Most value creation plans for managed services businesses focus on the wrong things.
Not wrong in a catastrophic sense. Wrong in a subtle, expensive sense. The initiatives look plausible. They get signed off at board level. And then they quietly fail to move the EBITDA number, and eighteen months in, everyone is slightly baffled about why.
After scaling an MSP from £2.5m to £40m+ EBITDA, the pattern I've seen repeatedly is that businesses chase growth before they've sorted margin, hire before they've fixed effectiveness, and optimise delivery before they've automated the obvious. The sequence matters as much as the content.
Start with gross margin
The single biggest lever in managed services is gross margin, and most MSPs are leaving 5 to 10 percentage points on the table without fully realising it. The causes are consistent: vendor relationships that haven't been renegotiated as the business has grown, service delivery models that still have manual steps baked in from five years ago, and pricing that was set in a different competitive environment and never revisited.
None of those are complicated to fix. The compound effect of fixing them across the whole revenue base is significant, and it requires no new headcount, no new products, and no new customers. It's the most underrated conversation in managed services because it doesn't feel like growth.
It feels like housekeeping. It isn't.
Sales effectiveness, not sales headcount
The instinct when revenue growth stalls is to hire more salespeople. It's almost never the right first move.
The headcount goes up, the cost base follows, and the new hires take six to nine months to ramp. Meanwhile, the existing team is still operating at the same win rates, the same average deal sizes, and the same conversion from pipeline. What moves revenue is improving those numbers. Better qualification means less time on deals that were never going to close. Shorter sales cycles free up capacity. Higher win rates mean you need less pipeline to hit the same number.
Process and enablement beat headcount every time. Once you've maximised effectiveness, then you hire.
The retention revenue sitting in plain sight
Net revenue retention in managed services should be north of 110%. If it's below that, the business is working harder than it needs to and leaving money in the existing base that isn't being captured.
The cost of acquiring a new MSP customer is somewhere between five and seven times the cost of retaining one. Most businesses know this and still under-invest in customer success relative to new business development, because new logos feel like growth and retention feels like maintenance.
It isn't maintenance. It's the most efficient revenue you have.
Every manual process is a margin leak
Every manual process in service delivery is a margin leak and a scalability constraint sitting side by side. Patching, monitoring, ticket routing, reporting: these are all tasks that can and should run without human intervention in a well-run MSP, and the businesses that are getting ahead of automation now are building a structural cost advantage that will be very difficult for competitors to close over the next three to five years.
This is where AI is starting to have genuine operational impact, not at the level of answering customer questions with a chatbot, but at the level of automating the work that consumes engineering time without generating proportionate value.
Organisational design is not a soft issue
The structure that worked at £5m revenue becomes a bottleneck at £20m. I've seen this play out enough times to be certain of it. Spans of control that made sense when everyone knew each other become layers that slow decisions. Role clarity that was implicit when the team was small becomes ambiguous as the organisation grows. The best people, who have options, start to leave because the environment has become frustrating to work in.
Getting organisational design wrong is expensive in talent, in speed, and in cultural friction. Getting it right unlocks the next phase of growth. The question worth asking regularly: is this structure built for where the business is going, or where it's been?
The sequence matters. Fix margin first, then effectiveness, then retention, then automation, then structure. Most businesses try to do all five at once. The ones that move EBITDA do them in order.