Article Summary
Most MSPs run 8% EBITDA. Best-in-class hit 20%+. The gap isn’t pricing alone — it’s an operating model. 60-15-15 means 60% gross margin, 15% sales and marketing, 15% general and administrative — landing at 30% operating margin. Bennett Financials runs this diagnostic on every IT services client in sequence: COGS first, S&M second, G&A third. Never reordered. Here’s what each one looks like inside an MSP P&L, and why the order matters more than the targets.
The 60-15-15 Standard for MSPs
60% gross margin. 15% S&M. 15% G&A. 30% operating margin. That’s the destination.
Out of every dollar that hits your account, how much survives after you pay the techs? If it’s less than 60 cents, scaling will make you busier — not wealthier. According to ChannelPro’s 2025 analysis of Service Leadership Index data, best-in-class MSPs run EBITDA margins around 20%, the industry median sits near 9.6%, and bottom-quartile firms operate near breakeven. Same business model. Same client profile. Different operating discipline.
Bennett Financials is a fractional CFO and tax planning firm that helps service business founders doing $1M–$20M diagnose growth bottlenecks, fix margins, and build businesses worth selling. The 60-15-15 framework is the operating model I use for every client. For MSPs and IT services firms it works the same way it does for marketing agencies and law firms — the targets are universal. The starting line and the timeline are not.
A few rules before we go deeper:
- 60-15-15 is the destination, not the starting line. Most MSPs land 18-24 months into focused execution.
- Diagnose in sequence. COGS first, S&M second, G&A third. Never reordered.
- Execute in parallel. One significant fix per area per month.
The reason the order matters: pricing decisions live in COGS. Once pricing is right, S&M and G&A targets become easier to hit automatically — because the denominator (revenue) grows faster than the numerator. Skip COGS and you spend two years cutting your way to a number you could have grown into in twelve months.
Why MSPs Typically Miss 60% Gross Margin
MSPs underperform on gross margin for three reasons, in this order: technicians are mispriced, technicians are misallocated, and tools are overweight. The third one gets all the airtime. The first two do all the damage.
The Fully-Burdened Tech Cost Most MSPs Miscount
Take a senior engineer earning $90,000. According to Flexpoint’s 2025 MSP profitability research, most MSPs underestimate their true labor cost by 20-40%. Once burden, PTO, meetings, and non-billable time are factored in, that $90,000 technician often carries a fully burdened cost of around $130,000-$145,000 annually. If you’re pricing managed services off the salary number instead of the burdened number, you’re already 30-40% short on margin before the first ticket comes in.
The diagnostic I run is labor efficiency — revenue divided by all delivery labor (including contractors). The target is 3.5x minimum. Below that, you have a labor problem, a pricing problem, or both. Service Leadership benchmarks tell the same story in a different unit: best-in-class MSPs generate roughly $3 in service revenue per $1 spent on service wages, while bottom-quartile firms generate under $2.
Picture a $4M MSP owner with three senior engineers and two junior techs. Total burdened delivery labor: $700,000. Labor efficiency: 5.7x. That looks healthy — until you discover 35% of delivery hours are non-billable, the close rate is 78%, and managed service contracts are priced off year-old benchmarks. The labor isn’t the problem. The pricing is.
Close Rate as a Pricing Signal
Close rate isn’t a sales metric. It’s a pricing metric. This is one of the diagnostics I run with every IT services firm before we touch the salary line.
The bands work like this. If your close rate is 80% or higher, your prices need to triple or quadruple. At 60-80%, double to triple. At 50-60%, raise 50-100%. At 40-50%, raise 25-50%. At 30-40%, pricing is right — go fix delivery efficiency. Below 30%, you have a sales problem, not a pricing problem, and that gets handed off to the S&M diagnostic.
Most MSP owners hear this and flinch. The instinct is “if I raise prices my close rate will collapse.” That’s the point. A close rate that drops from 78% to 38% on prices that doubled is a 92% revenue increase per won deal at the same sales effort. The math doesn’t care about your discomfort.
The reason I use 3x as the band where pricing locks in: below that, you’re trading dollars for friction; above 4x, the buyer pushes back and the gain is illusory. The 3x band is where both sides hold.
Tools and Licenses
Every MSP article online gives this section more weight than it deserves. Yes, RMM, PSA, backup, AV, documentation, and remote access tools should be 8-12% of revenue. Yes, tool sprawl is real. Yes, vendor consolidation is worth doing.
It’s not where the margin lives. The margin lives in pricing and labor efficiency. If the IT and tech services firms I work with cut every dollar of tool spend tomorrow, the average gross margin would move five points. If they reprice to the close rate band, gross margin moves fifteen.
Cut tools last. Reprice first.
The S&M Problem
Most MSPs spend on lead generation without ever calculating unit economics. They know what Google Ads costs and what referral commissions cost. They don’t know what a customer is worth or how long the payback runs. That’s a problem.
Once gross margin is healthy, S&M becomes the second diagnostic. Target: 15% of revenue. The two gates:
Gate 1: Is LTV:CAC at least 4:1? Gate 2: Is CAC payback at six months or less?
Both green and you have a growth investment — keep scaling. Either red and you have a unit economics problem that no amount of “more leads” will fix. The most common failure mode I see in MSPs: gate 1 is green (recurring revenue makes LTV strong), but gate 2 is red because the sales cycle is six to nine months and the contracts pay monthly. That’s a cash flow problem dressed up as an S&M problem. The fix is collection terms and onboarding speed, not ad spend.
The funnel diagnostic comes after the gates. SQL rate target: 60-80%. No-show rate: under 20%. Close rate: 30-40% as a process metric. According to Mosaic’s professional services benchmarks, billable utilization in professional services firms typically sits between 70-80%, with burnout risk above that range — that ceiling matters because it sets the upper bound on revenue-per-tech, which sets the upper bound on what S&M can profitably acquire.
You don’t cut your way to 15% S&M. You optimize until revenue grows faster than spend. Most MSPs at $5M run 15-25% S&M. Top performers at the same revenue run 10-15% — same dollars, more revenue.
Want to know where your business sits against the 60-15-15 standard? The Scale-Ready Assessment runs your actual numbers, builds a custom tax strategy, and produces a full enterprise value report. Free for US-based service businesses doing $1M–$20M. Book your free Assessment — 15 spots per month.
The G&A Trap
G&A rarely kills an MSP. It always drags margin.
What Counts as G&A in an MSP
Leadership salaries (non-delivery). Admin and ops staff. Office and facilities. Back-office software (QuickBooks, HR platform, Slack). Legal, accounting, insurance, licenses, bank fees, non-sales travel.
What’s not G&A: techs (COGS), RMM/PSA/backup tools (COGS), sales and marketing salaries (S&M), payment processing (COGS). If your accountant has technician salaries below the gross margin line, your P&L is misstating gross margin and you’re flying blind. Fix the chart of accounts before you touch anything else.
Owner Comp Split
This is where most MSP P&Ls get loud. The owner who does 50% delivery work and 30% sales and 20% leadership is taking $300K from the business and showing all of it in G&A. That’s wrong. Track time for two to four weeks. Split proportionally. In that example, $150K goes to COGS, $90K to S&M, $60K to G&A. The COGS line just got more expensive — which means your real gross margin was lower than the P&L showed and your real G&A was lower too.
Right-size leadership comp to market rate. Take the rest as distributions from profit. A tax strategy that ties to reinvestment makes the distribution efficient — done right, MSP owners I work with capture meaningful annual savings on the same dollar that used to disappear in payroll tax.
Non-Revenue Headcount
The cap is 25% of total team. If admin plus leadership exceeds that, you have too much overhead for the revenue. Fix sequence: automate first, consolidate second. A $5,000-per-year automation tool that absorbs the work of a $60,000-per-year admin role pays back in a month. The mistake I see is reversing that — cutting the admin first, then realizing the work didn’t go away, then hiring a temp at 1.5x the original cost.
What Most MSP Advisors Get Wrong
Generic CFO advice for MSPs reads the same way on every site: watch your gross margin, raise prices, cut vendor costs, track utilization. It’s not wrong. It’s incomplete.
The miss is sequence. Gross margin, S&M, and G&A are not three independent levers you pull in any order. They’re a stacked diagnostic. COGS gets fixed first because pricing changes the denominator everywhere downstream. A 25% pricing increase on healthy contracts drops S&M from 22% to 18% of revenue without touching ad spend. It drops G&A from 28% to 22% without firing anyone. You can fix two metrics by fixing one — but only if you go in order.
Most advisors flip this. They start with G&A because it’s the easiest place to find dollars to cut. The problem: cutting G&A while gross margin is broken just makes a less-resourced version of the same broken business. Across the IT and consulting firms in my client base, the ones who try to fix overhead before pricing usually spend a year cutting costs and end up at the same operating margin they started with — because the underlying GM never moved.
COGS first. S&M second. G&A third. Never reordered.
How This Connects to Enterprise Value
The reason 60-15-15 is worth doing — beyond the obvious “you make more money” — is that the same fixes that drive EBITDA also drive the multiple at sale. Two MSPs at $8M revenue and $1.85M EBITDA. One scores 49 on growth readiness. One scores 80+. The first sells at a 2.76x multiple. The second sells at 6.27x. Same earnings. Same revenue. The first is worth $5.1M. The second is worth $11.6M.
That gap comes from a 7-category scorecard built on 5,000 benchmarked companies. The biggest single lever is owner dependence — 25 of the 100 points. If your business can’t run without you for three months, it’s not a business, it’s a practice. Practices sell at a discount. Businesses sell at a premium.
I won’t walk through the full methodology here — that lives behind the Scale-Ready Assessment. What matters for this article: the operational work you do to hit 60-15-15 is the same work that moves the multiple. EBITDA grows. The multiplier grows. Both compound. A 30% EBITDA improvement combined with a multiple that doubles isn’t a 30% EV gain. It’s a 160% EV gain.
This isn’t exit planning. It’s operational maturity. The owner gets a choice — sell at a premium, or keep running an independent business that generates premium cash flow. Both are wins. Both require the same work.
Case Study: Eden Data
When Eden Data launched in early 2021, the founder had zero revenue and a clear request — embed finance leadership from day one, not just bookkeeping. Cybersecurity consulting is a labor-intensive service business with high pricing power if it’s structured right and very thin margins if it isn’t.
What I did: stepped in as fractional CFO from the startup phase. Taxes, forecasting, equity and compensation guidance, and ongoing decision support. Pricing decisions, cash planning, hiring timing, strategic tradeoffs — all on the same operating cadence I’d use for a $5M firm. The finance function operated as always-on decision support, not a quarterly report.
Results: Eden Data scaled from $0 to roughly $300K MRR. Equity, compensation, and rewards decisions were all guided with a “protect the founder” posture. Pricing held. Cash flow stayed positive through the growth curve.
The friction was real. The founder initially expected what most early-stage operators expect from an outside finance partner — spreadsheets and year-end taxes. The shift from “reporting” to “embedded decision support” took deliberate effort on both sides. There were calls early on where the founder asked for a clean P&L and I handed back a question about pricing on a contract being negotiated that week. That recalibration period matters. It’s the difference between fractional finance as an expense item and fractional finance as a founding-team-level partner.
The insight from Eden Data: the operating model only works if both sides treat it as embedded. A passive CFO produces a passive business.
How Long This Takes
Eighteen to twenty-four months. Not six. Not thirty-six. Eighteen to twenty-four.
Phase 1 (months 1-6): Pricing increase tied to close rate band. One S&M efficiency fix (usually pre-qualification or no-show reduction). One G&A cut (usually owner comp right-sizing).
Phase 2 (months 7-12): Labor optimization (insource contractors if they’re more than 10% of revenue). Funnel optimization. Admin consolidation through automation.
Phase 3 (months 13-18): Systems and process documentation. Final automation pass. Scale what’s working.
By month 18-24, an MSP that started at 50% GM, 22% S&M, and 28% G&A is typically running 62% GM, 16% S&M, and 16% G&A. That’s 30% operating margin. The destination.
Book a free Scale-Ready Assessment — three deliverables: full 60-15-15 financial diagnostic, a tax plan, and an enterprise value report showing your current multiple and the gap. 15 spots per month.
