Today, we released an analysis from Service Leadership, Inc., the leading financial and operational benchmark organization for MSPs and IT solution providers worldwide, that indicates that Continuum’s partners are able to achieve greater profitability, operate more efficiently and withstand market pressures better than other MSPs as a result of our transformative platform and business model. Let’s take a deeper look into these findings and how leveraging Continuum could be the key to becoming a world class MSP.
By comparing financial data from a random sample of 140 of Continuum’s partners in the Service Leadership Index® (S-L Index) to those in the S-L Index who do not use Continuum, the analysis illustrated the real, long-term effects of Continuum’s business model to not only achieve greater overall profitability than their peers, but withstand downward market pressures.
“Normally, we don’t compare any vendor’s partners to those of their competing vendors, because we know that the partner’s Operational Maturity Level© has a much greater impact on their financial performance than does their choice of vendor,” said Paul Dippell, CEO, Service Leadership, Inc. “However, Continuum’s business model allows the MSP to shift material operational responsibility, financial risk, and management effort, to Continuum for a flat fee. We wanted to see if this provided their partners with a measurable financial advantage. Because of the size of the overlap between their partner community and our benchmark community, we were able to examine this for the first time in a useful way.”
Achieving Higher Margins
Overall, the analysis showed a material advantage for MSPs using Continuum across key profit and growth measures. Of the MSPs in the top quartile of the S-L Index, Continuum partners achieved gross margins on managed services that were on average 8 percentage points higher than their non-Continuum peers. And, among all MSPs in the S-L Index, Continuum partners recorded Adjusted EBITDA figures that were on average 7 percentage points higher than their peers using other platforms.
Withstanding Downward Market Pressures
From the study, we can see that while the MSPs who did not use Continuum saw a decline in managed services margins of 4 percent from 2012 through 2016, Continuum’s partners saw their margins on managed services hold steady on average during that same period. In addition, they grew their Adjusted EBITDA dollars at a much faster rate. Continuum partners with less than $5MM in revenue grew profit dollars 7 percent on average, while MSPs who did not use Continuum realized just over 3 percent growth. Likewise, partners with more than $5MM in revenue grew profit dollars by 17 percent while their peers realized just under 13 percent growth.
These findings clearly illustrate the advantage of Continuum’s business model as MSPs strive to grow their business, increase profitability and remain competitive in today’s managed services market.
Carrying Less Overhead
The success of Continuum’s business model was further validated by findings that Continuum partners are able to leverage the company’s on-demand, integrated IT workforce and spend less than their peers on overhead expenses. This allows Continuum MSPs to grow their client base without needing to add costly technicians to their payroll, so they can focus resources on business growth. In fact, non-Continuum MSPs were found to spend 6 percent more on average on General & Administrative expenses between 2012 and 2016 than MSPs working with Continuum. That has given Continuum partners the ability to drive greater profitability and become stronger, more agile organizations.
“We are pleased to have empirical data from a scientific study conducted by Service Leadership, a credible third party, that validates our underlying value proposition established as the basis of our entire business—that our competitive differences drive profitability and growth for MSPs by allowing them to leverage Continuum’s integrated, on-demand IT workforce,” said Michael George, CEO, Continuum. “That means MSPs can grow their client base without needing to hire new technicians and increase payroll, and can therefore invest in other areas of the business. They can dedicate resources to higher-value projects that build the business, rather than focusing on mundane day-to-day, resource-heavy tasks. In fact, we saw that the highest-performing Continuum partners were all-in as far as leveraging our RMM, Help Desk and Backup solutions. This suggests that the correlation between use of our platform and profitability is exponential.”
To learn more about the Service Leadership analysis and Continuum’s transformative business model, click here.
By Carlos Borges
By Ray Vrabel