MSPCFO Sees Significant Growth As MSPs Look For Financial Help Maximizing Profits

MSPCFO has seen strong growth for its application and services as it works to help MSPs stay on top of their finances and maximize profit in the move to recurring revenue.

The company has seen "a lot of growth" and has received "a tremendous amount of interest" in its program over the past year, MSPCFO Director Michael Kraner told CRN at IT Nation 2014 in Orlando, Fla. MSPCFO does exactly what its name suggests, providing a CFO-level of financial analytics and consulting to MSPs who may not have it otherwise. The growing demand the company has seen over the past year shows the MSP market's hunger for this type of solution, Kraner said.

"I think it speaks to a need, a chasm that needs to be crossed. I think we're a bridge-builder to profitability," Kraner said.

[Related: 6 Questions To Get On The Path To Success In the MSP Marketplace]

It's been a busy year for the company with deals for bulk distribution in the works and the launch of an application in August. The app lets MSPs see a twice-daily update of revenue and cost of goods sold from a labor and products perspective. Revenue is broken down into fixed-fee, project and subscription categories. It works independently or through an integration with ConnectWise. Autotask integration is expected soon.

The idea is to use the many statistics and breakdowns provided to maximize the contribution, or gross profit, from each client, said Director Larry Cobrin. To take it another step further, MSPs want to maximize the contribution for every hour put into a client's environment.

To help figure out which clients are the most profitable, MSPCFO breaks the client base down into segments. By evaluating which clients are the most profitable and identifying those who are least profitable, the MSP can take steps to maximize its profits without adding new clients or more labor hours, Cobrin said.

"You can't make perfect clients, but you can definitely make bad clients better," Cobrin said. "What the tool allows is that rifle-shot approach to business management. Instead of saying, 'I have to fix all of my hours,' find out where you're leaking hours and focus on only those clients," he said.

One way they can do that, Cobrin said, is by looking at the product mix breakdown in the MSPCFO app, which builds graphs for the top, middle and bottom client segments. While MSPCFO won't tell an MSP what to do to maximize profitability, the graphs make it clear the difference in the product mixes between most and least profitable clients. The answer on how to get more profitability varies from MSP to MSP, Cobrin said, though, oftentimes, the key is adding more fixed-fee agreements.

The underlying problem, and need for an app like MSPCFO, Kraner said, is that without understanding the numbers, MSPs aren't running as efficiently as possible. With a little know-how, MSPs can boost margins without adding any labor or new clients.

"All the information is right there -- you just have to take the time to learn it. A lot of MSPs are saying, 'I don't have time to do this.' ... I believe strongly that the same as humans need oxygen, water and food, you will need good financials. I think in the near term, this is a good competitive advantage. In the next 12 to 18 months, anyone who doesn't know their numbers will be at a competitive disadvantage," Kraner said.

One area, in particular, this helps MSPs is as they pick up cloud solutions, and transition clients to the cloud and hosted solutions, Kraner said. They need to evaluate if they are making money on those solutions, he said.

The ultimate value proposition, Kraner said, is having realtime access to financial numbers and information, industry knowledge and top-level financial analysis to make sure the business is running as efficiently as possible.

"MSPs just work so hard ... you're always dealing with a hardship of some sort. If we can help these MSP owners do better and get paid, not just for their work and everyone in their company ... if we can help people have a fuller, more complete financially stable life because of this, I personally would feel great because of that. It's our way to make the community a better place," Kraner said.

PUBLISHED NOV. 20, 2014