Use MSP Financial Benchmarks to Build Your Annual Budget

Build the Revenue Lines Before the Spending Lines

Assume the managed fee and seat count stay at the example level for the annual comparison. Managed revenue is 700 seats times $225 times 12 months, or $1,890,000. The model sets that line at 52% of total revenue, so $1,890,000 divided by 0.52 gives about $3,634,615 in total revenue.

The other lines follow the model's chosen mix. They are assumptions for this example, not sales orders you can import into your own forecast. Replace them with the work and product sales you expect to earn.

Keep recurring product distinct from the managed fee. It has a different cost and margin in the model. Figures shown here are rounded; the model calculates totals using unrounded amounts, so adding displayed rows can differ slightly from a displayed total.

Calculate What the Margin Targets Allow

Gross profit is revenue less the direct cost of delivering it. The model targets 50% fully loaded gross margin for managed services, including burdened delivery labor and tools. Recurring product and hardware use 30% product margin, while projects use 50%.

Weight those targets by the revenue mix: 52% times 50%, plus 21% times 30%, plus 19% times 30%, plus 8% times 50%. The result is a 42% blended gross-profit allowance, below the model's separate 45% total gross-margin goal. This is why copying a collection of targets does not make them reconcile.

In the stable setting, sales and marketing use 6% of revenue. The EBITDA target is 20%, after a fair-market owner salary. EBITDA means earnings before interest, tax, depreciation, and amortization.

The general and administrative allowance is therefore 42% minus 6% minus 20%, or 16% of revenue. At the example revenue, that leaves about $581,538 for G&A. It is the amount the target leaves, not evidence that your office can run for that sum.

Replace Delivery Allowances With the Cost of the Work

For managed services, the 50% margin target leaves $945,000 for delivery. Tools cost 700 seats times $22.50 per month times 12, or $189,000 annually. Subtract tools from $945,000 and the delivery-labor allowance is $756,000.

Now price the actual roles. The model's stable desk has 3.20 FTE of work, rounded up to four people. That work assumes a well-run MSP at 0.5 tickets per seat per month; a typical MSP runs at 1.0 to 1.4, so copying the example's desk without checking your workload would understate the requirement.

Add the model's technical alignment, vCIO, centralized-services, and on-call costs to the desk cost. They produce $677,060 in managed delivery labor, including on-call. Do not add on-call again as a separate overhead line.

The product and hardware purchase costs are 70% of their respective revenue, leaving 30% gross margin. That 70% is a cost share, not a product-margin target. Keep the denominator straight before using these lines to set your prices.

Project labor includes both billed project work and unpaid onboarding performed by project engineers. It costs more than the project's $145,385 labor allowance in this example. Onboarding still consumes paid capacity when the client fee is waived.

Split Sales Payroll From the Remaining Program Budget

The stable sales-and-marketing budget is $3,634,615 times 6%, or about $218,077. The model's sales rep costs $137,500 at burdened on-target earnings. Subtract that payroll and $80,577 remains for programs and events.

The $218,077 already includes the rep. Subtracting the budget and the rep's salary again would count the same cost twice. Make the internal split visible even if your management report shows a single sales-and-marketing total.

Name the G&A Roles and Overhead

G&A is general and administrative spending outside the delivery and sales lines. The example carries $271,200 for the owner's burdened fair-market salary, $90,000 for the operations and office manager, and $31,250 for a half-time bookkeeper. That is $392,450 of G&A labor before the other overhead.

Add $392,450 of G&A labor to $254,152 of non-labor costs and actual planned G&A is $646,602. That exceeds the top-down $581,538 allowance. Keep the gap visible rather than reducing an expense cell until the target comes back.

The model's total burdened people cost is $1,362,919 across all functions. Those costs already sit in delivery, projects, sales, and G&A. Use the total as a payroll cross-check, not another deduction from profit.

Reconcile Profit and Test What Changes It

The detailed result is $1,594,955 gross profit minus $218,077 sales and marketing minus $646,602 G&A. That produces $730,276 EBITDA, or 20.09% of revenue. Managed delivery coming in below its allowance helps offset the project and overhead overruns.

The top-down budget reaches 20% by construction because G&A is its balancing amount. The detailed result comes from named roles and expenses. Similar answers do not mean the methods are interchangeable.

Test the assumptions that can change the result before approving the year. Use your actual ticket workload, seat pricing, planned start dates, and staffing commitments. A snapshot that holds seats and revenue constant is not a forecast of client wins and losses through the year.

Copy the revenue and cost headings into your own budget, attach the assumptions behind each, and check that every role appears once. Then place the expected receipts and payments into a separate cash forecast. Annual EBITDA will not tell you whether a hardware purchase or payroll date arrives before the cash to pay it.