Fixed-fee contracts erode invisibly
An agreement priced on an assumed ticket volume that has doubled since signing looks fine on the invoice and terrible on the labour. Most MSPs find out at renewal.
ERP by industry
Recurring contracts against variable labour, with hardware and licence pass-through sitting on top. The financial question that matters is effective rate per client — and almost no MSP under $50M can produce it without a spreadsheet.
Your client list, contract values, and ticket data. We return effective rate and margin per agreement.
The problems
An agreement priced on an assumed ticket volume that has doubled since signing looks fine on the invoice and terrible on the labour. Most MSPs find out at renewal.
Reselling equipment at low margin inflates revenue and crushes apparent gross margin. Without separating it, revenue per technician and every other ratio is wrong.
Microsoft, backup, security, and connectivity licences billed monthly against a seat count that changes weekly. The gap between what you buy and what you bill is real money and it drifts.
You know the contract value and roughly the hours. Effective hourly rate by client — the number that tells you which agreements to reprice — usually requires a spreadsheet nobody maintains.
A tier-one ticket and a project engineer cost very different amounts. Blending them makes project profitability and contract margin both unreliable.
Valuation and lending both hinge on the recurring proportion, and most MSPs cannot produce it cleanly without manual work.
Where the money goes
Nearly forty percent of total billings is pass-through in a representative MSP. Report on the gross number and every per-head and margin metric you produce is wrong in the same flattering direction.
Hardware and licence resale are real revenue and terrible margin. Separating them gives you a net revenue figure that makes revenue per technician meaningful — and it is the number a buyer or a lender will normalise to anyway, so you may as well run the business on it.
Your stack
Benchmarks
From engagements with MSPs between $5M and $45M in billings. Small sample, stated deliberately.
Contract value tells you what a client pays. Effective rate — contract value divided by the hours actually consumed — tells you whether that agreement is worth having. It is the single most useful figure in this business and most MSPs compute it annually at best, from a spreadsheet built by whoever last had time.
The reason it matters more here than in other service businesses is that MSP contracts are priced on an assumption about volume, and volume drifts. A client that signed at an assumed forty tickets a month and now generates ninety is not a bad client; they are a mispriced one, and the fix is a conversation you can only have if you can show them the number.
Effective rate is only trustworthy if the hours behind it are costed properly. A tier-one ticket handled by a junior and a project migration run by a senior engineer cost materially different amounts, and blending them across the team makes both contract margin and project profitability unreliable in opposite directions.
Loaded cost by role — salary, taxes, benefits, and an overhead allocation — pulled from payroll and applied to time from your PSA is the fix. It is not complicated; it just requires payroll, the PSA, and the ledger to be reading from the same model, which is the thing that does not happen when they are three separate systems.
Seat counts change weekly, distributor invoices arrive monthly, and client billing runs on a schedule that matches neither. The gap between what you are charged and what you bill is small per client and material across a book — and in most MSPs nobody owns reconciling it because it sits between operations and finance.
Bringing distributor invoices and client billing into the same graph makes the variance visible per client per month. It is one of the fastest returns in this industry and it is a reporting problem rather than a process one.
We do not replace your PSA or RMM, and an MSP wanting ticketing, dispatch, and remote monitoring in the same system as its ledger should stay with ConnectWise or Autotask and their financial modules. We are the layer that makes the money side legible, and we integrate with the tools your technicians live in.
Questions
Effective rate and true margin per contract, from your PSA and ledger, before you change anything.