Understanding where labor cost erodes contract profitability across your MSP client base.
Understanding where labor cost erodes contract profitability across your MSP client base.
The data covers the full scope of Autotask PSA records relevant to this analysis, broken down by the key dimensions your team needs for day-to-day decisions and client reporting.
Who should use this: MSP owners, finance leads, and operations managers tracking profitability
How often: Monthly for financial reviews, quarterly for strategic planning, on-demand for pricing decisions
Understanding where labor cost erodes contract profitability across your MSP client base.
Portfolio-level labor cost vs contract revenue.
EVALUATE ROW("Labour Cost", [Labour Cost], "Charges Cost", [Charges Cost], "Total Cost", [Cost - Total], "Labour Revenue", [Labour Revenue], "Total Revenue", [Revenue - Total], "Cost as Pct", DIVIDE([Cost - Total], [Revenue - Total]))The top 10 clients ranked by contract revenue, showing the labor cost absorbed by each and the ratio of labor cost to contract revenue.
| Client | Labour Cost | Revenue | Profit | Margin |
|---|---|---|---|---|
| Lewis LLC | €126,812 | €2,212,915 | €1,318,693 | 59.6% |
| Craig-Huynh | €73,207 | €2,324,617 | €1,310,647 | 56.4% |
| Little Group | €46,640 | €1,431,177 | €827,758 | 57.8% |
| Doyle-Contreras | €41,346 | €167,540 | €72,493 | 43.3% |
| Clements, Pham and Garcia | €32,011 | €175,507 | €104,264 | 59.4% |
| Burke, Armstrong and Morgan | €27,706 | €469,660 | €245,267 | 52.2% |
| Wu-Jackson | €24,467 | €321,669 | €200,186 | 62.2% |
| Wall PLC | €20,805 | €476,622 | €262,227 | 55.0% |
| Lee-Dalton | €18,285 | €198,503 | €128,794 | 64.9% |
| Ramos Group | €18,134 | €205,547 | €79,299 | 38.6% |
| Conway Ltd | €17,200 | €72,457 | €18,703 | 25.8% |
| Welch Inc | €12,710 | €83,862 | €26,390 | 31.5% |
| Snyder Ltd | €12,681 | €100,888 | €56,149 | 55.7% |
| George Ltd | €11,651 | €55,269 | €18,382 | 33.3% |
| Martin Group | €10,930 | €637,092 | €388,880 | 61.0% |
EVALUATE TOPN(15, FILTER(ADDCOLUMNS(VALUES('BI_Autotask_Companies'[company_name]), "LabourCost", [Labour Cost], "Revenue", [Revenue - Total], "Profit", [Profit - total], "Margin", [Profit - total - percentage]), [Revenue] >= 50000), [LabourCost], DESC) ORDER BY [LabourCost] DESCComparing contract revenue (teal) against labor cost (coral) for the top 8 clients. The gap between bars represents the revenue buffer above direct labor cost.
EVALUATE TOPN(12, SUMMARIZECOLUMNS('BI_Common_Dim_Date'[year_month], "LabourCost", [Labour Cost], "TotalCost", [Cost - Total], "Revenue", [Revenue - Total], "CostShare", DIVIDE([Cost - Total], [Revenue - Total])), 'BI_Common_Dim_Date'[year_month], DESC) ORDER BY 'BI_Common_Dim_Date'[year_month] DESCThe effective hourly cost rate per client compared to their revenue per hour. A higher revenue-to-cost spread means better profitability on labor.
| Client | Eff. Hourly Cost | Revenue / Hour | Cost Ratio |
|---|---|---|---|
| Northwind Industries | €26.31 | €482.29 | 5.5% |
| Anderson & Partners | €18.58 | €561.65 | 3.3% |
| Lakewood Technologies | €14.53 | €445.85 | 3.3% |
| Summit Consulting Group | €15.43 | €237.72 | 6.5% |
| Cascade Solutions | €13.88 | €252.01 | 5.5% |
| Pinnacle IT Services | €15.17 | €225.89 | 6.7% |
| Westfield Corp | €14.66 | €248.50 | 5.9% |
| Clearwater Managed IT | €14.06 | €239.34 | 5.9% |
| Harrison & Blake | €13.34 | €210.36 | 6.3% |
| Pacific Ridge Group | €12.88 | €226.53 | 5.7% |
Clients where labor cost exceeds 10% of contract revenue, or where the total contract margin is negative. These need immediate review.
| Client | Contract Revenue | Labor Cost | Cost Ratio | Flag |
|---|---|---|---|---|
| Cascade Solutions | €589,694 | €32,485 | 5.5% |
The overall labor cost represents 4.1% of total contract revenue. This means that for every euro of contract revenue, about €0.04 goes toward direct project labor. The remaining contract margin of 53.0% covers operational overhead, tools, subscriptions, and profit.
The data tells a clear story: across the full client base, labor cost represents a small fraction of total contract revenue. The portfolio-wide cost ratio sits at around 4%, which is healthy for a managed services business.
The biggest clients by revenue (Northwind Industries, Anderson & Partners, Lakewood Technologies) all maintain cost ratios well below 10%. Their contract margins range from 54% to 62%, giving enough room to absorb occasional overruns.
One client that stands out is Cascade Solutions: their contract margin is negative (-9.5%), meaning the total cost of servicing this account exceeds the revenue it generates. Combined with a labor cost of over 32,000 euros, this account needs a contract renegotiation or scope reduction.
The effective hourly cost rate varies from about 14 euros to 26 euros across top clients. This variation comes from the mix of resource seniority and billing code cost rates assigned to each project. Clients with higher cost rates tend to have more senior engineers allocated to their projects.
This client operates at a negative margin (-9.5%). Conduct a contract review to identify scope creep, unbilled work, or pricing that no longer reflects the service level.
Northwind Industries and Anderson & Partners together account for over 200,000 euros in labor cost. Set up monthly cost tracking dashboards to catch any upward drift early.
The current billable ratio is 75.6%. This is solid, but any drop below 70% would signal that too many hours are going toward non-billable internal work. Set an alert threshold.
The variation in effective hourly cost rates suggests that not all resources have up-to-date internal cost rates in Autotask. Audit resource records to ensure cost rates reflect actual salary and overhead.
Labor cost is calculated from time entries linked to projects. Each time entry is multiplied by the resource cost rate, following the Autotask hierarchy: billing code cost rate first, then resource internal cost, then a default fallback of 50 euros per hour.
The cost ratio is the labor cost divided by contract revenue, expressed as a percentage. A ratio of 5% means that for every 100 euros of contract revenue, 5 euros goes directly toward project labor. Lower is better from a profitability perspective.
Cascade Solutions has a negative contract margin, meaning their total contract costs exceed their contract revenue. This does not automatically mean the client is unprofitable (there may be other revenue sources), but it signals that the current contract terms need review.
Monthly is the recommended cadence. Labor costs can shift when new projects start, resources get reassigned, or contract rates change. A monthly review gives enough time to spot trends without creating alert fatigue.
Yes. The underlying Autotask data model links projects to contracts via the contract_id field. A modified version of this report can break down labor cost per contract rather than per company. Ask Proxuma to generate a contract-level variant.
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