Combatting Margin Erosion

By Shawn Sailer, Liongard

LEARN HOW MATURE MSPS KEEP PROFIT MARGINS HIGH, EVEN DURING ECONOMIC DOWNTURNS

What’s the one thing on most Managed Services Providers’ (MSP) minds right now? Margin erosion. While some of the top providers in the industry continue to see sales, prices and profit margins soar, many more MSPs are struggling at the break-even point, working harder than ever but making less. 

What’s the reason? And, more importantly, how can MSPs get out of this rut and combat margin erosion?

Margin Erosion Amid COVID-19

Obviously, the COVID-19 pandemic has shaken up the MSP industry. Many providers are scrambling to find new earning opportunities to avoid making cuts. Further, we’re in a new economic cycle, meaning MSPs that originated in the past 10 years have never dealt with an economic downturn. 

Back in 2016, MSP consultancy Taylor Busines Group (TBG) recommended MSPs shoot for over 17.5% margin, with 20%+ being preferred; but many MSPs now find themselves operating at about 10% profitability, the new break-even point.