MSP Cost per User: Calculate Delivery Cost and Margin

Count the Whole Cost of Delivery

A seat is a billed user, or the device count if that is larger at the client. Keep the managed service separate from recurring product resale, hardware, and projects so each revenue line carries its own costs. New-client onboarding is project-engineer work in the model, including when you waive the onboarding fee.

The example's managed-services cost breaks down as follows. The account roles stay in delivery because they are part of what the recurring service provides.

Delivery labor totals $80.60 per seat per month before the tools. Adding $22.50 gives the $103.10 delivery cost used in the opening calculation. The displayed components are rounded separately; reconcile the underlying amounts before rounding your own totals.

Use burdened pay, meaning salary plus employer payroll taxes, benefits, and insurance. The model applies a 1.25 multiplier to US non-owner salaries, with a separate owner multiplier. Count the owner's ticket work as delivery labor and allocate the remaining compensation to its proper function, so the same pay never appears twice.

Include the Account Roles

A technical alignment manager, or TAM, owns standards and the client's environment. A virtual chief information officer, or vCIO, owns the business conversation and budget. The model keeps these roles distinct and has both report to the owner; moving their pay into sales would leave the service margin missing part of delivery.

Monthly recurring revenue, or MRR, is the contracted revenue billed each month. The staffing assumptions are one TAM for about $70,000 of managed-services MRR and one vCIO for about $140,000. Centralized services are included too, bringing the combined account and centralized cost to $39.80 per seat per month in the example.

For your workbook, follow the work and reconcile the allocation to payroll. A person who splits time between delivery and another role needs an explicit split, rather than a convenient home for the whole salary. Write down the allocation method beside the calculation so you can use the same method next quarter.

Match the Cost Period to the Seats

I would use a completed quarter because the invoices and payroll give you a period you can reconcile. Seat-months are the sum of each month's supported seats across that period. They let you compare quarterly costs with a monthly seat price without pretending that the headcount stayed fixed.

1. Export the managed seat count for each client in each month of the quarter. Use the same seat definition as the agreement and billing record.
2. Add those monthly counts to get the quarter's seat-months. Keep adjustments for leavers and new starters consistent with your billing method.
3. Total the quarter's burdened delivery labor, on-call cost, and delivery-tool bills. Keep project labor and resale costs on their own revenue lines.
4. Divide each delivery-cost total by the seat-months. Add those amounts to calculate delivery cost per seat per month.
5. Divide managed-services revenue for the quarter by the same seat-months to find the average realized seat price.
6. Subtract delivery cost from managed-services revenue and divide by that revenue to calculate gross margin.

The seat-month total already accounts for the months in the period. Don't divide the result by the number of months again. Convert annual payroll into the cost for the chosen quarter before adding it to quarterly invoices; a mixture of annual costs and quarterly revenue is arithmetic with the dates missing.

Explain the Labor Before Adding People

The example's $38.25 desk cost depends on its well-run workload of 0.5 tickets per seat per month and four desk technicians. Hold the other assumptions constant and raise the rate to 1.0 tickets per seat: the modeled desk requires seven technicians and costs $66.94 per seat per month. Managed-services gross margin then falls from 54.2% to 41.1%.

That is a workload sensitivity, not a universal staffing rule. Compare your logged labor with the example's assumptions about minutes per ticket and the monitoring alerts requiring human work. A seats-per-technician shortcut can't tell you which part of the workload is consuming the time.

Keep the Tool Bill on the Right Line

The US example allows $22.50 per seat per month for delivery tools. At its $225 seat price, $22.50 / $225 = 10% of managed-services revenue. Use your actual bills in your own cost calculation, including the tools used to support clients whose ticket counts happen to be low.

A separately resold license belongs with recurring product. The model targets 30% margin on product and hardware, while the managed-services target is 50% after burdened delivery labor and tools. Its separate 70% margin target belongs to labeled resold services.

Check the revenue line whenever you move a cost. Putting a resold license into service revenue while leaving its vendor bill elsewhere flatters the managed-services margin. A project invoice also needs to stay with project costs, rather than making a recurring seat look more profitable.

Use the Difference to Choose the Work

The example's 54.2% is above the model's 50% managed-services target. Being below that target doesn't automatically mean a client loses money: a positive gross profit can still contribute toward the costs outside delivery. EBITDA means earnings before interest, taxes, depreciation, and amortization; count it only after sales, overhead, and a fair-market owner salary.

I'd reconcile the company totals before assigning a margin to individual clients. Use identifiable client labor and tool costs where the records support them, then label the shared-cost allocation. A company average is a starting comparison, not a measurement of every client's exact consumption.

Grade clients each quarter on margin and fit. For a weak relationship, examine whether a refresh or standardization project would reduce delivery hours before you reprice it. Reprice the weakest clients first, and replace bad revenue with good so you aren't carrying the same payroll against a shrinking revenue base.

A rule of thumb won't reconcile the books. Take the delivery-cost total and the managed-services revenue for the same quarter, tie both back to the accounts, and carry the same seat-month denominator through the workbook. Then choose the client or cost line whose difference from the company average you need to explain.