Margins I: Expenses

cash-dollars-hands-money-271168The next step is to make a detailed study of your expected finances. Every business has margins, that is to say, the difference between your costs and your prices. Managing your margins comes down to keeping an accurate accounting of your  overhead and getting clients to subscribe to your core services. In the MSP business, you’ll find that your costs fall into three categories.

The first category consists of business essentials that are not for any particular client or service, but make the whole business possible. This includes costs for:

  1. Liability Insurance
  2. Business License
  3. Domain Name & Web Hosting
  4. Bookkeeping & Time-Tracking software
  5. Microsoft Partner Pack
  6. Your Hardware
  7. Advertising
  8. Loan Interest
  9. Fees to Professionals (lawyers, accountants, etc)
  10. Taxes

This category also includes office expenses, such as:

  1. internet
  2. utilities
  3. rent/mortgage
  4. renter/owner insurance
  5. transportation expenses
  6. business cards
  7. flyers and brochures
  8. basic office items (toner, envelopes, paper, etc.)
  9. security
  10. office repairs

The second category includes whatever software (other than Microsoft licenses included in your Partner Pack) you need to actually do your work, such as:

  1. RMM Service
  2. Adobe CC/DC Apps
  3. Various one-time purchase software

The third category consists of software you purchase and sell to clients but don’t directly profit from. This might include licenses you sell at-cost for:

  1. Microsoft products
  2. Antivirus
  3. Remote Access

(Yes, you can mark up each license by a few bucks and make a slight profit, but it’s unlikely to add up to much because, if you charge too much more, clients will be enticed to buy their licenses directly.)

Most of that will be paid annually, though some RMM software gives you granular control of adding/removing features as needed, so be sure to average those costs, spread it out over the year, and mark the expense in your monthly budget.

When you add up the aforementioned, you’ll get a sense of how much you need to make to break even and then, to turn a profit.

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