EP304 - Stop Chasing Revenue – Start Building a More Valuable MSP with Ian Luckett

In this episode of The IT Experts Podcast, I want to challenge one of the most common success measures in our industry. Are you measuring success, or are you simply measuring size? After more than 300 episodes, some themes keep coming back, and this is one we hear every week from prospects, clients and the wider community. It is the gap between how much revenue you bring in and how much profit you keep, and why closing that gap is the key to building a more valuable MSP.

So many owners set their sights on the million-pound turnover mark, or on growing to 30 people, as if headcount were the prize. I know MSPs well past a million pounds who are making very little, and I know MSPs turning over six or seven hundred thousand who are absolutely nailing it, with more in their pocket than competitors twice their size. A bigger turnover means more money flowing through the business. It often means more cost flowing out the other end too. You can run a profitable million pound MSP with eight to ten people. When I hear of a million-pound business carrying 24 people, I know straight away the numbers cannot work.

Bigger teams bring more complexity, and that complexity lands on the owner. Most MSP owners never planned to lead large teams, which is why leadership is the area we help with most inside The MSP Growth Hub. Here is the test I often share. If you are too busy to make decisions, too caught up in the tech, or the person everything waits for, you have a leadership opportunity sitting right in front of you. The most successful MSPs grow because the owner has time to think. Strategic thinking time leads to better decisions, better clients, and better profit.

We also talk about the clients who quietly drain your margin. Many owners fear saying no to anyone. Some of your biggest clients are the noisiest and most demanding, and very few MSPs track profitability by client or by service. In some cases, you would be better off letting that client go, because the cost of serving them outweighs the value they bring. I share the story of MSPs who joined us bloated, with ten or twelve people in the wrong roles. One owner described his approach as destroy and rebuild. He took control of his most important clients, built the right team around them, and came out leaner and stronger. Another member recently sold his business for an eight times multiple with a smaller team than he had two years earlier. He walked out with no earnout, because he had become ONN, owner not needed. Three or four years before the sale, he knew his numbers so well it was almost unhealthy. That is how a more valuable MSP is built.

From there, I walk through four practical actions. The first is to measure net profit and EBITDA before you celebrate revenue. Keep a close eye on client concentration, so that no single client represents more than 10 to 15 percent of your revenue. I share an old analogy about pound coins leaving a drawer each morning and returning each evening with friends, because every pound that leaves your business should come back with a return. Track revenue per employee and aim for north of £150,000, and track profit per employee alongside it. These are the numbers that separate a busy business from a more valuable MSP.

The second action is to attract profitable, right fit clients. If someone is shopping on price, let them go. Make sure projects and managed services each stand on their own commercially, so a dangling carrot does not leave you in a pickle. The third is to build a lean team with the right people in the right roles. Keep spans of control to six to eight people per leader, design roles that are plug and play, and use AI to upskill your people and raise quality, rather than to cut heads. The fourth is to review your KPIs monthly and quarterly so they drive business value. Even a small MSP can start with one or two. This is not about boiling the ocean.

Something Stuart taught me many years ago still guides how we work. Where is