The Employee Engagement Blog

The Employee Engagement Blog

6 Tips to Help MSPs Build an Effective Pricing Strategy

Posted by Stephen Spiegel on Oct 16, 2018 8:59:00 AM

Without guidance, MSP pricing can be tricky business

Pricing can be a nerve-racking endeavor for managed service providers (MSPs). Too little and you’re not only underpaying yourself, but you also risk looking inexperienced.

The move away from fee-for-service to vastly more complicated MSP pricing models certainly hasn’t made things easier. MSP pricing can be anything but consistent, with variants dependent on the costs for specific services, and even the city you’re doing business in.

The goal is to find that perfect spot, identifying the exact amount clients are willing to pay, while still protecting your profit.

Six tips for determining your MSP pricing

Before diving into our advice, it’s important to understand that your pricing should be flexible. Rates need to be monitored consistently and adjusted to reflect changing expenses, client demands, and industry standards. With that in mind, here’s how to make your approach:

  • Assess your costs. The last thing you want to do is pay your client for providing a service. Your starting point needs to be how much a specific service will cost you. Consider industry standard rates, and how much your service will cost compared to it if your client hired an IT crew on-staff. Not only will this process help you wrap your mind around your rate, it provides a clear, relatable explanation of costs to your clients.
  • Don’t be a conformist. While it’s certainly necessary to identify industry standard pricing, blindly conforming to those rates can be costly. Instead, think of them as more of a gauge. Make note of anything that makes your service unique – any specialties or expertise, etc. – and consider how that should influence your pricing.
  • Align your sights. Different industries require different levels of service. When determining your rates, be sure to keep in mind any special regulations, or expenditures related to that specific type of business.
  • Consider bundling. One way to gain an edge over your competition is to bundle services that make your specific set of skills indispensable. Value staking services can be an excellent way of establishing your worth, without pricing yourself out of the competition. The key is finding a simple something-extra skill that makes you stand out.
  • Think ahead. The IT industry is changing faster than the weather. New client expectations can mean expansive service costs. While rate increases can be difficult, structure your pricing so that when they do come up, the rationale behind them is crystal clear, but that’s only half of it. You also need to prepare for potential costs on a project, so if they do manifest, both you and your clients are prepared.
  • Go a la carte. While controversial, line item pricing might help you land new clients. Services can be bundled in packages that include basic services, and allow clients to add individual services, or commission them alone. The intrinsic marketing research of this approach provides a bonus – today’s popular a la carte services can shape tomorrow’s proposals and offerings.

 

Is it all about the Benjamins?

Now that you’ve established your pricing and landed a healthy pool of clients, what’s next? You do your job, but if you don’t do it well, then it doesn’t matter what you charge.

While customer satisfaction surveys are becoming more and more a part of our daily lives, they haven’t quite crept into the MSP agenda. Failure to seek out feedback from your clients can be catastrophic. Find out why in our blog, “Why You Should Crave Negative Customer Feedback.”

Topics: MSPs