More Heads Is Not a Growth Strategy

In June, the chief executive of ConnectWise, one of the biggest software vendors in the managed services industry, said something worth taping to the wall: “The equation for growth is breaking. It is human-led, and there’s nothing wrong with that, but the market is shifting.”

He said it in an interview about his company’s AI products, so discount the sales pitch wrapped around it. The observation survives on its own, and you can prove it without any vendor’s research.

Here is the equation he means. For twenty years, growing an MSP worked like this: win a contract, hire a technician to serve it, repeat. Double the customers meant double the staff. Revenue followed payroll. Growth was a hiring plan with a sales team attached.

The next technician stopped showing up

That model has a quiet dependency: every time you sell, somebody qualified answers the job posting. That is the part that broke.

The evidence is national, not industry gossip. The Bureau of Labor Statistics puts the median wage for computer and IT occupations at $109,470 (May 2025). CompTIA’s read of the July jobs report puts tech unemployment at 2.8 percent, which in practice means almost everyone good is already working somewhere. An MSP in Omaha is not competing with the shop across town for that talent. It is competing with every IT department in the country.

Ask the industry and it says the same thing. In Kaseya’s survey of about a thousand MSPs, the share who called hiring skilled technicians a daily problem rose from 9 percent to 16 in a single year.

Pay, though, is not exploding. Service Leadership, which tracks compensation across the industry, says wage inflation peaked in 2022 and has cooled since. Technicians did not get expensive. They got scarce, and a raise does not fix scarce.

So the growth plan and the hiring plan have to stop being the same document. For twenty years they were.

Somebody already found the exit

Two numbers from this summer show the industry splitting in two.

First: MSP revenue grew 9.6 percent last year, while adjusted EBITDA, Service Leadership’s profit measure, grew 17.1. When profit grows almost twice as fast as sales, one likely reason is that operators are serving more customers without hiring proportionally more people.

Second: the spread. In Kaseya’s data, 17 percent of MSPs averaged recurring revenue growth above 20 percent a year over the past three years, and 7 percent shrank. The same market and the same shortage produced opposite outcomes. Some operators have already figured out how to grow without the next technician.

What no survey tells you is how they staffed it. Nobody measures that. Which brings us to the number this piece is about.

One number tells you which side you’re on

Take everything the company billed last year. Divide it by the number of people it took to deliver it. That is revenue per employee, and it is the cleanest test of whether a business grows by building or by hiring.

Nobody publishes a benchmark for it. Service Leadership’s public materials do not carry one. The Channel Futures MSP 501, the industry’s best-known ranking, reports that its 2026 class averaged more than $32 million in revenue, and it publishes no headcount figure. The industry does not know how many people it takes to produce its own revenue.

That is not a reason to skip the number. It is the reason to own it. Compute it every quarter, ignore the level, and track the direction. A line that climbs while service quality holds means you are building a machine. A line that only moves when you raise prices means you are not.

Four habits, in plain terms

Put it on the scoreboard. Revenue per employee goes into the quarterly review next to sales and churn, as a trend line. Count everyone honestly: people on payroll plus contractors and the offshore bench. The fastest way to ruin this number is to flatter it.

Make hiring requests carry the math. Anyone asking for a new hire brings two lines with the request: the revenue the hire unlocks and the quarter it lands. A growth plan that only works with one new hire per new customer is a payroll plan wearing a growth costume.

Stop pricing by effort. Billing by the hour or by the ticket sells your scarcest resource at cost and hands every efficiency gain to the client: automate a task and the invoice shrinks. Price new offers on the outcome instead, the covered employee or the audit passed, so the gains land as your margin. Change the anchors on new deals now, move old contracts at renewal, and never reprice anyone mid-term.

Pay your service leaders on the trend. A bonus for keeping everyone busy rewards the old machine. A bonus for growing revenue per employee rewards replacing busywork with systems, one workflow at a time.

The eight-quarter email

For a private equity reader, this number does in one line what forty pages of diligence try to do: it separates growth that was built from growth that was hired. Revenue up while the ratio stays flat means the growth was hired. Revenue up while the ratio climbs means someone built something, and built things command premiums.

The test fits in one email: revenue and average headcount, by quarter, for the last eight quarters. The speed of the answer is a finding by itself. An operator who runs this number sends the spreadsheet the same afternoon. One who has never seen it needs two weeks, because someone has to assemble a number nobody was managing.

The ConnectWise chief is right that the equation is breaking, whatever he happens to be selling alongside the observation. The operators who move first shape what replaces it. Pull four quarters of revenue, divide by heads, and look at the line. If it stayed flat while revenue grew, the equation is still running you.