Why your MSP business is losing money (and what you can do about it)

In managing an MSP business, you offer a subscription, the customer pays, and you enjoy an endless flow of cash -- seems easy, right?

Not exactly.

More and more companies are opting for cloud-based solutions. As your subscriptions grow, traditional methods of managing data are becoming obsolete. Cloud providers must ensure that their services meet users' expectations while implementing the most efficient way for customers to pay for their services. This is where Goolash automated billing comes in.

The problem with selling SaaS

The demand for more SaaS applications is increasing, which also increases the challenges faced by cloud subscription companies. Your subscribers are happy -- but how well is your business handling the massive influx of subscriptions?

The importance of gross margin

The gross margin is computed by deducting the cost of goods sold (COGS) from your revenue. Several factors contribute to a company's gross margin, including pricing, return on investment (ROI), and infrastructure, just to name a few.

Gross margin is essential for cloud providers because it indicates how scalable your business is. It is an incredibly valuable percentage that analysts and investors use to evaluate how efficiently your business drives profits.

Increase your gross margin with SaaS solutions

So, how can you make sure that you maintain a low COGS? There are a four key areas to optimize your business in:

Reduce costs

Reduced operational costs are always a good thing. The first thing to consider when moving to cloud services is standardising your product stack. By having a similar environment to manage each customer from, you can take the quality of your support to a higher level. At the same time you make it easier to grow and add new customers easily.

A long-term plan to reduce costs could be negotiating volume discounts by working together with your fellow MSPs. Join forces and create or join a peer group. Contact your vendors together and negotiate a better bulk price for the services they offer.

Business insights

What gets measured gets managed! Make sure that you have quick access to important reports such as your monthly recurring revenue (MRR), customer lifetime value, revenue forecast and much more. Business insights are essential to help you determine which areas of your cloud subscription business need more attention. In turn, your business can achieve its objectives faster and more efficiently.

Luckily we have access to tons of great tools to build better insights. The "Analyze" section in your Microsoft Partner Center CSP dashboard has great insights on your managed subscriptions. Autotask PSA offers you an easy way to peer into your operations or you can get creative with a tool like Microsoft Power BI.

How you handle support

Nowadays, support questions come from everywhere: your customer will send you mails, call you on your mobile or text via WhatsApp. It's easy to lose track of it all: what needs to be fixed and when, who is responsible and who needs to be kept in the loop. Automating these processes is key to stay on top of things.

There are a lot of great tools to help you with these challenges. Tools like Autotask PSA for invoicing, procurement and ticketing, IT Glue to manage your documentation and procedures and Datto RMM for remote management. Goolash can summarise all fluctuations from your Microsoft 365 and Google G suite subscriptions, even without a connection to your billing software.

It may seem like a daunting task switching between all these different tools, but these days they are all perfectly connected and integrated with each other. Be sure to find the ones that work best for you and your team.

Timely invoicing

Cash is king. You want to make sure your customers pay you on time. We suggest to negotiate payment upfront with your customers so you can be sure you have money in the bank.

More importantly, Managed Service Providers risk wasting the end of each month by manually creating invoices for your customers. Use an automated billing system to create timely invoices without wasting the precious time of your team.

Do you know how much profit you're missing because of this administrative work? Use our profit calculator to find out!

Conclusion

There are a lot of things to consider running your MSP business. Goolash is on a mission to help MSPs like you maximize their profits. We can help you run your cloud subscription business with ease by automating your administrative processes. Our automated system is a crucial part in ensuring your company's success.

With reduced costs on manpower, more time saved, accurate and timely billing, you can expect greater gross margins in no time. The result? Greater profit.

Increase my profit margins

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