Direct answer
What does this research show?
Using the U.S. Census Bureau's 2022 Economic Census, Bennett Financials calculated $232,939 of aggregate receipts per March employee and a 40.6% payroll share for 27,434 full-year NAICS 5415 employer firms in the published $1M–$24.999M bands. The Census table does not isolate MSP or cybersecurity companies or publish those subgroups' margin ranges, so Bennett treats it as broad context rather than a $1M–$20M U.S. MSP or cybersecurity benchmark.[1]
Key findings
What should an owner know first?
- Bennett calculation
Bennett Financials calculated $232,939 of aggregate 2022 receipts per March payroll employee and a 40.6% aggregate annual-payroll share for 27,434 full-year U.S. NAICS 5415 employer firms in the U.S. Census Bureau's published $1 million–$24.999 million receipts bands.[1]
- Illustrative example
Bennett Financials' illustrative $5 million IT-services company with 70% contracted recurring revenue begins a one-year plan with $3.5 million recurring and $1.5 million nonrecurring; the calculation is a revenue-quality example, not an external MSP benchmark.
- Illustrative example
Bennett Financials' illustrative $2 million annual managed-services contract produces $1.1 million of gross profit at 55% gross margin and $900,000 at 45%, a $200,000 one-year difference that must be traced to price, labor, tooling, utilization, or scope rather than treated as an industry prediction.
- Bennett operating target
As of September 2026, Bennett Financials applies the 60/15/15 framework to established U.S. IT-services, MSP, MSSP, and cybersecurity companies with $1M–$20M of revenue as a diagnostic target: 60% gross margin, 15% sales and marketing, 15% G&A, and a resulting 30% operating-margin target. It is not a measured industry average and should be tested by service line before being applied to the blended company.
Which financial metrics matter most for an IT services company?
A useful scorecard follows the contract from sale through delivery and cash. Company-wide revenue or EBITDA can hide an unprofitable managed-services agreement, a project team carrying idle capacity, or product resale that inflates the top line without adding much gross profit. Review the measures below by service line, customer, and contract cohort before relying on the blended result.
- Revenue quality — Track contracted recurring revenue, gross retention, net retention, the renewal schedule, and project backlog to determine how much future revenue is contracted, durable, and collectible.
- Delivery economics — Measure gross margin by managed service, project, resale, cloud, and security offer to identify which offers fund overhead and which merely create activity.
- Labor — Review gross profit per delivery-labor dollar, capacity, utilization, realization, and rework to determine whether paid technical capacity is producing priced and accepted work.
- Contract control — Calculate margin by agreement, endpoint, user, location, ticket, and included hour to test whether scope matches the price and operational burden.
- Risk — Track top-customer gross-profit concentration, vendor dependence, owner-led revenue, and renewal clustering to expose losses, repricing events, or absences that could damage the company.
- Cash — Reconcile advance billing, DSO, deferred revenue, vendor commitments, and the rolling cash forecast to determine whether recurring revenue converts to cash before obligations fall due.
How should revenue be separated across managed services, projects, and resale?
- Managed-services revenue
- Support or operational services billed on a recurring fee and governed by an agreement or service level. Recurring billing does not by itself prove retention, margin, or low delivery effort.[4]
- Core recurring revenue
- Recurring revenue from self-delivered services, separated from cloud or product resale when management needs to see the economics of the delivery platform it controls.[4]
- Project and professional-services revenue
- Implementation, migration, assessment, remediation, consulting, or other defined work with its own scope, labor plan, acceptance conditions, and billing schedule.
- Product, license, and cloud resale
- Amounts billed for third-party hardware, software, cloud consumption, or packaged vendor services. Gross billings can be a poor measure of economic contribution when most revenue passes to a vendor.
Build a revenue bridge from opening contracted recurring revenue to additions, expansions, contractions, cancellations, and closing recurring revenue. Reconcile that operating schedule to recognized accounting revenue and cash billings. Keep project backlog separate, and show usage-based cloud or security consumption independently when volume can move without a matching price adjustment.
Which labor and tools belong in cost of services?
For its management P&L, Bennett Financials generally assigns technical wages, payroll taxes and benefits, contractor delivery, white-label support, and tools required to monitor, secure, back up, or administer customer environments to the service line they enable when the costs can be allocated reasonably. Corporate accounting, general HR, leadership, and company-wide software generally sit in G&A. The Service Leadership normalized chart of accounts supports separating hard COGS, direct labor, contractors, outsourced delivery, and product resale by line of business.[4] A platform fee can be fixed at company level but variable per endpoint economically. Allocate it using the driver that causes cost, document the rule, and keep the rule stable. Moving required delivery software into overhead may improve reported gross margin while leaving total profit unchanged; it also prevents contract managers from seeing the true cost of the promise they sold.
What does the broad Census evidence show?
Broad IT-services employer-firm context
Last verified
| Population | 2022 result | Proper use |
|---|---|---|
| NAICS 5415 firms with $1M–$24.999M receipts | 27,434 firms; $126,219,994,000 receipts; $51,184,153,000 annual payroll; 541,859 March employees[1] | Broad scale and payroll context only |
| Derived aggregate ratios | $232,939 receipts per March employee; payroll equal to 40.6% of receipts[1] | A reproducible comparison denominator after definition adjustments |
The Census category mixes custom programming, systems design, facilities management, consulting, and other computer-related services. Employment excludes contractors and proprietors; payroll excludes employer fringe benefits. Do not call the derived ratios utilization, direct-labor cost, gross margin, or an MSP benchmark.[1][2]
How should utilization and contract economics be measured?
- Separate available capacity, productive utilization, billable utilization, and realization. Training, presales, internal security work, paid leave, and management are economically different uses of time even when none appears on an invoice.
- For fixed-fee managed agreements, measure labor hours, tickets, escalations, onsite visits, tooling, third-party support, credits, and gross profit by contract. A high utilization rate can be a warning when it reflects preventable incidents or underpriced scope.
- For projects, reconcile quoted hours and materials to actual delivery, rework, change orders, acceptance, and collected revenue. Realization should reflect the price actually retained, not the rate printed in a proposal.
- Track gross profit per delivery-labor dollar alongside revenue per employee. Product resale can lift revenue per employee without improving the return on technical payroll, while automation can improve contribution without increasing billed hours.
Where do cash and revenue-quality risks appear?
Recurring invoices do not eliminate working-capital risk. Annual vendor commitments, minimum cloud purchases, prepaid licenses, onboarding labor, equipment procurement, slow project acceptance, and customer payment terms can place cash outflows ahead of collections. Reconcile deferred revenue and prepaid vendor costs by contract so advance billing is not mistaken for earned profit or unrestricted cash. Measure concentration using revenue, gross profit, receivables, and delivery capacity. A large low-margin customer may dominate tickets while contributing little profit; a smaller customer may carry a concentrated receivable or renewal risk. Also map the percentage of new revenue, renewals, escalations, and key vendor relationships dependent on the founder or one technical leader.
How should an IT services company use the 60/15/15 target?
Where do IT-services benchmarks become misleading?
- Calling a broad NAICS result an MSP or cybersecurity benchmark ignores classification overlap and product mix.
- Comparing gross margin without aligning direct labor, benefits, contractors, white-label delivery, and required tools rewards accounting placement rather than operating performance.
- Treating all recurring revenue as equally valuable ignores renewal rights, churn, price protection, minimum commitments, service obligations, and customer concentration.
- Using one utilization target across support, projects, security operations, consulting, and management ignores the different work needed to deliver each promise safely.
Bennett Financials view
What do these findings mean operationally?
For a technology-services company, recurring revenue is valuable only when the contract renews, the scope can be delivered predictably, the tools and labor are visible in COGS, and collections arrive before committed outflows. We would rather see a smaller schedule of well-priced, renewable gross profit than a larger recurring-revenue headline supported by hidden labor and vendor obligations.
The diagnostic sequence is revenue quality, contract gross margin, delivery capacity, acquisition economics, G&A, cash, and concentration. That sequence keeps an owner from solving a scope or price problem with an overhead cut, or solving a retention problem by buying more top-of-funnel demand.
How was this analysis prepared?
Bennett Financials combined the all-flags-blank Census rows for NAICS 5415 firms operating throughout 2022 in four revenue bands: $1 million–$2.499 million, $2.5 million–$4.999 million, $5 million–$9.999 million, and $10 million–$24.999 million. Receipts per employee divides aggregate receipts by aggregate March employment; payroll share divides aggregate annual payroll by aggregate receipts.[1]
The operating scorecard and 60/15/15 architecture are Bennett frameworks. Service-line definitions and cost placement draw on the cited Service Leadership normalized chart of accounts, but none of that document's illustrative figures is treated as observed performance. No incompatible vendor survey was converted into a $1M–$20M benchmark.[4]
What are the limitations?
The Census proxy extends to $24.999 million, combines several IT-services models, compares annual receipts with March headcount, counts part- and full-time employees equally, and excludes contractors, proprietors, and fringe benefits. Among the sources cited on this page, none establishes compatible numeric ranges for MSP or cybersecurity recurring revenue, utilization, contract margin, tooling, churn, or concentration. Company decisions require normalized internal data.[1][3]
Questions this research answers
- What is the most important MSP financial metric?
- There is no single sufficient metric. Start with gross profit and gross margin by contract, then examine recurring-revenue retention, delivery labor and tooling, cash conversion, and concentration. MRR can rise while contract margin and cash weaken.
- Should MSP software tools be classified as COGS?
- In Bennett Financials' management-P&L treatment, tools required to deliver a customer service generally belong with that service line's cost of services when they can be allocated reasonably. Company-wide administrative software generally belongs in G&A. This is an internal decision view, not a universal financial-reporting rule; document the allocation driver and apply it consistently.[4]
- Is $232,939 a revenue-per-employee target for MSPs?
- No. It is Bennett's receipts-weighted calculation for broad NAICS 5415 employer firms in published Census bands from $1 million through $24.999 million. It is not a median, excludes contractors, and does not isolate MSP or cybersecurity companies.[1]
- How should recurring revenue quality be measured?
- Reconcile opening contracted recurring revenue to additions, expansion, contraction, cancellations, and ending recurring revenue. Add renewal timing, price rights, contract margin, customer concentration, and collection behavior; recurring billing alone does not establish quality.
- Does the 60/15/15 target apply equally to resale and managed services?
- No automatic equivalence is assumed. Bennett uses 60/15/15 as a company diagnostic target, but low-margin resale and self-delivered services have different revenue and COGS structures. Normalize each line first, then evaluate the blended architecture and the economic contribution of each offer.
Sources
- U.S. Census Bureau. Selected Sectors: Sales, Value of Shipments, or Revenue Size of Firms for the U.S.: 2022. EC2200SIZEREVFIRM, NAICS 5415. 2025-04-24. Period: 2022 receipts and annual payroll; employment for the pay period including March 12, 2022. Population: U.S. NAICS 5415 employer firms operating throughout 2022 in published receipts-size bands. Metric type: Estimate. Accessed September 2, 2026. Bennett combined the $1 million–$24.999 million bands. Derived ratios use aggregate values and are not firm-level averages or medians.
- U.S. Census Bureau. 2022 NAICS Definition: Computer Systems Design and Related Services. NAICS 54151 industry definitions. 2022. Period: 2022 NAICS. Population: Industry-classification definitions. Metric type: Not applicable. Accessed September 2, 2026. The definitions show that the category spans several computer-services models and does not identify a standalone MSP or cybersecurity-services industry.
- U.S. Census Bureau. 2022 Economic Census Information; Professional, Scientific, and Technical Services. Form PS-54150. 2022. Period: 2022 Economic Census. Population: Computer systems design and related services respondents. Metric type: Not applicable. Accessed September 2, 2026. Provides receipt, employment, and product-classification instructions, including the exclusion of independent contractors from payroll employment.
- Service Leadership, Inc., a ConnectWise company. Using the Service Leadership Index® Normalized Solution Provider Chart of Accounts™: Enabling the Measurement and Comparison of Profitability and Best Practices. Normalized Solution Provider Chart of Accounts. Period: Current PDF filename identifies 2024; no publication date is printed in the document. Population: Technology solution providers using a practitioner accounting framework. Metric type: Not applicable. Accessed September 2, 2026. Used for service-line and cost-classification definitions only. Illustrative margins in the document are not observed industry benchmarks.