FinanceChapter 1
Financial performance
MSPs predict growth; leaders focus on recurring revenue and efficiency.
Financial performance:
MPS predict growth; Leaders focus on recurring revenue and efficiency
MSPs have a positive growth outlook for 2025, and businesses of any size can punch above their weight in terms of annual revenue. Those who are pulling ahead have mastered charging premium prices and increasing recurring revenue—but they shouldn’t overlook how metrics tracking and driving efficiency could influence their bottom line.
MSPs track profit and recurring revenue—but miss customer and wage-focused financial metrics
Financial metrics MSPs track
Profits
About half
Monthly recurring revenue
About half
ROI metrics
35-40%
Customer lifetime value / churn
Barely a third
Seats managed per wage
About a quarter
EBITDA
Less than 20%
Half of MSPs use profits and Monthly Recurring Revenue (MRR) to track their financial health. A large portion (35-40%) also use Return On Investment (ROI) metrics—like Customer Acquisition Cost, Return on Capital Investment, and Cost of Goods Sold—to understand what their most capital-efficient services and channels are.
However, barely a third track Customer Lifetime Value (CLTV) or Customer Churn rates. If MSPs care about retaining and increasing their MRR—which is the third most popular financial metric being tracked—then understanding the long-term value of ongoing client relationships and when they stop doing business with you can offer extremely valuable insights.
Only a quarter track their Service Multiple of Wages. Ignoring this metric can cause MSPs to underprice services because they don’t have a clear picture of the staffing costs. Since many MSPs plan to hire new staff in 2025, this metric should be focused on.
Less than 20% of MSPs track EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This metric—used to evaluate overall company performance—is vital for MSPs seeking investment or a sale.
"EBITDA is relevant to any MSP that wants to either buy or sell. Most MSP owners are so deep into building the business, they’re really not thinking about EBITDA. But they should, because you don’t know when someone is going to be interested in buying you."
“ EBITDA is important for mature MSPs to measure, who are either on the precipice of selling or want to go down that path in the future. Having these numbers and knowing your value arguably makes you even more valuable to private equity firms, because keeping your books clean shows maturity.”
Many MSPs generate millions in revenue; Giants can hit $25+ million
Annual revenue distribution
<$500,000
$500,000 - $1 million
$1 million - $3 million
$3 million - $5 million
$5 million - $10 million
$10 million - $25 million
$25 million +
Unsure
Over half of respondents (57%) fell somewhere between $500,000 and $5 million annually. 38% make between $1–$5 million, while about a third (34%) make between $3–$10 million. Nearly a third (29%) of respondents make $5+ million. The bottom line? Most MSPs, regardless of size, can generate a few million in revenue each year.
When we look at the data based on company size, revenue generally shifts upward with employee count:
Small MSPs (1-10 Employees): A third (33%) make $500,000 or less annually. A quarter make between $500,000 and $1 million, while another third cap out in the $1–$5 million range. The small MSPs reporting more than $3 million in revenue also tend to have higher ARPU as well, with 28% making $151–$200 per client, and another 20% making $300+.
Mid-sized MSPs (11-50 Employees): Respondents are equally split across four key revenue ranges, starting as low as $500,000+ and capping out at about $10 million. Only 10% make over $10 million.
Large MSPs (51+ employees): Nearly 40% earn between $3–$10 million. About a quarter (23%) make $10+ million, but nearly a third (30%) are stuck in the $500,000–$3 million range—meaning some are performing closer to a mid-sized MSP. 10% earn over $25+ million—making them revenue leaders.
Better customer satisfaction influences revenue
Those with best-in-class customer satisfaction scores are slightly more likely than average to report making between $5–$10 million in annual revenue, and slightly less likely to be making less than $5 million annually—suggesting client satisfaction has a positive impact on revenue. They’re also much more likely to have recurring revenue rates in the 51–80%+ range, showing that superior customer experience can lead to valuable ongoing relationships.
Average ARPU falls between $100-$250; A rare few earn $300+
Average revenue per user
$101-$250
Nearly half
$151-$200
Largest single range
$251+
High performers
Nearly 50% of MSPs have an Average Revenue Per User (ARPU) rate between $101+–$250. The largest single group are those in the $151–$200 range, at 19% of respondents. Nearly a quarter (24%) have an impressive ARPU rate over $251—making them high performers in the category.
ARPU generally skews higher as company size grows, although some small and medium businesses have achieved a rate of $251+, which is more common for large MSPs.
MSPs with higher ARPU are more likely to:
Offer services like software license management, productivity management, asset management, and disaster recovery—suggesting that focusing on customer assets, efficiency, and security can improve ARPU.
Have higher Staff Utilization rates and track operational metrics like Aggregate Service Desk Productivity and Resource Utilization Rate—implying better staff productivity leads to higher ARPU.
Track First Contact / Level Resolution Rates and Escalation Rates—meaning prioritizing speedy customer service can increase the prices MSPs command.
Enjoy high recurring revenue rates between 51–80% and total annual revenue rates above 10+ million—suggesting customers will pay well for ongoing, high-quality service.
“ You could be charging $300 a user a month—but if you get a million tickets per person, your costs will go up and you won’t do very well. If you’re going to track ARPU, you have to correlate it with ticket data to see what you charge vs. what you spend.”
High recurring revenue rates influenced by client satisfaction, staff productivity
Recurring revenue rate signals
25% or less recurring revenue
26%+ recurring revenue
Track recurring revenue
Recurring revenue increased in past year
Nearly half of respondents (46%) have a recurring revenue rate of 25% or less. The other half (52%) have 26%+ or more in recurring revenue. Since about half (49%) of respondents track this financial metric—it’s the third most popular choice—it’s clearly a focus area for MSPs. Despite a large portion of respondents having rates below 25%, 81% of MSPs said their percentage of recurring revenue increased in the past year.
Those with higher customer retention rates and staff utilization rates were more likely to have recurring revenue rates in the 51–80% range. (Baseline respondents are more likely to have 25% or less in recurring revenue.) Customer satisfaction leaders are slightly more likely to have higher recurring revenue rates and say their recurring revenue rates have increased over the past year. These both indicate that a strong client experience and productive staff can positively influence recurring revenue.
Small MSPs are slightly more likely to have recurring revenue rates of 10% or less, and they’re slightly less likely to have rates in the 11–25% range than average—meaning smaller businesses may struggle to land recurring work. They’re also more likely to say they didn’t grow recurring revenue in the past year. However, small MSPs perform about as well as others in the 26–50% ranges—and even slightly better than bigger MSPs in the 51+ ranges. This suggests some tinier MSPs can enjoy high rates of recurring revenue—and perhaps shows a niche market preference for small, dedicated teams over larger MSPs.
Those with high recurring revenue are:
- Software License Management
- Disaster Recovery
- System Integrations
“A healthy MSP can be one that’s covering all of their costs with monthly recurring revenue. If you’re at the stage where you’re covering staff salaries, healthcare, etc., and the lights are on, you’re probably in a healthy place. Whatever you do on top of that—project work, hardware sales, software sales, additional service work—is mainly pure profit.”
“ To be a mature MSP, you need to be in the 70-80% range of recurring revenue. Our recurring revenue is over 80%. The only other revenue that's separate from that is product sales and professional services (but that's just for our existing client base).”
Most MSPs expect financial growth in 2025
Projected revenue growth drivers
Acquiring new clients
Offering new services
Increasing/improving marketing efforts
Growing existing client accounts
The majority of MSPs project their revenue will grow between 1–25% in 2025. About a quarter (26%) are more bullish and see their growth rate above 26%+. These rates are fairly consistent across MSPs of different sizes.
Projected growth drivers
For those projecting growth in the year ahead, nearly half (47%) attribute this to acquiring new clients. That could be why over a third (36%) plan to start, increase, or improve their marketing efforts. Another third also plan to offer new services and explore partnership opportunities to drive growth. This shows that high-growth MSPs are taking a more holistic approach to growing their business—with areas like marketing and partnerships becoming just as important as the technical services provided.
Less than a third plan to impact growth by driving efficiency through service delivery or by reducing costs. However, since many MSPs see increasing costs as an impediment to their growth (more on this later), looking inward to increase efficiency should perhaps be higher on their list of priorities. Large and small MSPs with high annual revenue were more likely to see service delivery efficiency as a major growth driver in the year ahead.
How Revenue Leaders Pull Ahead
MSPs with the highest reported annual revenue are more likely to have:
Higher average ARPU and recurring revenue rates
A formal customer success program in place and a roadmap for customers
A desire to improve project management efficiencies
Used AI to improve alerts, monitoring, and reporting
Offered technical training, certifications, and higher education to upskill employees
