MSP KPI Definition
MSP Professional-Services Gross Margin: Definition & Formula
Professional-services gross margin measures the share of project-services revenue remaining after direct delivery costs. Keep labor revenue and its matching costs together; report hardware resale separately when inspecting labor economics. Illustrative example: $50,000 of project labor revenue less $30,000 in matching delivery costs leaves $20,000, or 40%. This example is not a target or a client result.
By MSP Fuel · Examples are illustrative.
Target interpretation
Context matters
Set the target against your service scope and company plan.
Formula
PS gross margin % = (professional-services revenue − matching direct delivery costs) ÷ professional-services revenue × 100
Why it matters
High billable utilization can coexist with weak margin if rates, delivery costs or scope are wrong.
Department economics help leadership evaluate staffing and project commitments.
Common mistakes
Combining hardware resale revenue with labor-only costs.
Ignoring unbilled rework or subcontractor costs.
Comparing cash receipts with accrual-based costs from a different period.
What moves the number
Use a consistent chart of accounts and matching period.
Inspect realized labor rates, utilization and rework before changing staffing.
Review estimate-to-actual differences at project closeout.
Related MSP Fuel resources
Your company plan sets the target, priority and timing for improving this number from your current position.