Top 3 Mistakes Most IT Businesses MakeManaging Profit Margins and More…

Presented by:

Frank Coker, CMC, MBACEOCoreConnex, Inc.Producer of theCorelyticsTM Financial Dashboard

Agenda• Business Stages• Models & Trends• Top 3 Mistakes• Management Tips• Q&A

How do you manage?

What road is your company on?

Start Up Lifestyle

Business Stages

Experienced Team

Building for Exit

LifestylePersonal freedoms

• Primarily T&M• Some fixed fee• Personal

management• Income, expenses

& cash

• Multiple LOBs• Contracts• Develop

Management skills

• Growth

Start UpBuild, build, build!

• Client Portfolio• Client service #1• Line managers• EBITDA

Experienced TeamDevelop rhythm

• Succession• Most optimal

value with smoothest transition

• Valuation

Building for ExitThe right fit

Different models, different style

Trends

• MSPs - the lure of recurring revenues

• Blended services complex to manage, higher profits

- Taken from Corelytics Industry Performance Report February 2011

Believe the hype about RMM software

Trends

49% more profitable if installed in more than 72% of clients

- Taken from Corelytics RMM Industry Performance Report June 2011

Top 9 Key Financial Metrics

1. Revenue

2. Margins

3. Profit

4. Rev./Billable FTE

5. Expense/Billable FTE

6. EBITDA

7. Marketing Expense

8. Sale Expense

9. Gross Margin

Key Financial Metrics By LOBUnderstand…

… revenues by LOB

… cost structure of each LOB

… how billable staff are contributing / consuming

… EBITDA: operating profitability

… are expenses for marketing/sales generating results

I t ’ s a M a n a g e m e n t S o l u t i o n

#3: Lack of Clarity of Business ModelHave consistency

• Predominant Business Model® (PBM®)– Managed Services– Product Resell– Project– 7 others…

• Variations– Sell – Manage– Support

http://support.coreconnex.com/corelytics/define-pbm/

Types of Gross Margin

Price determined by market -

Cost determined by vendor

More hours xRate per hour -Cost per hour

Less hours xRate per hour -Cost per hour

Product

T&M

Flat FeeHow do you optimize?

Solution• Know your business model• Know what to optimize• Optimize each Line-of-Business

(LOB)

#2: Unable to Articulate Financial GoalsPick a target

• Pick your goals – Growth– Percent of Revenue

• Track benchmarks for your model

• Forecast performance – Know best and worst

case scenarios

Solution• Set goals for financial performance

– Company-wide– By LOB

• Communicate goals – show the picture!

• Link operational priorities to financial metrics you track

• Assign ownership (this may be you!)

• Visibility of business performance

TOP 3ACTION ITEMS

assign ownership

# 1: No Management Process

30 Minutes a Month

Management Tips

S t a r t To d a y !

Learn More

https://dashboard.corelytics.com