It’s Time to Examine Your Managed Services Pricing Model

Pricing As the MSP landscape changes and you offer more and a larger variety of services, you might need to examine your pricing structure.  Bringing it in line with market standards and acceptable ranges helps keep you from being the discount provider by default.

In the interest of helping make sure that you are where you need to be here are the reasons that might drive you to make changes in your price model.

Your Services Increase
Most MSPs started out offering just a few services and over time, and have increased their offerings.  Being larger does not in itself give a good reason for increasing prices, but being able to meet needs of your clients on many fronts builds value to your company and that is worth money, both to them and to you.

Your Costs Increase
As your business grows, so do your expenses.  Hard costs that are associated with your business need to be monitored and understood as to their effect on overall profitability.  An important component of your pricing model is your own cost structure.

Your Proficiency Increases
One of your main investments lies in the proficiency level of your business to your clients.  MSPs have a varied lineup of offerings, but must maintain a high level of expertise in all areas at the same time.  Your clients expect to have answers to questions about new or emerging technologies.  It is part of what they pay for in a relationship with you as their trusted technology advisor.  This is a value-added area that figures into your pricing model as well.

If you find that you are not where you need to be in pricing with your clients, you will need to move carefully if you are inclined to increase your prices.  The tactic of offering to lock in existing rates in exchange for longer term contracts may seem a good way to create a solid base upon which to build your business, but this may hurt you in the long run, as you cannot anticipate the economic factors that can erode your profits over time. A better approach is to utilize a clause in your agreements that allows you to write long term contracts with the ability to review them yearly and make adjustments as needed, with a "not to exceed by x%" stipulation. As long as you curb this to within 5%-10% of your existing price, you can provide your clients the flat fee they are looking for and insulate yourself against margin loss. 

Visit www.mspu.us to download a sample Managed Services Agreeement FREE with this and other verbiage included, along with a basic SLA.

Profitability is a key concern for your operations just as it is for your clients.  Just because the allure of Managed Services is based in part upon savings does not mean that you have to submit to client-imposed prices.  Perform some research to make sure that you are where you need to be in terms of pricing vs. the services that you offer, and evaluate your pricing model on a yearly basis so that your rates align with the value of your services.

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Erick Simpson
MSP University
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Posted in: General Business, Sales

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