A profitability matrix is an easy way to determine which of your clients are profitable and which are a drain on your resources as a managed service provider (MSP).
The purpose of keeping a record in this way lets you see, at a glance, which of your clients are a good fit for you, and which might be less profitable for your business as a whole.
When it comes to your style, what data you choose to keep, and how detailed you want to be, is completely up to you.
However, we’ve come up with a few suggestions for you to consider when developing a matrix of your own.
The Purpose of a Profitability Matrix
The profitability matrix exists as a record for each of your clients and how profitable your relationship is with them.
For example, the data that goes into the matrix should show what they pay for, how security-focused they are and how good the business relationship is between you.
It can also be used to highlight any areas of concern, as well as any opportunities to sell more of your services.
The matrix should be easy to refer back to, for those times when you need to remind yourself which clients is becoming a big drain on your resources. And who you need to be firmer with when it comes to paying for your services on time.
Suggested Sections to Cover in Your Profitability Matrix
We’ve come up a few suggestions and headings for you to consider for your own profitability matrix.
Service Uptake
The service uptake section tells you about the products each client subscribes to, including any bespoke services, licences or sites your look after.
You should consider asking:
- Which of your service products or packages do they currently subscribe to?
- What’s the monthly revenue you get from this customer?
- How likely and open are they to purchasing more of your services?
Service Consumption
The service consumption section is about how much of your resources your client takes up. Are they fairly easy to manage as a client? Or do they take up a lot of your time?
- How often do they log service request tickets?
- What’s the approximate average monthly cost of those tickets?
- How many of those tickets are preventable?
Stability of Relationship
This section covers anything to do with how responsive the client is when paying their bills, in their communications in general and whether there’s likely to be any pushback on your new year pricing.
- How regularly are they paying their bills?
- Is there ever any pushback when it comes to your pricing?
- What’s the longest term they’re locked in for?
Security Awareness
With security being such an important part of all managed services, how security savvy is your client? Are they compliant with any frameworks, privacy or cyber insurance requirements?
- How close are they to meeting framework standards?
- How seriously do they take cybersecurity?
- What’s the risk of shadow IT?
You can be as detailed as you like with the information you capture as part of your matrix. Or if you just want to keep very broad indicators for convenience, that’s up to you.
A Profitability Matrix Alongside Other Tools
The profitability matrix is just one tool you can use to keep on top of your profitability.
If you use a PSA tool, this will help you track your costs for tickets, licences and engineer time.
Part of your customer relationship management (CRM) database should record some useful details too.
For example, when a client is looking to open a new office, future modernisation plans, or if they’re planning to downsize in future. All of this could affect your bottom line if you don’t keep a close watch on it.
Do You Keep a Similar Matrix for Your Business?
We’d love to hear if you keep a similar profitability matrix for your business.
What works for you? Is there some metric or data we’ve missed that you’ve found particularly useful?
Please let us know in the comments.
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I'm the MSP Community Manager for Tubblog. A small business owner, technical writer and blogger, with 15 years experience in corporate IT. I frequently attend MSP peer groups and create content relevant to IT service providers and business owners.
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