Last time, we looked at simplifying your sales management process. This time, we’d like to focus on:
It can be difficult to provide an “objective” incentive plan for your MSP engineers, especially since they may work on a variety of different type of client scenarios (Fully Managed, Time-and-Material, Fixed Fee projects, etc.) And for the more senior engineers (who are paid more), more should be expected, right?
We would suggest considering an incentive program that sets a goal for each engineer based on their salary compensation, and sets a goal measured by the “revenue they impact”. You can quantify the “revenue they impact” in several categories:
- Fully Managed clients: Fully Managed clients pay you a flat fee at the beginning of the month, then your engineers “work” for that client throughout the month. Your engineers should receive “credit” for the time they spend for that client, but there should be an incentive to be efficient in their approach to the client (thereby minimizing the hours spent, which maximizes profitability). We recommend “crediting” the engineer for time worked on the account based on the number of hours worked multiplied times the “effective hourly rate” for that contract this month. If you have a $1,000 per month client and your engineering team works 10 hours for that client this month, your effective hourly rate would be $100 per hour ($1,000/10). If your engineering team works 20 hours on that contract this month, your effective hourly rate would be $50 per hour ($1,000/20).
- Time-and-Materials and Block Time clients: “Credit” for time spent working for time-and-material or Block Time clients is simply be the number of hours multiplied by the hourly rate. This would also be true for project work that is billed on an hourly basis.
- Flat Fee Projects “Credit” for Flat Fee Contracts or Flat Fee Projects operate the same way as Fully Managed contracts, with the hourly rate decreasing as more hours are logged against that project.
- Product Revenue or Gross Margin: If your engineers directly influence the purchase of products by your clients, you may also want to provide “credit’ to the engineer based on derived product revenue or gross margin.
All of the information that you need to calculate the revenue that each engineer has impacted is available via ConnectWise by looking at the number of hours logged per month versus the revenue generated for each of the above categories. Providing engineers with an “objective”, verifiable incentive program to reward their efforts can be a welcome addition to your engineering compensation package.
THE NEW HAVEN APPROACH
At New Haven, we’ve been working with some of our clients to create a way to implement this revenue-based engineering incentive program, and make it quick and easy to do. Here’s a screenshot of the overall report:
…and we measure the “revenue credit” compared to the goal for each engineer based on their W-2:
At New Haven Technologies, we provide access to information so that you can make data-driven, informed decisions about your MSP business. Our service is provided on a month-to-month basis, and starts with a free two-week trial on your network with your data. We also include customized reporting, dashboards and SmartPhone reports, all at no additional cost as part of the service.
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Best Wishes for continued success in building your MSP practice!
Founder and Chief Consulting Officer
New Haven Technologies, LLC
Stop Guessing. Start Knowing.