM 1 hour0.5 hours

(30 minutes)

0.25 hours

(15 minutes)

0.125 hours

(7.5 minutes)

Support

Resources6.25 3.1 1.55 0.78


• Endpoints supported: 1,000

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Example

A B C D

Tickets /

Endpoint / Mo.1 0.5 0.5 0.25

Avg. Resolution

Time1 hour 1 hour 0.5 hours 0.5 hours

RHEM 1 hour0.5 hours

(30 minutes)

0.25 hours

(15 minutes)

0.125 hours

(7.5 minutes)

Support

Resources6.25 3.1 1.55 0.78

AISP $100 $125 $140 $90

Support Desk

Leverage$16,000 / mo. $40,000 / mo. $90,000 / mo. $115,000 / Mo.

• Endpoints supported: 1,000


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Letting the noise permeate

Lower noise

Generate NRR


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Picanomics




1. Avg. AISP

2. Avg. MRR

3. RHEM


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• Macro Picanomics

– Based on MRR & NRR, match roles to revenue

– Compare targets against current organization

– Where are we inefficient?

– Where do we have capacity?

Macro Picanomics


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Macro Picanomics

Current Projected

MRR

NRR / Month Average

Team by Delivery AreaCurrent Should be…

Projected (24 months)

Support


Network Administration

vCIO



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• Summary

– Use macro view to evaluate your service delivery

– Identify capacity and inefficiency

– Uncover revenue impact

– Combine with micro view to get a more complete

picture

– Projections create a framework

Macro Picanomics


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Micro Picanomics

• Micro Picanomics

– Determine the cost per seat by delivery area

– Use Macro Picanomics as your guide

– Based on our AISP, what is our Gross Margin?


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Support:

* Seats Managed is 160 (hours) divided by Average Time per Ticket divided by Tickets per Month per Endpoint.

Monthly Cost per Employee

Tickets per Month per Endpoint

Average Time per Ticket

Seats Managed*

Cost per Month per

Seat

$4,500 0.5 0.67 480 $9.38

Micro Picanomics


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Centralized Services:

Monthly Cost

Seats Managed

Cost per Month per Seat

per Employee $4,500 1000 $4.50Tools (total) $4,000 1000 $4.00

Micro Picanomics


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Network Administration:

** Seats Managed = Clients Managed per Employee Multiplied by Average Seats per Client

Monthly Cost per Employee

Clients Managed per Employee

Average Seats per Client

Seats Managed**

Cost per Month per

Seat

$5,800 20 25 500 $11.60

Micro Picanomics


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vCIO:

*** Seats Managed is Clients Managed per Employee Multiplied by Average Seats per Client

Monthly Employee

Cost

Clients Managed

Average Seats per Client

Seats Managed***

Cost per Month per

Seat

$7,100 45 25 1125 $6.31

Micro Picanomics


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Cost per Month per Seat

Support $9.38

Centralized Services $9.50

Network Administration $11.60

vCIO $6.31

Total: ~$36 / Month / Seat

Micro Picanomics


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Gross Margin:

AISPTotal Costper Seat

Gross Margin

Gross Margin %

$125 $36 $89 72%

Micro Picanomics


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What if your AISP is lower?


Gross Margin

Gross Margin %

$125 $36 $89 72%$100 $36 $64 64%$85 $36 $49 58%

Micro Picanomics


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What if cost per seat is higher?

Micro Picanomics


Gross Margin

Gross Margin %

$125 $46 $79 63%$100 $46 $54 54%$85 $46 $39 45%


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The impact of RHEM and prices

ExampleAvg.

Seats

Avg.

AISP

Avg.

MRR

MRR with

50 clientsSeats

Right

Customers-

Right price20 $140 $2,800 $140,000 1000

Right

Customers-

Wrong Price20 $95 $1,900 $95,000 1000


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• Macro View: This is the framework to align

people with top-line revenue

• Micro view: Calculating cost per seat provides

a detailed understanding of GM based on AISP

• Smart Numbers: AISP, average MRR, RHEM

Picanomics


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The N-ABLE TECHNOLOGIES and N-CENTRAL marks are the exclusive property of N-ableTechnologies, Inc. and its affiliates, are registered with the U.S. Patent and Trademark Officeand the Canadian Intellectual Property Office, and may be registered or pending registrationin other countries. All other N-able trademarks, service marks, and logos may be commonlaw marks, registered or pending registration in the United States, Canada, or in othercountries. All other trademarks mentioned herein are used for identification purposes onlyand may be or are trademarks or registered trademarks of their respective companies.

Questions




The N-ABLE TECHNOLOGIES and N-CENTRAL marks are the exclusive property of N-ableTechnologies, Inc. and its affiliates, are registered with the U.S. Patent and TrademarkOffice and the Canadian Intellectual Property Office, and may be registered or pendingregistration in other countries. All other N-able trademarks, service marks, and logos maybe common law marks, registered or pending registration in the United States, Canada, orin other countries. All other trademarks mentioned herein are used for identificationpurposes only and may be or are trademarks or registered trademarks of their respectivecompanies.