From Vision to Action: Goal Setting and Profit First for MSP Success

Updated on 2024-11-24
by MSP Association®

As tax professionals, we’ve worked with so many entrepreneurs who start the year with big dreams but end it wondering why they didn’t make more progress. If that sounds familiar, you’re not alone.

With the end of the year around the corner, now’s the perfect time to reassess your goals and explore tax strategies that align with them. By combining a strategic goal-setting framework with the Profit First methodology, you can take control of your finances and turn those big ideas into a sustainable future.

Step 1: Define a Five-Year Goal

Imagine your goal is to become a top-tier MSP in your region, growing annual revenue from $1 million to $5 million while maintaining a 25% profit margin. Growth of this magnitude requires not only strategic investments in tools and talent but also disciplined financial management to ensure you don’t overextend.

Here’s how you can break this ambitious vision into manageable milestones:

Year One: Optimize current operations to improve efficiency and profitability.
Year Two: Invest in automation tools and cybersecurity offerings to differentiate your services.
Year Three: Expand your client base by 50% through targeted marketing and partnerships.
Year Four: Build a team capable of scaling your operations, including hiring senior engineers and sales staff.
Year Five: Reach $5 million in revenue with a stable, recurring client base and a 25% profit margin.

Step 2: Use Profit First to Drive Success

Profit First offers a framework for managing cash flow that ensures your business grows sustainably. Here’s how leveraging the system can help you reach your goals:

Allocate for Innovation
Innovation isn’t optional in the MSP world—it’s essential. New threats and tech emerge constantly, so create an “Innovation Fund” using Profit First principles. Set aside 5% of your revenue for cutting-edge tools like cybersecurity platforms, remote monitoring, or AI solutions.
Plan for Scaling Costs
Scaling means more staff, licenses, and infrastructure. Profit First helps you stay ahead by allocating funds for future growth:
1. Owner’s Pay: Make sure you’re paying yourself fairly as you scale.
1. Operating Expenses: Adjust allocations for hiring, data center upgrades, or recruiting costs.
Prioritize Profitability
Fast growth can lead to overspending or taking on clients who aren’t worth it. Start with a 10% profit allocation and gradually work toward 25%. This ensures every new client or tool adds real value, not just top-line revenue.
Segment Your Clients
Not all clients are created equal. Analyze your contracts to identify which ones boost profitability and focus your efforts there. Use your Profit account to celebrate wins with high-value clients and phase out the ones that drain resources.

By integrating these steps into your MSP business, you’ll align growth with sustainability and take your business to the next level.

Step 3: Annual Checkpoints to Stay on Track

Here’s where many businesses stumble: they get so caught up in daily emergencies that they forget to step back and assess their progress. A good CPA and Profit First Professional can help you stay on track, ensuring these strategies are seamlessly integrated into your business. This way, you can align growth with sustainability and elevate your business to the next level.

Year One: Optimize Operations

Audit your existing processes. Are you billing for all services rendered? Are your contracts aligned with your profit goals?
Allocate funds to streamline operations, such as investing in an integrated PSA (Professional Services Automation) tool.

Year Two: Invest in Differentiation

Tap into your Innovation Fund to add advanced cybersecurity services or automated client reporting tools.
Increase your marketing spend from your Operating Expenses allocation to highlight your new offerings.

Year Three: Expand Your Client Base

Use profits and savings to invest in marketing campaigns and strategic partnerships with industry organizations.
Expand into new verticals, such as healthcare or finance, where managed IT services are in high demand.

Year Four: Build Your Team

Allocate funds for hiring top-tier engineers and sales staff who can handle the complexity of your growing client base.
Invest in training and certifications to ensure your team stays ahead of industry trends.

Year Five: Solidify and Scale

By now, your Profit account should consistently reflect the 25% margin you’ve been working toward.
Use additional funds to invest in branding and market leadership activities, such as sponsoring industry events or publishing thought leadership content.

Example in Action

Let’s bring this to life:

The Goal: Grow from $1 million to $5 million in revenue with a 25% profit margin.
Profit First in Action:
- In Year One, you allocate 10% of your revenue to profit and 5% to an Innovation Fund, saving $50,000 for future investments.
- In Year Three, you use these funds to secure three new clients in the healthcare industry, generating an additional $1.5 million in recurring revenue.
- By Year Five, your Profit account holds $1.25 million, reflecting the 25% margin goal, and your Innovation Fund supports ongoing advancements.

Why It Works

By combining a clear growth plan with the structured financial framework of Profit First, MSPs can avoid the common pitfalls of uncontrolled scaling and unprofitable clients. The result? A future-ready business with stable profits and a reputation for excellence in a competitive industry.

If you’re ready to align your business with your long-term goals, start by setting up your Profit First accounts and outlining your five-year vision. With the right plan and tools, success is within reach.

At Go Figure, we specialize in helping MSPs like you. As the nation’s top Profit First Mastery Certified Firm, we understand your market and can guide you in building a profit-focused plan that keeps your big picture in sight, one decision at a time. Reach out today to get started!