Understanding Business Metrics: The Importance of Profit and Loss Management
Dave Sobel highlights the importance of understanding profit and loss (P&L) as the key indicator of a business's wellbeing. P&L is the main metric to which all others relate. He outlines his approach to explaining P&L to vendors and supply partners, emphasizing revenues and costs, particularly labor costs as the largest expense in managed services.
Dave discusses the concept of a 'healthy' profit margin for managed services providers (MSPs). He suggests that anything over 12-15% is good, and over 20% is very healthy. He emphasizes the importance of consistent quarter-on-quarter improvement and carefully monitoring costs and revenue to ensure business growth.
Dave suggests maintaining a strategic plan and setting incrementally-improving quarterly targets to achieve long-term business goals. The idea of merging and acquisition is briefly touched upon, though he recommends focusing on strengthening individual business first.
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