February 11, 2016
How New MSPs Can Develop A Pricing Strategy
When your company is about to make a move from break-fix to managed services provider, one of the first steps involves working out a pricing strategy. This can be a tricky task for any MSP.
Monthly pricing is typically determined on a per-device, per-GB or per-user basis. Additional one-off projects outside of the agreement are billed separately. This is really just the starting point for developing a pricing strategy. There are a variety of other factors that are important to consider when it comes to pricing your services.
New MSPs often price services based on their competitors’ rates. However, rates vary widely, as this data from Kaseya’s 2016 Global Pricing Survey shows:
According to Jordi Tejero, owner of CRS Technology Consultants, it’s better to just look at your business’ costs and determine the margin you want to hit. Your fees should be based on those numbers. “Understanding your own costs is essential,” said Tejero. “Start with technology costs. From there, look at costs associated with particular clients—number of users, amount of data, number of servers. Then, factor in hourly costs for supporting each client.”
That last part is more complex than it sounds. Support costs can vary widely from client to client depending on their specific needs. Tejero said this is one of the factors he considers when determining mark up over hard costs. In other words, customers that require the most support are charged at a higher rate than less challenging clients.
Another factor to consider is the technology the client already has in place. If a customer has dated technology, it will take more effort to support them. “Performing a network assessment when evaluating a client can help you determine costs associated with older technology,” said Jeff Cohn, President of SAGE Computer Associates. “It also presents an opportunity to recommend more appropriate technology.” Tejero takes a similar approach. “I’ll perform a network audit and come back to them and say ‘here are five things you need to update before we can take you on as a client.’”
Finally, it’s important to take straightforward approach. “If you have a lot of clients, simpler is better,” Cohn said.
Interested in learning more about what it takes to make the move from break-fix to MSP? For even more details, download our eBook: From Break-Fix To MSP.