Learn how to price your MSP offering
How to price your MSP offering is a huge part of your company’s success. When you first get into business, you’re probably willing to take on whoever throws money at you. Then, you eventually realize that they’re not profitable. You have to reset your pricing in order to get enough money in the bank to grow. Here’s what we do.
Prices may vary from city to city, however the focus should not be on prices. Profit margins on each job or contract should be your main goal. At our MSP, ARRC Technology, we strive for a 64% profit margin on all our offerings.
To get off on the right track, when pricing a new client, you should consider several items:
- How many hours will your tech have to be there?
- Do you have the right tech for the right job?
- Can you use more automation to handle more tasks so you cut down on tech hours?
If you are just starting out as an MSP, figuring out your profit margins may be somewhat difficult because you’re not sure how much time a job will take. However, keep these components in mind during your pricing stage, and religiously track your time spent through documented processes, so you can get closer to your profitability mark out of the gate.
If you are already an established MSP, you should go back through your older contracts and see how you can boost your margins. As you are going through this process, consider any upsell you can offer older clients. Maybe a Dark Web Scan, Cyber Threat Scan, anything new so you don’t leave money on the table. This one addition can turn a non-profitable client profitable.
No Itemized Billing
Pro tip from Alex: When billing, do not submit an itemized breakdown of how your monthly fees break down. For example, if you are billing $100 per user at 15 users then your client will think your $1,500 per month fee is directly connected to how many users he has at that moment. You may use these numbers for your internal pricing calculator, but do not share this in the customer invoice. Pricing with a flat fee can remove many client complaints down the road if they suddenly lose a few company members and want credit for fewer employees.
Four Major Pillars
As part of our CORE training video series, Alex Rogers, CEO & Founder, of CharTec & ARRC Technology breaks down this complicated topic into 4 major components.
- Management Fees
- Professional Services
- Subscription / Third Party Charges
Alex goes through each component and gives you the rundown on how each one affects your overall pricing structure, and profit margin. Watch this video for the full rundown.