How an $8.5M MSP Added $216K in Annual Recurring Revenue

The Situation

An owner-operated managed services provider with about $8.5M in revenue was growing, but had never run a fully loaded rate analysis on its client base. Pricing had been set account by account over the years, and no one could say which clients were profitable.

What We Did

We built a fully loaded cost model across roughly 120 accounts, covering labor, tools, and overhead by client. Forty accounts were priced below the company's target margin. The owner repriced them. Three clients declined the increase and left. That was an expected trade: each was below the margin threshold, and the capacity they used was worth more on other work.

The Result

• About $18K in additional monthly recurring revenue, net of the three departures
• About $216K annualized
• Gross margin up nearly 2 points

Why It Matters

Revenue growth hides unprofitable clients, and most owners avoid repricing because they're afraid of losing accounts. Losing three clients on purpose was part of the result, not a cost of it.