Pricing MSP services is something of a minefield but as we discussed in our earlier post, 5 Things You Should Know Before Becoming an MSP it is one of the most important things to think about when becoming an MSP.
If you manage to pitch your pricing correctly, you can ensure your business is highly profitable while at the same time, pleasing customers with consistent monthly fees. If you get the pricing wrong however, you may scare off potential clients or, even worse, find yourself committed to delivering services that produce little or no reward.
To help avoid this situation, here are five basic points that you should consider when devising your MSP pricing structure:
First off …it’s worth determining who your most significant competitors are – these may be companies working with clients in your target sector or in your local area. Chances are your current and potential clients are probably already aware of them so it is essential that you consider their pricing when thinking about your own!
Here you will need to decide whether you should shoot for higher pricing by delivering a better or more comprehensive service, try to undercut their prices to win business, or of course simply play it safe somewhere in the middle.
In order to decide the best course of action you need to know, in detail, the costs of providing your service. This includes knowing everything from the cost of your tools of the trade (GFI MAX RemoteManagement for example!) to the cost of your staff. Otherwise it’s impossible to accurately calculate your profit margin and you could find yourself in a situation where you’re running around servicing clients but not making any profit.
You can find out more about GFI MAX’s pricing model here – however, we don’t shout about our prices so you can keep your profit margins a secret from your clients. Just grab a free trial and we’ll run you through the no minimum, capped, PAYG pricing!
While per-user pricing makes more sense to clients, per-device pricing is perhaps more beneficial to the MSP. After all, a user with a desktop, laptop, home PC, iPad and smartphone is likely to require far more support than a part time employee with only a desktop PC.
Be sure to give this some thought though, although you may be attracted toward the per-device model, a-la-carte pricing based on the number of PCs, server and printers seems a little outdated now - in a world of service-based IT.
It may be better to make sure that your per-user pricing is pitched in such a way as to provide you with enough revenue to support those with a collection of different devices!
For the MSP, one of the main costs of delivering on an MSP agreement is providing support. Clients who require support during non-business hours should expect to pay more – in fact, for smaller MSPs, it may simply be impossible to offer certain support outside of working hours.
If you plan to offer out-of-hours services, make sure you charge appropriately. This is another area where it can be handy to have a look at what your competitors are doing.
Ultimately, you need to know how much money you can make! The nature of MSP business frees you up from the limitations of a “selling your time” business model. However, you still need to plan the correct resources to serve all your clients at once, both when everything is working well and when something serious happens at several sites at once.
Ensure your pricing is such that your MSP can be profitable through the busy times as well as the quiet.
An MSP model gives you the opportunity to move beyond the revenue potential of a traditional IT services business, but there is still the risk of not working for fair reward if your pricing is wrong – so it’s worth spending the time getting it right!