Margin Analysis

Overview

Revenue is visible in every PSA and accounting system; cost is not. MSPs routinely know what they bill a client but not what it actually costs to serve them, because cost has two very different components with very different data quality: cost of goods (marketplace subscription costs from Pax8/Sherweb — usually complete and precise) and cost of labor (technician time actually spent — usually incomplete, because not every MSP enforces disciplined time entry against every ticket).

This skill computes margin at the client or service-line level using whatever cost data is actually available, and is explicit and conservative about what it could not compute — a margin number built on a guessed labor cost is worse than no margin number, because it will be trusted and acted on.

Margin = Revenue − Cost
Margin % = (Revenue − Cost) / Revenue × 100

Revenue = billed amount from PSA/accounting invoices for the period
Cost    = marketplace wholesale cost (Pax8/Sherweb) + estimated labor cost
          (PSA time entries × loaded technician rate, when available)

Anti-triggers

• Accounting-platform financial reports — Profit and Loss, Balance Sheet, and Aged Receivables are prebuilt reports with their own parameters and response shape; use xero-reports or qbo-reports. Neither produces per-client or per-service-line margin, which is what this skill assembles.
• Time entries or billing items as records — use autotask-time-entries or autotask-billing.

Connected Systems

System	Role	Required?
PSA (Autotask/HaloPSA/ConnectWise/Syncro) or accounting (QBO/Xero)	Revenue — billed amount per client/service line	Yes (at least one)
Pax8 / Sherweb	Cost of goods — marketplace wholesale cost per subscription	Optional — recommended
PSA time entries (Autotask/HaloPSA/ConnectWise/Syncro)	Cost of labor — hours logged per client, for estimating labor cost	Optional

Revenue is the only hard requirement. Everything else is a cost input that improves accuracy but is not mandatory — this skill must still produce useful output with only revenue and zero cost data, by explicitly reporting "cost data unavailable" rather than fabricating a margin figure.

Workflow

Step 1: Discover what's connected

Call conduit__search_tools and search for "invoice", "subscription", and "time entr" to determine which revenue and cost sources are live for this org. Proceed with whatever combination exists.

Step 2: Pull revenue per client

Pull billed amounts for the analysis period from whichever accounting/PSA billing source is connected (qbo__list_invoices, xero__list_invoices, or the PSA's invoice/billing-item search tool). Sum to a per-client revenue total for the period. Where service-line-level margin is requested rather than whole-client margin, keep revenue broken out by line description/service rather than collapsing to a single total.

Step 3: Pull cost of goods (if connected)

Pull active subscriptions from Pax8/Sherweb (pax8__list_subscriptions or the Sherweb equivalent) for the same client, and sum wholesale unit cost × quantity to a per-client cost-of-goods total for the period. This is the most reliable cost input available — treat it as ground truth once fetched.

Step 4: Estimate cost of labor (if time-entry data is connected — treat as an estimate, always)

Pull time entries for the client for the period from the PSA (autotask__search_time_entries or the connected PSA's equivalent). Sum logged hours. Multiply by a loaded technician rate to estimate labor cost.

The loaded rate must come from context, not be invented:

• If the user or prior context supplies a blended/loaded hourly rate, use it.
• If the PSA exposes a billing rate or cost rate per resource, use that as the best available proxy and say so.
• If no rate is available from any source, do not invent one. Report hours logged as a fact, mark estimated labor cost as "not computed — no loaded rate available," and exclude it from the margin calculation rather than silently defaulting to an arbitrary number.

Time-entry data is inherently an underestimate of true cost-to-serve when time tracking discipline is inconsistent — note this caveat in the report whenever labor cost is included, so the reader doesn't over-trust a number built on incomplete logging.

Step 5: Compute margin, flagging what's missing

For each client (or service line):

• Full data (revenue + COGS + labor) — compute margin and margin % normally.
• Revenue + COGS only — compute a "gross margin (excludes labor)" figure and label it as such. Do not present it as full margin.
• Revenue only — do not compute a margin figure. Report revenue and state "cost data unavailable — margin cannot be computed" rather than guessing or omitting the client from the report entirely.

Never interpolate a missing cost component from portfolio averages or silently skip a client with incomplete data — both produce a false sense of coverage. Every client in scope appears in the output, with its data-completeness state explicit.

Step 6: Rank and flag

Sort clients by margin % ascending (worst first) among those with a computed margin. List clients with incomplete cost data in a separate section, not interleaved with ranked results, so the ranking itself is never built on an apples-to-oranges mix of full-margin and gross-margin-only figures. Flag any client with negative margin (operating at a loss) prominently regardless of where they sort.

Report Format

═══════════════════════════════════════════════════════════════════
MARGIN ANALYSIS
Period: [Month/Quarter Year]
Cost inputs available: COGS [✓ / not connected] | Labor [✓ / not connected]
Generated: [Date]
═══════════════════════════════════════════════════════════════════

RANKED — FULL MARGIN (Revenue − COGS − Labor)
  1. [Client] — Revenue $[X] − COGS $[X] − Labor $[X] = Margin $[X] ([X]%)
  ...
  N. [Client] — Margin $[X] ([X]%)  ⚠ NEGATIVE MARGIN — operating at a loss

RANKED — GROSS MARGIN ONLY (Revenue − COGS, labor not available)
  [Client] — Revenue $[X] − COGS $[X] = Gross Margin $[X] ([X]%)
  [Note: excludes labor cost — not directly comparable to full-margin clients above]

COST DATA UNAVAILABLE
  [Client] — Revenue $[X] — no COGS or labor data connected; margin not computed

SUMMARY
  Clients with full margin computed:   [N]
  Clients with gross margin only:      [N]
  Clients with no cost data:           [N]
  Clients operating at a loss:         [N]
═══════════════════════════════════════════════════════════════════

Graceful Degradation

Missing / Unavailable	Handling
No accounting/PSA billing connected	Cannot run — no revenue source. State this explicitly.
No Pax8/Sherweb connected	Compute margin on labor only if available, or report revenue-only; never omit COGS silently from a "full margin" label.
No PSA time entries connected	Compute gross margin (revenue − COGS) and label it as such; do not present as full margin.
No loaded/blended labor rate available anywhere	Report hours logged as a fact; exclude labor cost from margin math rather than guessing a rate.
Client has revenue but zero rows in every cost source	Report revenue and mark "cost data unavailable" — do not drop the client from the report.

Related Skills

• agreement-reconciliation — confirm billed revenue is accurate before trusting it as a margin input
• license-true-up — confirm marketplace cost inputs reflect actual provisioned/deployed seats, not stale subscription data
• shared/skills/billing-reconciliation — margin math reference for Pax8-cost-vs-sell-price comparisons at the subscription level