MSP Profit Margins: 2026 Benchmarks From Survey Data

Ask ten MSP owners what a good profit margin is and you will hear ten numbers, none of them with a source. Vendor blogs repeat a single target, usually without saying whether it is gross margin, net margin or EBITDA, or who was surveyed. This guide uses the one public dataset we found that shows the whole distribution, explains which margin is which, and shows you how to calculate your own.

The short answer

There is no single good margin for an MSP, because the market is split. In Kaseya's 2026 survey the largest single band of MSPs reported net profit of 16-20% on managed services, and a further 29% reported 25% or more (14% at 25-30% plus 15% above 30%). At the other end, 10% said managed services were not profitable yet, double the share a year earlier, and 6% said they were breaking even.

10%

Kaseya, 2026 State of the MSP Report, 2026Vendor surveyn=1,061Verified 2026-10-11

For a benchmark on the efficient end, Service Leadership's best-in-class line for IT solution providers is adjusted EBITDA of 19% or more of revenue, a level it reports has held for six consecutive years.

19%+

Service Leadership, 2026 Annual IT Solution Provider Industry Profitability Report (press release, 2026-06-23), 2026Vendor-owned indexVerified 2026-10-11

Read those two figures together: a margin in the mid-teens or above puts you in the better half of the survey, and 19% adjusted EBITDA is the line a vendor-owned index uses for the best performers. Neither number is a promise for your business. Both are starting points to test against your own accounts, which the rest of this guide helps you do.

The 2026 net-profit distribution

This is Kaseya's Figure 8, the question "net profit for managed services", with the 2025 and 2026 answers side by side.

Net profit, managed services	2025	2026
Not profitable yet	5%	10%
Breaking even	5%	6%
1-2%	4%	2%
3-5%	8%	5%
6-10%	10%	11%
11-15%	15%	14%
16-20%	15%	18%
25-30%	15%	14%
Over 30%	16%	15%

A few things to know before you place yourself on the table:

• The shares do not add to 100%. Kaseya excluded "I am not sure" and "Do not know" answers. Treat each share as a share of all respondents, not of those who answered. If you want a share among those who gave an answer, divide by the column total (95% for 2026).
• There is no 21-24% band. The source jumps from 16-20% to 25-30%. If your margin is 22%, you sit between those two bands, and our KPI benchmark checker says so rather than forcing a fit.
• It is self-reported. Respondents typed or selected a number. Nobody audited it, and the report does not say how owners treated their own pay when they answered. Check that before you compare.
• It is net profit for managed services, not for the whole company. If you also run projects or resell hardware, your company-wide margin will differ.

Adding bands together gives a few useful cut-offs, using only the 2026 column. Adding the first four bands (not profitable, breaking even, 1-2% and 3-5%) gives 23% of respondents at or below 5%. Adding the three top bands (16-20%, 25-30% and above 30%) gives 47% at 16% or above. That is the polarised picture Kaseya describes in its own text: a meaningful group is protecting strong margins while another group struggles.

Why unprofitable MSPs doubled

Kaseya attributes the change to the combined effect of slower revenue growth and rising operating costs. In a separate question about economic uncertainty, 30% of MSPs cited rising labour, tool and infrastructure costs as a direct constraint on growth. The report also describes deal sizes compressing and pricing power being limited, which makes cost increases harder to pass on.

We cannot separate cause from correlation in a single survey, so treat this as the publisher's explanation, not a proven mechanism. It does match the other numbers in the same report: the share of MSPs whose typical customer spends $25,000 or more a year fell from 75% to 41%, and the largest band of MSPs now reports average MRR per client of $1,000 or less.

41%

Kaseya, 2026 State of the MSP Report, 2026Vendor surveyn=1,061Verified 2026-10-11

30%

Kaseya, 2026 State of the MSP Report, 2026Vendor surveyn=1,061Verified 2026-10-11

Net vs gross vs EBITDA: which one is "your margin"

The margin you hear quoted depends on who is quoting it. Mixing them up is the main reason published targets appear to conflict.

Definitions

Direct cost of delivery usually means technician labour, the per-seat tool stack, licences and subcontractors. What counts as direct varies between firms, so write down your own definition and apply it consistently.

Why published targets conflict

Three reasons, all visible in the sources:

1. Different measures. A blog that says "aim for 20%" may mean gross margin, EBITDA or net profit. Kaseya's distribution is net profit for managed services. Service Leadership's line is adjusted EBITDA. They are not interchangeable.
2. Different populations. Kaseya surveys MSPs, 76% of them in North America. Service Leadership's report covers IT solution providers across 104 countries, a broader group than MSPs alone.
3. Different treatment of the owner. If the owner pays themselves below market rate, reported profit looks better than a buyer would accept. Adjusted EBITDA exists to normalise this, but definitions vary by publisher.

We found no neutral public benchmark for MSP gross margin, so we do not quote one. If you see a gross-margin target online, ask for the survey behind it. Instead of a market number, use your own history: track gross margin by client and by service line, and watch the trend.

What best-in-class looks like

Service Leadership describes best-in-class IT solution providers as those at 19% or more adjusted EBITDA, and says that line has held for six years running. Its 2026 report also shows MSP total revenue growth of 9.6% in 2025, up from 7.1%, with MSP adjusted EBITDA growing 17.1%.

9.6%

Service Leadership, 2026 Annual IT Solution Provider Industry Profitability Report (press release, 2026-06-23), 2026Vendor-owned indexVerified 2026-10-11

Two cautions. First, Service Leadership is a ConnectWise company, and ConnectWise sells software to the same MSPs the index describes. We read the figure through a syndicated copy of the release and recommend opening the canonical page before you quote it. Second, "best in class" is a selected group. Using it as your target is reasonable; assuming the average MSP achieves it is not.

The margin killers

The sources show where margin is under pressure. None of these items is a diagnosis of your business, but each is worth checking.

• Tool sprawl. Per-seat tool costs sit in direct cost, so every added product comes straight off gross margin unless the price rises with it. Audit tools quarterly: for each, name the service it supports and the clients who pay for that service. We found no neutral data on average stack cost per seat, so use your own invoices. The security layer is the usual place to start; see packaging and pricing managed security.
• Under-priced seats. If your price per user was set years ago and has not moved, rising wages and tool costs have eroded it. Kaseya's pricing data is three years old and from a vendor, so use it as context only; start from your costs in the pricing calculator, then follow how to raise prices without losing clients.
• Shrinking deal size. With 30% of MSPs reporting average MRR per client of $1,000 or less, fixed onboarding and account-management effort is spread over less revenue. Price onboarding as its own line item and set a minimum monthly commitment.
• Unmeasured client mix. Without per-client profitability, you cannot tell which accounts subsidise the others. Compare each client's monthly price with the labour hours and tools it consumes.
• Owner time not costed. If you do the work of a service manager and pay yourself nothing for it, your margin looks higher than the business's real economics. Cost your own role at a market rate, then see what is left.

Calculate your margin

Work from last year's accounts in this order:

1. Revenue: managed services revenue separately from projects and hardware.
2. Direct cost: technician labour at fully loaded cost, per-seat tools, licences and subcontractors that serve managed clients.
3. Gross margin: (revenue - direct cost) / revenue.
4. Overheads: everything else needed to run the company, including a market-rate salary for yourself if you work in the business.
5. Net margin: (revenue - all costs, interest and tax) / revenue.
6. Adjusted EBITDA: add back interest, tax, depreciation and amortisation, then normalise owner pay and one-off items. Keep a note of each adjustment so a buyer can follow it.

Then compare. The KPI benchmark checker places your net margin against the Kaseya distribution above, and the pricing calculator shows the price per user that would deliver the margin you want.

If your margin is below where you want it, pricing is usually the fastest lever to test, so read how to price MSP services from your real costs and our summary of pricing models. If you are thinking about a sale, margin is only part of the story: see how MSPs are valued. For the wider operating metrics, read the 12 MSP KPIs worth tracking, and browse every sourced figure on the research page or in the pricing and profitability hub.

A note on method

We use the 2026 column of Kaseya's Figure 8 because the report text confirms it ("the proportion that report being unprofitable has doubled"). The percentages are as printed. Our own additions (23% at or below 5%, 47% at 16% or above, 29% at 25% or more) are simple sums of printed bands. We excluded no one: respondents who answered "not sure" were excluded by Kaseya before publication. Figures were checked against the report PDF on 11 October 2026. Our methodology page explains how we source and verify data.