Business Growth

One of the most common topics appearing on Reddit’s MSP sub-reddit r/MSP is about time sheets and the general distaste that many in our sector have for them.  So let’s talk about why they are essential and how to make sure they get done.

Often engineers don’t feel that time keeping is a necessary part of their role and there are many reasons they feel this way.  MSPs technicians come up with a plethora of reasons as to why they don’t record their  time. Here’s a few:

  • What they offer is a product, not a service, and that time has little to do with the outcome.
  • Worrying that the customer will get billed “too much”.
  • Worrying that their productivity will be called in to question by management.
  • “Too hard basket” – feeling too busy to enter time.

Whilst it’s human nature for technicians to be wary of management’s intentions for time sheets, the truth is that in a well run MSP time is the driver of all other aspects of the company. Good managers aren’t only about billable time – they are about quality of life and careful planning.

MSPs are a service business

Before we get into that, let’s explore and hopefully dispel one common myth improperly echoed in MSP forums – “MSP is a product, not a service so timesheets don’t matter”.

MSP is, in fact, a service, not a product and here’s why.

MSPs have been successful at packaging pricing to make invoices easier for customers by coming up with per user or per device pricing and bundling other products like Office 365 or antivirus in to the price. But an MSP is still a human driven business and the majority of the “product” is in fact labour.

Despite leaps and bounds in automation technology (RMM) and simpler ways to deliver IT support to a customer, there is invariably always someone working on a customer account and that person costs money in the form of a salary. Whether it’s level 1 technician or a senior network administrator, labour is both a cost and a revenue stream for an MSP – even if it’s packaged at a fixed fee.

This is a very important distinction because if technicians avoid entering time then the MSP ends up losing “stock”.  The employee gets paid, but the MSP does not have a clear picture of how the employees time is divvied up across multiple customers.

At Benchmark 365 we often meet with MSPs who have several technicians but no clarity on how their time is spent. The technicians are overworked and want management to hire more techs but the timesheet is patchy or non-existent – making it difficult for the owner to make a data driven decision.

If nothing else is taken from this article, mark my words, you cannot make critical hiring decisions and capacity decisions without data to tell your how time is being spent.

Still not convinced time is meaningful in an MSP?

OK, I know there are tons of arguments to field here but let’s look at the financial dynamics of an MSP.  Recently I met with John from Colorado – John has a small MSP with 10 small customers each paying around $1000 a month.  His engineer was stressed out and John was working at all hours to help him. We took a look at timesheets and to no one’s surprise – there weren’t anyway.  So I asked John to spend the next month tracking time for him and his engineer and we’d meet again once he had some tangible data.

The result was that of his 10 customers, 5 of them rarely called. So they were profitable – not necessarily happy, but profitable. The other 5 had more than 20 hours each of labour in that month. So if we do some simple math here, those customers were paying around $50 an hour for support.

For some this would appear to be fine – especially if the technician was on a relatively low salary. But this is only half the story. To win these $1000 contracts John had thrown in everything and the kitchen sink.  Customers enjoyed Office 365 licenses, anti-virus software, spam filtering, backup storage and RMM tools.

Because John and his tech were overwhelmed they’d also engaged a call center to answer the phone and some of these customers were phoning 3 times a day at an additional cost to the business.

All said and done, John had 5 profitable customers and the rest were barely covering his costs if not costing him money.

An MSP is a time driven business – and if you cannot equate the hours spent on a customer to how much the customer spends with you – then you cannot grow, you cannot make informed hiring decisions and, as an owner, you may find yourself stuck on the tools for a very long time.

Some hard truths for MSPs

If you still think that time isn’t essential – the industry data suggests otherwise. In fact, the majority of MSPs we’ve spoken to aren’t pure MSPs.  Many have legacy break/fix contracts that are purely time driven. Almost all MSPs have out of scope work and projects that are also time driven and, unfortunately, often aren’t recorded accurately – resulting in lost revenue.

So even if you desire to be a fixed fee provider, if you’re doing any form of hourly servicing, you and your team must record time.

Employees and latency

Let’s assume MSP owners don’t mind if a tech bills less than the market mantra of “80%” billable time.  Some MSP owners that we speak with see enough value in the skill set of an engineer that they don’t care if billable time isn’t at the market minimum.

I get that – in my companies we have a ton of people who are so valuable to me that if they miss billable targets we have other metrics like quality and customer service or distinct skill sets.

But let’s be clear – if you are keeping high quality, high paid resources on your team who don’t track time consistently then you have a latency problem. Either your customers have to pay for that latency in the form of higher hourly rates, higher than average margins on products you sell or higher user fees – or you are paying for it!

Latency is a massive problem for MSPs.  If staff don’t track time, and clients only require the use of your high paid staff intermittently then this generally leads to poor financial results for an MSP.

Benchmark 365 solves the latency issue for our Partners by only billing for usage. It doesn’t matter that we have a large, skilled team working around the clock. What matters is our Partners only pay for what they use.  This unique approach to solving MSP latency makes our Partners more profitable because – unlike staff who are either latent or not recording time – every hour of service we provide is a direct ROI to them.

Time is in your side

Now that we’ve defined the problem.  What’s the answer? Many will say it is impossible to get technicians to enter an accurate time sheet.

I struggled with this myself until I changed my mindset.  Once I changed my mindset (when I learnt that we were writing off 50% or more of our teams time each week!) I went to work on my team and today we record everything 24 hours a day, 7 days a week.. and that’s a lot of time that could have been wasted.

Here’s what we did:

1.     Daily timesheets – leaving a timesheet to be updated for a week is a recipe for disaster.  We shifted to daily time sheets with a reminder before the end of the technicians shift.

2.     Making time visible – as I stated earlier there are often some good reasons why some staff aren’t 80% billable.  That’s fine. But when we made time visible through the team dashboard it was amazing to see many of our resources accomplish 20-30% more recorded time in a day

3.     Make it part of the technicians KPIs.  It’s not the only KPI, but it is an important one.  It may be as simple as ‘must have a daily time sheet recorded’ or as assertive as a minimum number of hours recorded or billed.  You know your culture and what might work for you but having a KPI is a good first step

4.     Dispel the “overcharging” myth.  Earlier in the article I stated that some techs don’t enter time because they don’t want to overcharge a client.  The truth is that it isn’t the technicians job to decide how much money your clients pay or how much profit your business makes – that’s your decision.  But more to the point, management aren’t using time purely for billing purposes. It’s so you can assess the workload and so you can assign more resources giving some of your overworked engineers their life back!

Time is a contentious issue for MSPs and their staff but if you want to truly scale up it’s important to connect the dots between labour cost and what clients pay.   If you get this right and you keep labour costs under control – perhaps even through outsourcing your helpdesk – your business will grow from strength to strength.

If you are interested to learn more about solving you latency issues – talk to us on chat here or drop us a line anytime!