Why most MSPs think they need to charge their clients more...but don't do it
As an IT Solution Provider or Managed Service Provider (MSP) it’s important that you charge correctly for your services. That might sound like common sense, but ask the vast majority of IT providers whether they feel they are charging their clients enough and they’ll say “probably not”.
If you don’t think you’re charging your clients enough, then you’re not charging your clients enough - and the answer is to raises your prices.
The consequences of raising your prices
“But if I put my prices up, I’ll lose clients!” you might say. This might be true (although often is not the case at all) but consider those clients you have who are price sensitive and are likely to leave you due to a price increase. I’m willing to bet those are the same clients who are the most demanding, take a lot of persuading to upgrade their systems, and generally are the least fun to work with. Would you *really* miss them if they left? Even if the increased revenue from your remaining clients meant that you didn’t miss them financially?
In fact, putting your prices up - be it your hourly rate for break/fix work, or your monthly Managed Service cost - will actually win you more business. The old phrase “You get what you pay for” sits strongly in peoples minds, so if you’re priced too cheap - people will assume it’s because you don’t provide a great service.
Charging what you’re worth
It’s not about being greedy, it’s about charging what you are actually worth. It’s entirely your clients choice whether you are “too expensive” or not, but take it from me that for every client you find who thinks you are “too expensive”, you’ll find another two who think you’re reasonably priced.
But how do you decide what you’re worth? As an MSP, what you absolutely shouldn’t focus on is the time you spend doing work.
Let me give you an example.
On the break/fix model, if you spent an hour doing the updates on a Windows PC - you’d charge for an hour of your time. Let’s say you charge $60/hour. Doing the updates for ten of your clients PC’s each month would therefore cost them $600/month - and the client is happy to pay this because they can’t afford a security breach that an un-patched PC might incur.
Now, if you employ a Remote Monitoring and Management (RMM) tool that completes those same updates for you automatically, taking just an hour of your time to administer each month - do you charge the client $60? Or do you charge them $600?
We’ve used a simplistic example, but the bottom line is - the value to the client is the same in either scenario, you’re still making sure their PC’s are patched up to date and kept secure, you’re just spending less time doing so. The client wants PC’s that are secure and safe. If you price that service at $60 based on your time spent, so be it. If you price that service at $600 based on the value the client gets from that service, you’re thinking correctly.
Focusing on Value
Once you start taking this view towards all the work you do for a client your attitude towards pricing changes dramatically. It’s not about the time you spend, it’s about the value you provide.
Ironically though, peoples perception of value is typically based on their time (but not yours!) If you are going to save a client time - they’ll invariably pay for this. Time is much more valuable to most people than money.
Good clients would much rather pay you to deal with IT problems than waste their time. They understand the benefit of using their own time effectively, making money doing what they do, and leaving you to do the IT.
Bad clients resent paying you to deal with their IT problems. They think in terms of cost, only turning to you as a last resort after they’ve wasted their own time, ignorant to the fact that if they’d paid you to fix the issue in the first place, they could have been earning much more money doing what they do.
Again, if you’re worried about raising your prices - consider which type of clients you’d like to attract.
I speak from experience as a former MSP owner when I tell you that by raising your prices you’ll actually win MORE business and work with more of the clients you enjoy working with.
It might seem scary, and you might be worried about losing existing clients - but once you’ve taken the step of raising your prices, you’ll never look back.