Service Leadership, Inc. has released its 19th Annual IT Solution Provider Industry Profitability Report™, revealing unprecedented growth rates for TSPs for the fourth consecutive year. The report highlights record profitability, high company valuations, strong MSP revenue growth, and the impact of hyper-automation and customer experience on the industry. TSPs are expected to sustain impressive growth rates and profitability by adopting innovative technologies and improved business processes.
In an analysis by Rich Freeman in Channelholic, The report also found a correlation between high customer satisfaction and profitability. Surprisingly, private equity-owned MSPs had higher Net Promoter Scores (NPS) than their smaller counterparts, indicating higher operational maturity. PE-backed MSPs also showed faster gross margins and EBITDA growth than non-PE providers. However, MSPs without private equity funding performed better regarding gross margin percentages and adjusted EBITDA growth.
Why do we care?
Some data driven insights. Investing in tools and processes that improve customer interactions can drive higher customer satisfaction. Focus on personalized services and proactive support to boost NPS and, consequently, profitability.
While PE-backed MSPs show faster growth in gross margins and EBITDA, non-PE MSPs perform better in gross margin percentages and adjusted EBITDA growth. This indicates that non-PE MSPs might be more efficient in their operations, despite slower growth rates. TSPs should evaluate their growth strategies in the context of operational efficiency.
The distinction between PE-backed and non-PE-backed MSPs highlights diverse paths to success. Understanding these dynamics can help TSPs position themselves more strategically in the market.
