Reseller margin is the gap between what carriers charge you and what you bill your customers, less the cost of running the billing and collecting the money. It is easy to set at the start and harder to keep, because carrier rates, customer usage and the services on each account change over time while retail prices often stay as they were set.
This post covers the places margin is commonly lost and how to measure each one from your billing data. None of them depend on raising prices across the board, although some will show where a specific price needs to change.
Key Takeaways
- Margin needs measuring at the level of each call class, customer and carrier, since an average can hide loss-making traffic
- Differences in rounding and unapplied carrier rate changes reduce margin on every affected call
- Bundle allowances affect margin according to how closely they match actual usage
- Per-carrier margin reporting shows where supplier or routing choices affect profit
- Billing speed, accuracy and collection method affect cash and the cost of disputes
Knowing the Cost of Each Service
A flat markup across every call class assumes the wholesale cost varies less than it does. Termination rates differ by destination, number type and sometimes time of day, and international and non-geographic calls vary most. Where retail rates are fixed in a tariff, a carrier increase on one route can turn that route loss-making without any change on the customer’s invoice.
Other cost differences to check:
- Fixed carrier charges that apply regardless of usage, which need covering in rentals or minimum charges.
- Rounding. If a carrier rounds call durations differently from your retail tariff, the difference applies to every call. Compare the carrier’s billing increments with your own.
- Rate changes. Carriers revise their rate cards, and a notice that is missed leaves retail prices unchanged while costs rise.
A billing platform that holds the wholesale cost from each carrier record alongside the retail charge shows margin per call, customer and service. In SAFE, the Margin Watch report finds live records billing below their carrier cost, with flags for below-cost, missing-cost and below-floor records.
Bundle Design
Bundles combining rentals and inclusive usage give customers a predictable monthly price and can increase revenue per customer. Their effect on margin depends on how the allowance compares with actual usage:
- An allowance well above typical usage gives away less margin than it appears, but makes the bundle look expensive against competitors.
- An allowance below typical usage generates out-of-bundle charges, which customers may see as poor value at renewal.
- Usage patterns change, particularly as customers move between products, so allowances set some time ago may no longer fit.
Review allowance usage across the customers on each bundle periodically, and adjust new bundles before existing ones, since a change to an existing customer’s terms may need notice under their contract.
Margin by Carrier
Where you buy the same services from more than one carrier, the margin on a call depends on which carrier supplied it. Reporting margin by carrier and call class shows where one supplier is consistently more or less profitable for a given traffic type. That informs routing decisions with your carriers and supplier negotiations; the billing platform reports the result but does not route the calls.
Customer Profitability
Revenue ranking and profit ranking often differ. Grouping customers by margin rather than revenue shows:
- Customers whose costs have risen without a price change, for example after carrier increases that were not passed on
- Services below a minimum margin, which need either a price change or a deliberate decision to accept them
- Accounts with high servicing costs, such as frequent billing queries, which reduce profit without appearing in margin reports
When retail prices do need to change, the contract terms decide how. For residential and small business customers, in-contract rises must be set out in pounds and pence at the point of sale; our compliance guide covers the rules.
Billing Speed, Accuracy and Collection
How you bill affects margin through cash flow and the cost of putting errors right:
- Accuracy. Each billing error takes time to investigate and may end in a credit. Clear, itemised invoices reduce queries about charges that are correct.
- Speed. Customers pay against the invoice date, so invoices issued days after period end delay payment by the same amount.
- Collection. Payment collection by Direct Debit or card against each due date reduces both the delay and the time spent chasing.
- Visibility for customers. A portal where customers can see usage during the month reduces disputes over unexpected totals.
Our post on the hidden costs of manual billing covers how to measure these in your own business.
Where to Start
- Run a margin report by customer and service, and look at the lowest-margin items first.
- Re-check five customers against their carrier records: rates, rounding and any charges that did not reach the invoice.
- Review allowance usage on your main bundles.
- Measure your billing timeline from period end to invoices sent.
Each gives a specific item to correct, which is more useful than a general target.
Frequently Asked Questions
How often should I review reseller margins?
Review the lowest-margin customers and services after each billing run where your reports make that quick, and carry out a fuller review of bundles and carrier costs at least quarterly or whenever a carrier changes its rates.
What causes most margin loss for telecoms resellers?
Usually a lack of detail rather than a single cause. Looking only at total revenue and total cost hides the call classes, customers and services that are breaking even or losing money.
Can margins improve without raising prices?
Yes, by correcting unapplied rate changes, rounding mismatches, missed charges and slow invoicing. Where a specific price does need to rise, the customer’s contract and Ofcom’s rules decide how it can be done.
What should a billing platform provide for margin management?
Margin by customer, service, call class and carrier, based on the wholesale cost from each carrier record, plus a report of services billing below cost.
To see margin reporting against your own carrier costs, arrange a demonstration.