Jordan Jasper, CPA

I had an MSP client tell me recently that their worst nightmare is their biggest client leaving unexpectedly.

In some MSPs, a single client can contribute north of 30% of their total revenue (This is especially true for smaller MSPs).

It would be devastating.

Now they have to pull from reserves to keep the wheels turning.

This is where your Margin of Safety matters.

Most MSPs think of profit in terms of “what’s left.” But Margin of Safety is about:

How far can revenue drop before we are losing money?

Let’s say your MSP is doing $1M. Your Gross Margin is 70%. Total Expenses are $550k.

Your breakeven, as a percentage of revenue, is almost 80%.

Said another way, you can lose 20% of your revenue and still be profitable.

In this example that's $200k a year, or about $17k in MRR.

If you lose anything over that- you're in the red.

Margin of Safety isn’t a number to glance at once a year.

It’s something to actively build.

Keep overhead lean.

Diversify your client base. (I know- this is easy to say.)

And sleep better at night.