Talking about MSP KPIs (managed service provider key performance indicators) gives me the chance to break out two of my favorite business management quotes (both of which have debatable origins):
- “What gets measured gets done”.
- “Not everything that can be counted counts. Not everything that counts can be counted.”
There’s an interesting tension to those two quotes that anyone running an MSP can relate to. Some aspects of your business, like sales numbers and costs of goods sold (COGS), are straightforward to measure. Other things, like reputation and customer delight, aren’t easily quantifiable.
That tension makes selecting the right MSP KPIs and understanding what they can and, just as importantly, cannot tell you an essential aspect of running a profitable MSP business.
To help you get it right, in this article we’ll explore 27 critical MSP KPIs, how to calculate them, and how they help measure MSP performance. As a bonus, I’ll close things out with one of my new favorite business management quotes for MSPs.
MSP Marketing and Sales KPIs
MSP Financial KPIs
MSP Client-Centric KPIs
- Average ticket response time
- Average ticket resolution time
- First contact resolution rate
- Service level agreement (SLA) compliance rate
- Customer satisfaction (CSAT) score
- Customer efficiency
- Technician efficiency
- Number of new tickets opened/closed
- Customer churn rate
MSP Marketing and Sales KPIs
The MSP KPIs in this category can help you develop an efficient MSP sales strategy. If you’re looking to understand how much it costs to acquire customers, calculate when firing a customer might make sense, or quantify your sales effectiveness, start here.
1. Total cost of sales and marketing
The total cost of sales and marketing is the sum of sales and marketing expenses over a time period.
Total cost of sales and marketing inputs include:
- Labor costs
- Commissions and fees
- Advertising expenses
- Sales and marketing tools
which are added together to create this MSP KPI. Total costs of sales and marketing is a powerful MSP KPI for calculating how much your efforts to acquire customers cost. This MSP KPI is often calculated on a monthly, quarterly, or yearly basis.
2. Number of appointments set (first-time appointments)
The number of first-time appointments (FTAs) track the total number of sales calls an MSP books over a time period.
This MSP KPI is useful for tracking leads. Talking to new leads is a significant step in closing new leads. Tracking this KPI is simple: Add up the number of FTAs you book and conduct in a given period. This indicator is a valuable probe that helps determine if your business is spending enough time attempting to grow business with new customers.
⚠️ Be careful with FTAs as an MSP KPI. Number of FTAs is a practical “smell test,”, but you should avoid over-emphasizing this KPI as it can create misaligned incentives between your business and your marketing teams. After all, you don’t just want leads. You want profitable leads you’re likely to close.
3. Cost per lead
Cost per lead is the cost of sales and marketing spend divided by total leads.
This MSP KPI is an average that is calculated like this:
🔴 total cost of sales and marketing ÷ total number of leads = cost-per-lead
The key to using this KPI effectively is clearly defining a lead. In general, I recommend considering any potential customer that expresses interest in your offerings as a lead. That makes FTAs a possible input to this calculation.
4. Lead-to-opportunity rate
Lead-to-opportunity rate is the percentage of unqualified leads that convert to qualified opportunities.
Understanding this MSP KPI requires a marketing funnels 101 refresher. There are three types of potential customers in a marketing funnel. They are:
- Leads: An unqualified potential customer at the top of your sales funnel. For example, they may have expressed interest by downloading a website asset. Leads may or may not be one of your MSP’s target personas.
- Prospects: Prospects are leads that can likely benefit from your business’s products or services. They are one of your MSP’s target personas, and they might consider buying.
- Opportunities: An opportunity is a prospect with a high probability of closing. For example, details of a deal have been expressed and the potential customer has clearly signaled interest in your products or services.
With that in mind, the lead-to-opportunity rate is a percentage calculated like this:
🔴 (leads that convert to opportunities ÷ total number of leads) × 100 = lead-to-opportunity rate
This MSP KPI helps quantify how efficiently you are pushing potential customers through the sales funnel.
5. Close ratio
Close ratio is the number of leads that convert to customers.
Close ratio goes further than the lead-to-opportunity rate and calculates the ratio of leads that convert to customers. It is calculated like this:
🔴 leads converted to customers ÷ total number of leads = close ratio
This MSP KPI is a good indicator of the effectiveness of your sales funnel in finding quality leads and ability to close. All else being equal, close ratio can help you forecast how many leads you need to generate to grow your customer base by a given amount.
6. Customer acquisition cost (CAC)
CAC is the average cost of gaining a new customer.
The CAC calculator is pretty straightforward for any given period:
🔴 total cost of sales and marketing ÷ total customers = customer acquisition cost (CAC)
Coupled with client lifetime value (CLV), this KPI can give you insight into your MSP business’s long-term sustainability and profitability.
7. Client lifetime value (CLV)
CLV is how much money customers spend with your business throughout the customer lifecycle.
There are multiple ways to calculate CLV, including accounting for net present value (NPV). One of the most straightforward CLV formulas is:
🔴 average revenue per client × average client lifetime = client lifetime value
For example, if the average client spends $1,000/month and remains a client for two years (24 months), CLV is $24,000.
What’s a good CLV to CAC ratio?
As a rule of thumb, about 3:1 is a healthy ratio.
There’s no one-size-fits-all answer to this question, but 3:1 is the textbook answer for a healthy CLV to CAC ratio. At 1:1, you’re breaking even on each customer. If your ratio is less than 1:1, acquiring customers is costing you money. 3:1 provides a reasonable balance of sustainability and growth. If your ratio drifts too high above 3:1, you may not be investing enough in marketing.
However, the context of your business goals and market conditions matter too. A lower ratio may be fine if you’re more worried about capturing market share than growing profits. Conversely, if you’re not looking to expand too much and want to focus on increasing business with existing clients, a ratio well above 3:1 may be a reasonable target.
8. Minimum client MRR
Minimum client monthly recurring revenue (MRR) defines the minimum revenue required for a business to onboard a client.
Minimum client MRR sets a floor to consider when onboarding a new client. If the client isn’t willing to spend the minimum client MRR amount per month, signing a service agreement doesn’t make business sense.
This metric can be coupled with CAC and profitability goals to help decide which potential customers are “worth it” financially. Remember that a strategic customer may sometimes warrant an exception to minimum client MRR. For example, a trial service contract at one location may lead to contracts for a dozen more.
9. Average deal size
Average deal size is the average revenue per sales deal closed.
The average deal size calculation for a given period (e.g., month, quarter, or year) is:
🔴 total revenue from sales deals ÷ number of deals = average deal size
This MSP KPI can provide insight into the potential incremental revenue per deal you close. You can add more context by calculating the average deal size for different categories (e.g., customer industry or region).
10. Upsell rate
Upsell rate quantifies the frequency at which existing clients are sold additional products and services.
The upsell rate calculation is:
🔴 (existing clients sold additional products or services ÷ total clients) × 100 = upsell rate
This MSP KPI provides insight into how well you’re growing business with existing clients.
Want to learn how to price your managed services effectively? Check out the free MSP Guide to Pricing Managed Services.
MSP Financial KPIs
The MSP KPIs in this category help you home in on the financial side of MSP performance. They can help you quantify net operating income, operating expenses, and cash flow. Getting these right can make or break your bottom line.
11. Monthly recurring revenue (MRR)
MRR quantifies how much recurring revenue — such as revenue from subscriptions and contracts — a business brings in monthly.
MRR is an essential KPI in the MSP industry. It tells you how much money your MSP brings in from recurring revenue sources, like service contracts, that are the backbone of MSP financials. MRR is calculated as:
🔴 average recurring revenue per account × total accounts = MRR
For example, suppose you have a single service contract that costs $1,000/month and 10 accounts signed up for that contract. Your MRR is $10,000/month ($1,000 × 10).
12. Client contribution (CC)
Client contribution (CC) is a measurement of customer profitability.
CC indicates the profitability of a given account. The formula for calculating this MSP KPI is:
🔴 revenue from the client – costs associated with the client = CC
A low or negative CC can be an indicator there’s something wrong with the client relationship. A high CC indicates a profitable client you should continue to nurture a relationship with.
13. Staff utilization rate
Staff utilization rate indicates the percentage of time staff spends on productive revenue-driving work.
Staff utilization rate is calculated as:
🔴 (labor hours on billable work ÷ total labor hours) × 100 = staff utilization rate
As with many MSP KPIs, the key to using staff utilization rate effectively is appropriately framing the inputs and setting reasonable expectations. For example, you probably want employees to do some on-the-clock training that isn’t billable so they can be more productive in the long run. Similarly, you should be wary of the 100% utilization myth when resource planning.
14. Total effective billable rate (EBR)
Total effective billable rate quantifies the actual return on billable time.
This MSP KPI indicates your actual billable rate when you include context that might not be captured in your published billable rate. The calculation for EBR is:
🔴 revenue ÷ total labor hours = EBR
A low EBR may signal that there’s waste or a bottleneck in your processes negatively impacting profitability.
15. Service line effective billable rate
Service line effective billable rate (EBR) details EBR for individual service offerings.
Service line EBR helps MSPs understand the return on labor for different offerings. This MSP KPI can help inform decisions around which offerings to expand and which offerings may need to be revamped or eliminated from a portfolio. The calculation for service line EBR is:
🔴 revenue from offering ÷ total labor hours dedicated to offering = service line EBR
16. Cost of goods sold (COGS)
COGS quantifies costs associated with creating a product or service, including labor, materials, and services.
COGS is a standard accounting metric that sums all the expenses directly associated with a product or service. For example, here is a simple COGS formula:
🔴 labor + hardware + software licenses = COGS
Note that COGS doesn’t include overhead costs like marketing expenses.
17. Earnings before interest, taxes, depreciation, and amortization (EBITDA)
EBITDA is a measurement of operational profitability.
As the name implies, EBITDA can be calculated using this formula:
🔴 net income + interest expenses + taxes + depreciation + amortization = EBITDA
EBITDA is sometimes criticized as overstating profitability and is not recognized in generally accepted accounting principles (GAAP). However, it can help clarify the profitability of an MSP’s business operations.
18. Contract profitability
Contract profitability measures the profit or loss associated with individual contracts.
Simply put, contract profitability tells an MSP if they’re making money on a service contract or not. This MSP KPI is calculated with this formula:
🔴 contract revenue – costs associated with contract = contract profitability
Customers with profitable contracts are likely to be your VIP clients. Customers with low or no profitability contracts may be a sign of a business problem you need to address.
MSP client-centric KPIs
These MSP KPIs help you better understand customer relationships and the efficiency of your service delivery. In the MSP world, where being a trusted advisor is often the name of the game, that can mean a lot.
Integrated MSP software can help you calculate MSP KPIs in general, and can significantly streamline and improve tracking of several of these client-centric KPIs in particular. That’s because integrated MSP software combines tools like PSA and RMM in a unified platform that reduces data silos.
19. Average ticket response time
Average ticket response time details how quickly an MSP responds to new tickets.
This MSP KPI tells you how quickly your team responds to tickets your clients open. The calculation for average ticket response time in a given period is:
🔴 total time for waiting for response ÷ total tickets = average ticket response time
20. Average ticket resolution time
Average ticket response time details how quickly an MSP resolves tickets.
This MSP KPI tells you how quickly your team resolves tickets your clients open. The calculation for average ticket resolution time in a given period is:
🔴 total open ticket time ÷ total tickets = average ticket resolution time
💡 Pro tip: Use automated remediation to improve resolution times. By removing the human element from simple fixes, MSPs can drastically reduce resolution times and improve client satisfaction.
21. First contact resolution rate
First contact resolution rate is the percentage of tickets resolved the first time contact is made on a ticket.
All else being equal, the less back and forth on a ticket, the better. Your clients don’t want to spend time explaining problems, and you don’t want technicians spending more time than needed to resolve issues. This MSP KPI helps you quantify how often you solve problems on first contact.
The formula for first contact resolution rate is:
🔴 (total tickets resolved on first contact ÷ total tickets) × 100 = first contact resolution rate
22. Service level agreement (SLA) compliance rate
SLA compliance rate is the percentage of tickets resolved within the timeframes defined in an SLA.
SLAs are the cornerstone of customer relationships for an MSP. They define expectations for resolution times and responsibilities. SLA compliance rate is an MSP KPI that helps describe how well you are living up to your agreements.
You can calculate SLA compliance rate with this formula:
🔴 (total tickets closed within SLA time ÷ total tickets) × 100 = SLA compliance rate
23. Customer satisfaction (CSAT) score
Customer satisfaction scores quantify customer satisfaction based on surveys or similar customer touchpoints.
Keeping your customers happy is important to customer retention and acquisition through word of mouth. Quantifying customer satisfaction can be challenging, making it difficult to measure. Several scores aim to solve this problem, with net promoter score (NPS) being among the most popular.
NPS is based on a 0-10 rating where scores of 9-10 are promoters of your business, 7-8 are “passive” (satisfied, but not promoters), and 0-6 are detractors. With that in mind, NPS is calculated using this formula:
🔴 percentage of promoters – percentage of detractors = NPS
24. Customer efficiency
Customer efficiency measures the time it takes to service a ticket by customer.
Customer and technician efficiency reports help MSPs identify potential bottlenecks and “golden geese” in their ticket workflows.
To calculate customer efficiency, compare:
🔴 total time spent on customer tickets ÷ total tickets for a customer
to
🔴 total time spent on tickets ÷ total tickets
If a customer’s tickets of the same type are significantly higher than other customers, there may be a problem. If they are substantially lower, you may have a “golden goose” that helps make your business more efficient.
25. Technician efficiency
Technician efficiency measures the time it takes to service a ticket by technician.
To calculate technician efficiency, compare:
🔴 total time a technician spent on tickets ÷ total tickets for a technician
to
🔴 total time spent on tickets ÷ total tickets
If a technician’s tickets of the same type are significantly higher than other techs, there may be a problem that requires training or investigation. If they are considerably lower, you may have a superstar technician that helps make your business more efficient. As you review the data, you may even gain some insights that lead to restructuring or reorganizing your support tiers.
26. Number of new tickets opened/closed
The number of new tickets opened/closed indicates whether your ticket backlog is growing or shrinking.
This MSP KPI helps you understand if the help desk can keep up with the inflow of tickets or not.
You can calculate this KPI either as a ratio:
🔴 new tickets ÷ tickets closed
or by taking the difference between new and closed tickets:
🔴 new tickets – tickets closed
A 1:1 ratio or difference of 0 implies your help desk is just keeping up with tickets as they come in. Anything higher suggests they aren’t keeping up.
27. Customer churn rate
Customer churn rate is the percentage of customers that stop using a service in a given period.
Lost customers means lost revenue. While some churn is effectively inevitable, MSPs should strive to keep churn low to protect their profits. Churn of 2-5% or less is a reasonable ballpark.
To calculate churn, use this formula:
🔴 (customers lost in a given period ÷ customers at start of period) × 100 = customer churn rate
For example, if you had 100 customers at the beginning of a month and lost three throughout the month, that’s a 3% churn rate.
In addition to customer churn rate, MSPs can calculate recurring revenue churn with this formula:
(recurring revenue lost in a given period ÷ recurring revenue at start of period) × 100 = recurring revenue churn rate
If customer account size varies greatly, calculating churn based on revenue helps add context you might otherwise miss.
Want to optimize your ticket handling workflows to drive better retention and higher profits? Download the free guide to Ticket Handling Best Practices for MSPs.
Which MSP KPIs are right for your business?
The MSP KPIs we’ve covered here are a great way to help you home in and improve your business with data-driven decisions. However, simply focusing on KPIs isn’t going to improve your bottom line. In fact, you probably don’t need all of these KPIs. You need the right set of KPIs, targets, and context to help you drive business outcomes.
This brings me back to one of my new favorite MSP business quotes, paraphrased from computer scientist Alan Kay: “Context is worth 80 IQ points.”
For example, if you’re focused on growth, a higher-than-normal CAC might make sense. Similarly, a high churn rate might be a good thing if you’ve just fired a big account that wasn’t profitable.
If you’re looking for an integrated MSP platform that can help you track key KPIs and run a more profitable MSP, sign up for a free trial of Syncro.
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