Proper MSP Compensation Will Make Business More Profitable

As vice president and general manager at Service Leadership, a ConnectWise solution, Peter Kujawa knows a thing or two about the managed service provider (MSP) landscape, especially when it comes to helping IT solution providers build shareholder value and how to extend best-in-class practices on MSP compensation.

Kujawa is hosting a session at the upcoming Channel Partners Conference & Expo and MSP Summit, March 11-14, in Las Vegas, where he'll talk about everything related to MSP compensation, plus "everything you need to know about payroll," an MSP's "single largest expense," he shared with Channel Futures.

"Knowing what to pay your employees is critical to recruiting and retaining a team that will deliver great customer service," Kujawa said.

Service Leadership's Peter Kujawa

He will touch on everything from incentive pay to work-from-home models to benefits costs.

Kujawa believes those in the MSP community will benefit from the session, telling us that owners and those who make compensation/staffing decisions will take away plenty from the conference session.

Expert Talks MSP Compensation and How to Drive Profit  

Knowing that MSPs have a lot on their plate, including staying competitive with their compensation practices, there is much to balance, notes Kujawa. 

He also believes that driving greater profitability comes down to understanding what to pay per position, "how much of that payment should get tied to performance, staffing ratios, and so much more," Kujawa contends.

Related:Register for CP Expo/MSP Summit 2024, March 11-14, Las Vegas

He further shared that getting MSP compensation right will only lead to more significant profit.

"It is critical for recruiting and retention," he said.

To help drive higher profit margins, Kujawa said he plans to share data from his firm's "Service Leadership Annual Compensation report," a resource he plans to release shortly before the event.

Kujawa says attendees will learn what he calls "the fundamental contrasts between how the top-performing and lower performing MSPs compensate their employees," adding, "It is dramatically different."

Moreover, Kujawa has plans to cover how he says every MSP should look at the ratio of service wages to service revenue and why this is "such a pivotal key performance indicator (KPI) to help them understand how well run their service operation is, if they have the proper amount of staff and if they are charging enough for their services."

Audience members should come ready to engage, as Kujawa is keen to answer questions about everything from remote working models to the impacts of inflation on MSP wages. 

Significant MSP Growth in 2024

Kujawa's session couldn't come at a more optimal time, at least according to a new Canalys, a Channel Futures sister company, poll. It found that MSP revenue will grow some 12% in 2024. 

It could also be the year that artificial intelligence (AI) takes MSPs by storm, with several offerings poised to present them with plenty of chance.

That same study found mergers and acquisitions (M&A) in the space, while down some 60% in 2023, could rise again in 2024, although not at the same as pre-2023 figures.

Vendors like Microsoft with its Copilot offering and AWS with its "Q in Connect" tool are latching onto a monthly subscription fee approach, with most experts saying there's opportunity in adjacent services such as data management that could also be big money makers for MSPs.