Why MSP Projects Fail (And How to Stop Losing Money Because of It)

Most MSPs don’t have a service problem. They have a project problem. And it’s quietly eroding both margins and customer trust.

In a recent episode of the Evolved Radio Podcast, Moovila CEO Mike Psenka joined MSP consultant Todd Kane to unpack why projects so often go sideways, and why the impact is bigger than most MSPs realize.

The takeaway is simple: bad project management isn’t just inefficient. It’s expensive.

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Bad Project Management Is a Profit Problem

One of the most direct takeaways from the conversation is that profitability issues in the MSP space are often misdiagnosed.

As Todd Kane puts it, “A full 25% of the MSP channel is breaking even or losing money. That’s bad, right? But dig deeper into the data, and it becomes clear that managed services are profitable. Bad project management is cannibalizing the profits.”  

That framing matters. It shifts the conversation away from pricing or demand and toward execution. Projects that should be profitable become margin killers when timelines slip, resources collide, and scope isn’t controlled. The issue isn’t that the work isn’t valuable. It’s that it isn’t being delivered in a way that holds up operationally.

If keeping projects profitable is a challenge, we’re digging into how to fix it in Moovila’s March livestream. Join us to learn how better project execution can protect (and grow) MSP margins.  

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Growth Exposes the Cracks in How Projects Are Managed

A recurring theme throughout the discussion is operational maturity, or more accurately, the lack of it.

Mike Psenka points out that many MSPs grow into complexity without evolving how they manage work. He explains that many MSP founders self-describe as accidental entrepreneurs. Disciplined project management wasn't necessary when they were a single engineer or growing the business. Knowing when you’ve reached that tipping point is critical.

At a certain point, what used to work stops working. Managing projects from memory, spreadsheets, or loosely structured tickets becomes unsustainable as the volume and interdependency of work increases. The systems don’t scale with the business.

Mike draws a blunt comparison: “You don’t expect software to run well if it is full of buggy, incomplete code. You can’t expect projects to run on buggy, incomplete plans.”  

The problem isn’t just process. It’s also tooling. PSAs aren’t built to handle complex, dynamic project execution, and layering in disconnected tools only increases risk. What you end up with is fragmented data and no reliable source of truth.

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Projects Are Statistically Likely to Slip

One of the most eye-opening parts of the conversation is the reality that delays are not the exception. They’re the expectation.

Mike explains it in terms of probability: “Even if they did, though, statistically there is only a 1.5% chance that the project would be completed on time – even if the project plan is beautifully built and structured.”  

That’s assuming a 90% on-time completion rate for each task, which is an unrealistically high bar.

Mike also clarifies that this isn’t because teams are underperforming. It’s because most project plans aren’t built to handle the inherent uncertainty of real work. Delays compound across dependencies, and without systems that can dynamically adjust, the plan breaks down quickly.

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Delays Don’t Kill Projects, Lack of Visibility Does

There’s an important distinction made in the conversation between delays and failures.

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“Lots of projects are delayed but ultimately successful.” - Mike Psenka

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The real issue is when delays aren’t identified early or communicated clearly.

He highlights the difference this way: “There is a big difference between, ‘There will be a problem in six weeks,’ and ‘A problem last week caused a huge delay.’”  

That gap is where trust erodes. When customers feel like issues should have been anticipated, it raises a bigger question: what else is being missed?

This is why project management has a direct impact on retention. It’s not just about delivery. It’s about credibility.

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Why MSPs Keep Losing Money on Projects

Another major issue is that many MSPs don’t have a clear view into project profitability.

Todd Kane calls out a common pattern: “Most people don't recognize the impact because their P&L has blended the Help Desk and projects. They are failing to recognize that service delivery profits might be 60% but project delivery is more like five or a negative 15.”  

Without that visibility, losses get absorbed instead of addressed. Scope creep goes unbilled. Overages aren’t tracked in real time. Projects quietly eat into margins.

Mike adds that some MSPs respond by avoiding project work entirely, which creates a different problem: “So now you're opening the door for a competitor to take your business?”  

Ignoring the issue doesn’t eliminate it. It just shifts the risk elsewhere.

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The Missing Feedback Loop

One of the clearest gaps in MSP project delivery is the lack of a structured feedback loop.

Psenka explains that while large organizations routinely analyze project performance, MSPs often don’t have the bandwidth to do the same. They don’t understand what they we misquoted and where they need to modify.

Without that analysis, mistakes repeat. Estimates stay inaccurate. Templates don’t evolve.

The opportunity is to turn projects into repeatable, refined offerings over time where each execution improves the next. Without that loop, every project starts from scratch.

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If You’re Guessing Durations, You’re Guessing Outcomes

Toward the end of the conversation, the focus shifts to what actually drives better project execution.  

Mike emphasizes that it’s not just about breaking projects into more tasks, but about defining them correctly. To unlock automation and accuracy, you need dependencies and durations.

This is where many MSPs fall short. Tasks may be assigned and estimated, but without clear durations and dependencies, timelines aren’t grounded in reality.

He also makes it clear that manual management isn’t a viable solution at scale: “Trying to do that manually is why project plans are terrible. It's not possible.”  

If plans can’t adapt automatically when things change, they quickly become outdated, and the entire project drifts.

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Better Project Management Isn’t Optional

The thread running through the entire conversation is that project management isn’t just an operational concern. It’s a business-critical function.

When it breaks down, the impact is twofold: margins erode and then customer trust follows.

Or, as Mike puts it more directly: “Bad project management is a two-hit thing. You lose money. Then you lose customers – and a potential reference from those customers.”  

You can’t eliminate delays. But you can control how early you see them, how clearly you communicate them, and how effectively you respond. That’s the difference between projects that stay on track, and ones that quietly cost you far more than you expected.

For more insights on managing projects at your MSP, check out our blog or reach out to our team for a demo.

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