MSP University Managed Services Blog

The First Step To Determining Profit - Calculating Full Burden For Billable Staff

In working with literally thousands of IT business owners all over the world, the one universal question that is asked and must be answered in order to determine true profitability (no matter what your service delivery model is) is "how do I determine my full burden for billable staff"?

To calculate full burden for billable staff, first calculate Hourly Labor Burden for billable staff, then Hourly Overhead Burden (including non-billable staff), then add these together for your hourly full burden for billable staff.

To calculate Labor Burden for billable staff, divide all their labor costs above and beyond gross compensation by 2080 (work hours per year). These costs may include, but not be limited to:

• Total Compensation
• FICA
• FUTA
• SUTA
• Disability
• Workers' Comp
• Healthcare
• Sick Leave
• PTO
• Vacation
• Holiday
• Profit Share/Pension/401k
• Retirement
• Additional Bonus

For instance, if you had 8 billable staff whose total Labor Burden equals $250,000, your formula would look like this:

$250,000 ÷ 2080 = $120.19/hr.

To calculate Overhead Burden, total the yearly amount of all company overhead costs (including indirect labor costs), then divide by the number of staff, and again by 2080 for your hourly Overhead Burden rate. These costs may include, but not be limited to:

• Total Non-Billable Staff (Indirect Labor) Compensation (see above for these costs)
• G/L Insurance
• Picnics, Parties
• Tool/Gas/Vehicle
• Company Meetings
• Training/Education
• Cell/Mobile/Internet
• Vehicle Fuel/Maint./Insurance
• Miscellaneous
• Electricity
• Gas
• Heating Fuel Oil
• Water & Sewage
• Rent
• Equipment and Maintenance
• Clothing
• Telecom
• Office Supplies
• Postage
• Cleaning & Maintenance
• Bank Charges
• Payroll Taxes
• Property Taxes

For instance, if your total yearly Overhead Burden amount equals $500,000 and you have 20 non-billable staff, your calculation would look like this:

$500,000 ÷ 20 ÷ 2080 = $12.02/hr.

Now add your billable staff’s Labor Burden per Hour and Company Overhead Burden per Hour together to get your billable staff’s Full Burden:

$120.19 + $12.02 = $132.21/hr.

So if we wish to make a 50% margin on labor, our formula would look like this:

$132.21 + 50% = $198.32/hr.

Now I'm not an accountant, so please don't take this definition as gospel - please work with your financial team to determine your own full burden per billable employee, then you'll know how much to add to this hourly rate in order to reach your desired labor margin.

For all you MSPs out there, next time we'll explore how to determine the margin for your service desk team.

Erick Simpson 
MSP University
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Webcast Next Wednesday - Spend More Vendor Dollars and Less of Your Own

It's the end of the year and your sales are less than you desire.  You want to market your business to increase sales, but budgets are tight.  Your sales team just keeps calling the same people.  You need new leads, new opportunities in your pipeline and more closed sales before you fall behind on your projections.
   
Our special guest for this valuable Webcast is our good friend David Russell, MANAGEtoWIN CEO and MSP University Boot Camp Sponsor. Dave has been in the computer industry for 28 years and spent a lot of that time as a partner of Microsoft, Cisco, Intel and other top vendors.  He has built many businesses on "OPM" (other people's money) and it's time you did too.  This is a unique opportunity to learn how to access money from multiple vendors to implement best practice marketing programs that generate powerful new sales and recurring revenue opportunities.
 
But do not be confused as we talk about vendor money, marketing and sales.  You are in the people business in part because the greatest asset of your company is its ability to develop and maintain relationships with local clients.  A primary skill of your vendors is branding and marketing, but they need you to cost effectively reach your local market.  It is time to combine these two strengths for greater results.
 
During this Webcast, you'll discover how to:

• Access thousands of vendor marketing dollars in less time
• Implement proven best practice marketing campaigns that increase your bottom line without your active involvement
• Automatically hold your people accountable to achieve "stretch" goals to build your business
• Track the status of your people's pursuit of their key objectives so your company achieves or exceeds its most important goals

Along with sharing these great secrets to leveraging your vendor's dollars instead of your own, Dave will share how to automate teh management of your vendor campaigns and cash with his cloud-based MANAGEtoWIN solution, which he started developing nearly four years ago. Although you can take what you learn during this valuable Webcast and execute the steps Dave will share with us manually, it takes too much time, lacks accountability and you will have inconsistent outcomes.
 
All attendees will receive a downloadable version of their choice of one of MSP University's best-selling books OR audio books:

• The Guide to a Successful Managed Services Practice
• The Best I.T. Sales & Marketing BOOK EVER!
• The Best I.T. Service Delivery BOOK EVER!

You don't want to miss this special Webcast - register now!

Click here to register!

About MSP University's Webinar Series
 
MSP University's Webinar Series is meant to inform. The more you know about your industry, the products and services available to you and your clients, and how to market and sell those products and services, the greater your opportunities to increase your value to your clients, as well as your business success. 

About Erick Simpson

Vice President and CIO of MSP University, Erick is a recognized industry expert and IT and Managed Services author, speaker and trainer, and contributor to numerous industry publications and events. Author of "The Guide to a Successful Managed Services Practice - What Every SMB IT Service Provider Should Know...", the definitive book on Managed Services, and the follow-ups in MSP University's Managed Services Series "The Best I.T. Sales & Marketing BOOK EVER!", "The Best I.T. Service Delivery BOOK EVER!" and "The Best NOC and Service Desk Operations BOOK EVER!". Erick has also co-authored the HTG publication "Peer Power - Powerful Ideas for Partners from Peers".
 
About David Russell
 
David Russell is CEO of MANAGEtoWIN and author of 2 books on how leaders can overcome their addiction to poor management habits. He has been in the computer industry for 27 years as a reseller, managed services provider, vendor and entrepreneur.  He specializes in helping entrepreneurs, small-midsize businesses, global non-profits and churches can increase profits by systematically through better utilizing talent.  His clients include Microsoft, Cisco, Intel, Ingram Micro, Tech Data, ConnectWise, Catalyst Telecom, Vistage and the Entrepreneur's Organization members.
 
See you on Wednesday!

Erick Simpson 
MSP University
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Recorded Webinar Posted - Selling the Cloud as a Managed Service

We've posted our latest State of the Industry Webinar for viewing in case you missed it live!

Topic: Selling the Cloud as a Managed Service

Location: http://www.mspu.us/en/courses/this-months-free-training.htm
 
Solution providers have always been pioneers in taking advantage of the latest technologies and translating their expertise into profits. Small and medium business' demand for computing services has not changed in over a decade: they need reliable, cost effective and full-featured products that help them execute their business strategy. What has changed is the solution portfolio that is now available to everyone on demand.

Gone are the days of expensive internal network design, centralized security and working with dozens of vendors to provide necessary technology for business. Small and medium business customers are spending their money on mobility through their laptops and smartphones, providing the ability to do business anywhere, anytime. The term "cloud computing" has come to encompass computing capability without intense local configuration and software deployments. 

Cloud services present MSPs with an opportunity to extend their business model of delivering predictable service levels at a predictable cost by providing services and solutions without large capital investments for themselves or their clients. Technologies such as Hosted Exchange, SharePoint, Offsite Backups, Web Filtering and more provide enterprise level reliability and features far beyond company firewalls.

Our special guest for this timely Webcast is Vlad Mazek, CEO of Own Web Now Corp www.ownwebnow.com, a global provider of hosted solutions to the IT industry, who will share his special insights into the growing cloud computing movement and how you can take advantage of it.
 
Watch this valuable Webinar and learn to sell the cloud as a Managed Service!

Click here to view! - if you don't already have one, you'll need to create a FREE basic MSP University account to view this and dozens of other Webinars to improve your service delivery practice...!

Erick Simpson 
MSP University
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Join MSP University FREE for all things Managed Services

Microsoft 5W50 Webcast on Leveraging Your Peers Next Week Featuring HTG Members

Our good friend Arlin Sorensen from HTG will be conducting an informative Webcast next week on the power of peers - see Arlin's announcement:

This Tuesday, December 2, 2009 at 9am PST, noon Eastern, you will have an opportunity to view a very action packed webcast as part of the Microsoft 5W50 series. The topic will be growing your company and how to leverage peers as part of the growth process. You will hear from HTG members Amy Kardell, Jamison West, and Dave Sobel as they join Arlin Sorensen to talk about some of the exciting things that have happened in their companies as they have leveraged their peers.

Growth is a lot of work, but it can go faster and more smoothly when you learn from those who have done it before. Peers can help you overcome the blockers that cause you to beat your head against the wall. They can prevent mistakes you would likely make if you do it alone. There is much to be gained from running and growing your company in the companionship of a group of people like yourself, and peer groups provide that opportunity. Join us as we tackle that topic.

To register for the event next Wednesday Dec 2, go here. I hope you will take an hour and learn with us about the power of peers!

I'll see you there!

Erick Simpson 
MSP University
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Webinar Tomorrow - How To Supercharge Lead Generation

Are you seeking a cost-effective way to supercharge lead generation?
 
Are you interested in leveraging the latest technologies to maximize your marketing results?
 
Is your website delivering its maximum marketing potential?
 
Find out how to supercharge your lead generation results tomorrow, Thursday November 19th, 2009 at 10am PST and 1pm PST:
 
CLICK HERE TO REGISTER for our Web 2.0 Marketing Soluton presentation on Thursday Nov. 19th at 10am PST
 
CLICK HERE TO REGISTER for our Web 2.0 Marketing Solution presentation on Thursday Nov. 19th at 1pm PST 
 
If you rely on reactive word of mouth referrals as your sole source of new business leads, your pains include being spread across many verticals, the inability to forecast new revenue month over month and an inconsistency in the quality of your leads.

Proactive, direct marketing lets you to focus on your target market and desired leads on a consistent basis, allowing you to forecast revenue more consistently and improve the quality of your leads.

Learn how to supercharge your lead generation results tomorrow! 

Have you had less than successful marketing results in the past? Is it difficult for you to devote consistent time and attention to an effective marketing process? Have you never successfully gotten marketing programs off the ground because you just didn't know where to begin?

 Click here to watch a short video showing you how we can supercharge your lead generation results!
 
There is simply no other organization with MSP University's experience and expertise that can help you supercharge your lead generation results and ncludes the development and implementation of everything you need to create and deliver a consistent, effective marketing program utilizing the latest technologies in direct and electronic marketing techniques to realize a consistent ROI month after month. We create your entire marketing campaign and integrate the latest in analytics to power your sales follow-up efforts

Why wait any longer when you can supercharge your lead generation results and drive sales!
 
Erick Simpson 
MSP University
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Why Do Businesses Select Your Company?

Have you ever sat down and asked what it is about your company that makes it worth doing business with?  Have you considered setting up one of those online surveys so that you can find out? It is not a bad idea to perform this task to see if you are still on-target in providing the type and quality of service needed by your clients to sustain your business.

There needs to be some type of standard; however, by which you can compare your business against just to make sure that you are where you need to be in terms of client offerings and services.

Here are some general guidelines that can provide a set of standards:

Consolidated Services Contact

Being able to do business with a consolidated services provider keeps complexity to a minimum when it comes to products, documentation and interoperability that is necessary for a successful business. Adding value to your client relationships by continuing to include additional services over time to your available deliverables maintains your perception of a true business partner, increasing loyalty and influencing referrals.

Single Supplier

Simplification is the goal of any business and a single supplier system makes great strides in taking out much of the complexities of multiple vendors and the relationships that accompany them. As the trusted technology business advisor, it is your role to manage all technical relationships and locate and marshall all of the resources required to address your clients' needs.

Comprehensive SLAs

Imagine a Service Level Agreement that encompasses practically the entire client environment.  This one alone is worth the price of your MSP offerings.

Contracted Pricing

Knowing that a level billing and pricing structure is in place helps your clients better manage their budgets regarding their IT infrastructure.

Extensive Reporting

With active reporting models, keeping on top of problem areas is not a challenge.  Being managed proactively becomes a reality in some of your client organizations that might never have achieved that goal in the past.

Lowered TCO

Total Cost of Ownership is constantly in the cross-hairs of of bean counters.  With an MSP agreement in place, costs are lowered over time and this is welcomed by accounting departments.

24x7x365 Network and Service Monitoring

The peace of mind that accompanies a fully monitored environment is invaluable for any business.  Because the demands on today's organizations are increasingly global, monitored services should be ‘globalized’ as well.

How are you doing in the areas above?  What are your clients saying about your services?  Do you feel like you are out front and leading your clients or do you think that they are pulling you along?  Are you the change agent or are they?  An annual check-up in this area would be a good way to make sure that you are doing and providing the things necessary to keep your clients satisfied and asking for more.

Attend MSP University's next Boot Camp for FREE!

Erick Simpson 
MSP University
Subscribe to my blog here
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Selling the Cloud as a Managed Service

Join us for MSP University's State of the Industry Webinar
 
Please join us Thursday, November 19th @ 9am PST as I host MSP University's State of the Industry Webinar.

Topic: Selling the Cloud as a Managed Service
 
Solution providers have always been pioneers in taking advantage of the latest technologies and translating their expertise into profits. Small and medium business' demand for computing services has not changed in over a decade: they need reliable, cost effective and full-featured products that help them execute their business strategy. What has changed is the solution portfolio that is now available to everyone on demand.

Gone are the days of expensive internal network design, centralized security and working with dozens of vendors to provide necessary technology for business. Small and medium business customers are spending their money on mobility through their laptops and smartphones, providing the ability to do business anywhere, anytime. The term "cloud computing" has come to encompass computing capability without intense local configuration and software deployments. 

Cloud services present MSPs with an opportunity to extend their business model of delivering predictable service levels at a predictable cost by providing services and solutions without large capital investments for themselves or their clients. Technologies such as Hosted Exchange, SharePoint, Offsite Backups, Web Filtering and more provide enterprise level reliability and features far beyond company firewalls.

Our special guest for this timely Webcast is Vlad Mazek, CEO of Own Web Now Corp www.ownwebnow.com, a global provider of hosted solutions to the IT industry, who will share his special insights into the growing cloud computing movement and how you can take advantage of it.
 
Attend this valuable Webinar and learn to sell the cloud as a Managed Service!

Click here to register! 

 

About MSP University's State of the Industry Webinar Series
 
MSP University's State of the Industry Webinar Series is meant to inform.  The more you know about your industry, the products and services available to you and your clients, and how to market and sell those products and services, the greater your opportunities to increase your value to your clients, as well as your business success. 

About Erick Simpson

Vice President and CIO of MSP University, Erick is a recognized industry expert and IT and Managed Services author, speaker and trainer, and contributor to numerous industry publications and events. Author of "The Guide to a Successful Managed Services Practice - What Every SMB IT Service Provider Should Know..." the definitive book on Managed Services, and the follow-ups in MSP University's Managed Services Series "The Best I.T. Sales & Marketing BOOK EVER!", "The Best I.T. Service Delivery BOOK EVER!" and "The Best NOC and Service Desk Operations BOOK EVER!". Erick has also co-authored the HTG Peer Groups publication "Peer Power - Powerful Ideas for Partners from Peers".
 
About Vlad Mazek
 
Vlad Mazek, MCSE, is an author, technology radio show host, Exchange MVP and CEO of Own Web Now Corp, creator of ExchangeDefender and Shockey Monkey, and which hosts thousands of SBS and Exchange Servers. Mr. Mazek is very active in the IT professional community and has over ten years of experience managing and developing secure communication networks and platforms. Through a network of thousands of partners, numerous international data centers, A popular blog site and a radio show, Mr. Mazek has a unique insight to the needs of both businesses and IT solution providers.

Join Me For HTG and ConnectWise Events This Week

This week marks the HTG All Q4 Peer Group Meeting, where all of the Heartland Technology Peer Groups will be descending in Orlando, FL to conduct group meetings, receive training and hear some major announcements  during the HTGALL lunch on Wednesday, per Arlin Sorensen, Founder and CEO of the HTG Peer Groups and Heartland Technology Solutions. I'll be speaking in the Senate Room on Wednesday, November 3rd at 1:45pm, and my session is titled 8 Areas Critical to Maximizing IT and Managed Services Practice Success. If you will be in attendance, stop by to say hello. Attendees are encouraged to Blog, Facebook and Tweet with #HTG during the event, to keep those interested that could not attend apprised vicariously of their thoughts, experiences and feedback. Click here for the Agenda.

Immediately following the HTG event, ConnectWise kicks off Partner Summit 09 and will be streaming Arnie Bellini's Keynote and all Main Stage Speaker Presentations live. Click here to watch. My session at the ConnectWise Partner Summit 09 will be delivered along with Mary McElwee from ConnectWise and Chris Chase from DTI on Thursday, November 5th at 1:45pm and is titled 4 Tips To Jumpstart Social Media For Your IT Business. We will be sharing ways that we use Social Media to improve our marketing results, brand and drive interest in our respective organizations, products and services. Click here for the Agenda. Tweet the Summit with #cwps. Stop by and say hello!

 

Pre-Order MSPU's New Book The Best NOC and Service Desk Operations BOOK EVER today!

 

 
Erick Simpson 
MSP University
Subscribe to my blog here
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Join MSP University FREE for all things Managed Services

MSP University's Final Boot Camp Of 2009 Begins Today!

We are about to kick off our 4th I.T. Solutions and Managed Services Sales & Marketing and Service Delivery Boot Camp of 2009!

This year alone we will have trained over 500 Solution Providers in our challenging Boot Camps all across the United States. At today's Boot Camp at the Omni Mandalay Hotel in Irving, TX we will host over 140 Solution Providers - our biggest live training event yet!

Helping us make this Boot Camp possible are our strategic sponsors, thank you for your generous support:

Platinum Sponsor

CompTia

Gold Sponsors

Asigra

Autotask

CharTec

eFolder

Panda Security

Silver Sponsors

MANAGEtoWIN

Own Web Now

Service Leadership

Bronze Sponsor

Synergy Global Solutions

Download our October Boot Camp Agenda here

Did you miss our 2009 Boot Camp series? See us in 2010 - we're conducting 9 International Boot Camps!

Click here for our 2010 Boot Camp dates and locations!

 

Pre-Order MSPU's New Book The Best NOC and Service Desk Operations BOOK EVER today!

 

 
Erick Simpson 
MSP University
Subscribe to my blog here
Subscribe to our Newsletter here 
 
Join MSP University FREE for all things Managed Services

The Human Touch is Still Important

For services-based businesses in general, two circumstances have caused a reduction in the amount of in-person meetings cpncucted with clients.  First, many offerings; such as Managed Services, have moved to an online or remote delivery model.  Second, the down economy has forced businesses to cut back on expenses such as travel, affecting the frequency of on-site meetings for geographically-displaced clients. This is unfortunate because human-to-human contact is still extremely important in client-provider relationships.  Even the best audio and video conferencing solutions cannot replace the impact and effect of an on-site visit.

Know When to Go

How do you know when to venture out to client sites, and how often?  Part of the answer lies in knowing your client.  You should be able to tell which clients require more contact and which do not.  Suffice it to say that even if a client appears ‘fine’ during infrequent conferene calls, video conferences or in email communication, they might be considering other options for services that you provide, because they may incorrectly perceive that you do not value them as a client.  An annual visit is probably too infrequent and a monthly one might be too often.  Something in between is probably about right. For new Managed Services clients, a monthly visit during the first 90 days, bi-monthly visits for the next 90 days and quarterly visits thereafter is a good strategy. Remember to keep these visits at the strategic level and discuss not only what your team has accomplished since the last visit, but the benefits you are providing the client towards helping them reach their business goals through technology roadmapping.

Know What to Present

Gone are the days of proving value in your client relationships by of taking them all out to dinner and a few drinks.  That is acceptable from time to time, but your strategic sessions with your clients need to continue to reflect your value as you present solutions that increase your clients' efficiencies, reduce their overall costs, eliminate business pain and mitigate their risk - all which improve their profitability. And if your solutions can help them increase their sales as well, that is icing on the cake.

During these meetings steer discussion on expanding on your services and explain what you do and how you operate to make your clients' businesses benefit from it.  Provide some backroom stories about ways that you have helped clients in dire need and how they are doing at the present.  Then, if you do have new product and solution offerings, present those as well.  The goal is to maximize on the human touch during your strategic meetings while generating excitement.

Build Loyalty, Strengthen Relationships

Meeting with clients regularly builds loyalty to your company and services.  Everyone is quick to respond something breaks and needs to be fixed.  And that is important in salvaging a relationship that might be damaged.  But strategic on-site visits strengthen relationships that help weather those kinds of storms.

Go With Something in Hand

Take something with you that clients can physically hold when you leave.  These are always good reminders of your relationship.  Choose items that your clients will not perceive as corny or cheap - you should not shy away from investing in your clients for these leave-behinds - after all, they are investing in you, aren't they? One way to make these take on even more significance is to have a story to go with them, even if it is humorous and has no connection to doing business with them.  The impact comes when they look at the items and remember the story and your relationship.  Try it, it works.

Sure, on-site visits cost money, but they can mean the difference between keeping a client and watching them move over to a competitor and losing that revenue completely.  Which would you rather go experience?

 Pre-Order MSPU's New Book The Best NOC and Service Desk Operations BOOK EVER today!

 

 
Erick Simpson 
MSP University
Subscribe to my blog here
Subscribe to our Newsletter here 
 
Join MSP University FREE for all things Managed Services