Managed service provider (MSP) pricing is a critical aspect of your business strategy, defining how you charge clients for your services and impacting overall profitability. To learn how to price your services, you should first understand the common MSP pricing models, including their pros and cons. After that, following key steps to set and establish your pricing while keeping certain tips in mind will ensure that you charge correctly and effectively.
Best Free General MSP Pricing Template
We created a free MSP pricing template to empower you to effectively present and price your services. You can use it as a guide and customize it to your preferences. It includes the basic services MSPs offer, service descriptions, and a combination of per user/per device/per month and tiered pricing models. Check out our MSP pricing template article to receive our free general template as well as specific templates for certain types of MSPs.
7 Common MSP Pricing Models
There are several types of common MSP pricing models that suit different types of MSPs. These models include per device, per user, tiered (bundle), value-based, monitoring-only, a la carte, and all-you-can-eat. We’ll explore each of these in greater detail below.
The per-device pricing model charges clients based on the number of devices they have, such as servers, workstations, or mobile devices. It’s a straightforward model that’s easy to understand and implement, allowing you to directly correlate pricing with the devices you manage. This model delivers predictability and simplicity.
Both MSPs and clients can anticipate costs based on the number of devices being managed. Plus, clients can easily add or remove devices from their networks. However, it doesn’t accurately represent the complexity of managing different devices or the specific services provided for each device. As a result, MSPs can undercharge or overcharge certain clients, leading to revenue discrepancies and potential client dissatisfaction.
In the per-user model, you charge clients based on the number of users they have, regardless of the devices they use. This model focuses on the individuals using the devices rather than the devices themselves. The per-user model offers simplicity and scalability, especially for businesses with multiple devices per user.
The per-user model is easy to manage and track for MSPs, as it’s based on the number of users rather than individual devices. The main disadvantage of this model is that it may not adequately cover the costs of managing different devices or varying user needs. Like a per-device model, this could lead to undercharging or overcharging clients, negatively affecting both client satisfaction and MSP revenue.
Tiered (aka Bundle)
Tiered pricing involves offering different fixed price or per-hour service packages, each with a specific set of features and pricing. It’s like offering a menu of bundles, where each bundle includes a different combination of services. This model allows for flexibility and customization, catering to various customer needs and budgets.
Clients are free to choose the service level that best suits their needs. MSPs can upsell and cross-sell, potentially increasing revenue and improving customer satisfaction. However, it’s complex since it may require more time and effort to manage and may lead to customer confusion if not clearly explained. Additionally, it could cause tension if clients choose lower-priced tiers without fully understanding the limitations of those offerings.
Value-based pricing focuses on the value you deliver to the client rather than specific services or devices. It seeks to price services based on the overall impact they have on the client’s business, specifically through a flat fee.
The model allows for higher profits, particularly for clients who demand high-quality services and recognize the value they provide. It also incentivizes MSPs to continually improve and innovate their service offerings. However, determining the exact value provided to each client is subjective and difficult to quantify. This model needs a significant investment in marketing and customer education to convey the value delivered effectively.
Monitoring-only pricing involves charging a fixed or hourly rate for monitoring and alerting services only, without including other services like maintenance or support. This model is attractive to cost-conscious clients who may not need comprehensive managed services. It may also be attractive to smaller businesses or those with a tight IT budget, making it a potential market segment for MSPs.
With its simple and predictable pricing structure, it allows clients to understand exactly what they’re paying for. On the downside, this model doesn’t guarantee sufficient revenue for MSPs to maintain a healthy business, as it doesn’t encompass other potentially profitable services. Plus, it could lead to client dissatisfaction if clients later realize they need more comprehensive services not included in the monitoring-only package.
A La Carte
The a la carte pricing model allows clients to pick and choose individual services they need, instead of being locked into a predefined package. You can charge a flat rate or a per-hour rate for these services. This model’s flexibility and customization enable you to cater to a wide range of client requirements. But there’s a risk of introducing complexity to the management of the model.
Flexibility makes this model particularly attractive to businesses with specific IT requirements that don’t fit neatly into a pre-packaged bundle. However, managing an a la carte model needs a more sophisticated service catalog and billing system, as well as more involved communication with clients to identify their specific needs. There’s also a risk of lower profitability compared to bundled services, as clients may choose only the most affordable services.
All-You-Can-Eat Pricing Model
The all-you-can-eat pricing model is designed to offer comprehensive IT support and services for a fixed monthly fee. This model covers everything from routine maintenance and monitoring to emergency support, on-site visits, and even consulting services. It provides predictability for both the client and the MSP, as the monthly fee remains the same regardless of service usage.
Clients enjoy the benefit of having unlimited access to a wide range of managed services, ensuring that all their technology needs are met. It also encourages clients to fully utilize their IT support, which can lead to higher client satisfaction. The downside to the all-you-can-eat model is the risk of clients overusing services, leading to increased costs for the MSP. It requires careful management and clear boundaries to ensure profitability.
Understanding the various MSP pricing models is essential for determining the best approach for your business. By exploring different models, you can identify the approach that best suits your MSP. Ultimately, you’ll want to choose the one that reflects your unique value proposition and supports your long-term business growth.
7 Steps to Set Your Own MSP Pricing
There are a number of steps you have to implement to create a successful pricing strategy. You need to understand your costs, account for scalability, target the right market segment, stay current with technology trends, and keep an eye on the competition. Additionally, you should make a habit of reviewing your pricing strategy from time to time to remain effective and competitive.
1. Analyze Your Costs
To establish a solid pricing foundation, first understand your direct and indirect costs. These costs include labor, software, hardware, and overhead expenses, as well as any additional investments required for delivering your services. Make sure to account for all these costs to ensure your pricing strategy is profitable and sustainable. Begin by calculating the costs associated with each service you offer. Factor in expenses such as training, certifications, and support tools plus indirect costs like marketing, sales, and administration.
2. Plan for Scalability
Your MSP pricing strategy should be designed to accommodate future growth, both in terms of your own business and your clients’ expanding needs. Consider the potential for increased service demands and plan your pricing structure accordingly. Assess your capacity to scale your service offerings and evaluate whether your pricing model can accommodate additional services or client growth.
3. Identify Your Target Market Segment
Next, understand the specific needs and expectations of your target market segment. Analyze the types of clients you aim to serve and tailor your services and pricing to meet their unique requirements. Research your target market segment’s size, industry, and common pain points. Determine which services are most valuable to your ideal clients and evaluate how your services can address your market’s specific needs.
4. Stay Current with Technology Trends
Technology is constantly evolving, and staying ahead of the curve will ensure that your services remain relevant and valuable to your clients. Keep up with industry news and trends and emerging technologies that could impact your MSP business and affect your pricing strategy. Attend industry events and engage in continuous learning. Monitor new tools, platforms, and technologies that could enhance your service offerings. Adjust your pricing to reflect the value of incorporating new technology solutions into your clients’ IT infrastructure.
5. Assess Your Competition
To develop a competitive MSP pricing strategy, analyze your competitors’ services, pricing models, and value propositions to identify gaps and opportunities for differentiation. Research your competitors’ service offerings and pricing structures. Identify any market gaps or areas where your services could outshine the competition. Use competitive insights to refine your value proposition and pricing strategy.
6. Choose Your Pricing Model
At this stage, you should have a good understanding of your costs, the value you offer, your market, your clients, and the most suitable pricing model for your business. Now it’s time to officially choose your pricing model and set your prices. This starts with choosing and customizing a pricing template to help structure your pricing plan. Have a look at our free general and specific pricing templates in our MSP pricing template article to help you get started.
Keep in mind that pricing isn’t a one-time decision but a dynamic process dependent on market trends, customer feedback, and business performance. Take your time to plan your pricing carefully and make informed decisions.
7. Periodically Evaluate & Adjust Your Pricing Structure
You should also monitor and adjust your pricing periodically. These regular reviews ensure your pricing structure remains competitive, profitable, and aligned with your clients’ needs. Track your business performance and financial metrics. Collect client feedback to identify areas for improvement. Update your pricing structure as needed to maintain competitiveness and profitability, adapting to changes in the market and evolving client expectations.
Setting the right MSP pricing structure is vital for long-term business success. By implementing these steps, you can develop a competitive pricing strategy that satisfies your clients and makes you profitable. Remember, just setting your pricing is not a one-time activity. You have to regularly review your pricing structure to find your pricing sweet spot and make sure it remains aligned with the ever-changing landscape of the managed services industry.
3 Best MSP Pricing Examples
Here are three effective MSP pricing examples that showcase per user, per month, and tiered pricing models. By studying these examples, you can gain insights into best practices for presenting your MSP pricing structure to potential clients.
Managed Solution MSP Pricing Example
Managed Solution is an MSP specializing in cloud solutions, cybersecurity, and IT consulting services. Their pricing model focuses on a per-user, per-month structure that simplifies billing and caters to businesses of various sizes. Let’s take a look at the effectiveness of their pricing model and how it can be a good example for other MSPs:
What makes Managed Solution’s pricing model stand out is its user-friendly and straightforward approach. By adopting a per-user, per-month pricing structure, clients can easily predict their IT costs and budget accordingly. Additionally, the transparent pricing and concise descriptions of each plan help clients make informed decisions about which services best fit their needs.
1Path MSP Pricing Example
1Path is an MSP that stands out for its comprehensive service offering and well-defined pricing model. The MSP uses a tiered pricing approach, providing clients with the flexibility to choose from various service packages based on their specific needs. 1Path’s pricing page presents three tiers — Engage, Accelerate, and Optimize:
A major strength of 1Path’s pricing structure is its clarity. Each tier is clearly defined with a set of included services, making it easy for clients to understand what they’re getting for their money. This clarity simplifies the decision-making process for clients and sets clear expectations, which provides a great basis for creating a satisfied and loyal customer base.
Ntiva MSP Pricing Example
Ntiva is an MSP specializing in IT support, cybersecurity, and cloud services. Their pricing model is centered around value-based offerings that emphasize the benefits their services provide to clients. Studying this example can help you understand how to convey the value of your services effectively within your pricing structure:
Ntiva’s pricing model stands out due to its focus on the value provided by each service tier. Rather than merely listing the services, Ntiva explains how their offerings can impact clients’ businesses positively, making it easier for clients to appreciate the value proposition. This approach helps clients see the benefits they’ll receive from investing in the managed services provided by Ntiva.
Examining these real-life MSP pricing examples will provide you with valuable insights into crafting your own effective pricing structure. By drawing from the transparency, simplicity, and flexibility of these MSPs, you can better understand how to communicate the value of your services and satisfy client needs. These examples should help you create a compelling, competitive, and customer-centric pricing strategy.
Top 6 Tips for Establishing Your MSP Pricing
Developing a successful MSP pricing strategy can be a challenging task, but keeping a few essential tips in mind can make the process smoother and more effective. To complement the steps above, find a balance between flexibility and simplicity, think about the benefits and drawbacks of each model, understand your value proposition, clearly communicate your pricing, analyze your market position often, and remember your services’ worth.
Balance Flexibility with Simplicity
While flexibility in your pricing model allows you to cater to diverse client needs, also maintain simplicity to make your offerings easy to understand and communicate. Striking the right balance between customization and straightforward pricing will improve your sales process and boost client satisfaction.
Consider the Pros & Cons of Each Option
A fixed monthly rate offers several pros, such as predictable revenue for you and simplified budgeting for clients, but it doesn’t cover variable costs, is inflexible for customers with changing needs, and can make your clients fear being locked into a set package. Per-hour pricing is more flexible for ad hoc or infrequent service needs, but your revenue and costs are less predictable, client retention tends to be lower, and you need to be careful to track time accurately.
Understand Your Value Proposition
Knowing the unique value you bring to your clients is key when establishing your pricing structure. Identify the factors that differentiate your services from competitors and ensure that your pricing reflects the value-added benefits you provide, such as exceptional customer service, specialized expertise, or innovative solutions.
Communicate Your Pricing Transparently
Transparent communication about your pricing structure is critical for building trust with your clients. Make it easy for clients to understand how your pricing works, what they can expect to pay for your services, and what’s included in each pricing tier. Transparency can help reduce confusion, prevent misunderstandings, and improve client relationships.
Regularly Review Your Market Position
Keep an eye on your position within the market and be ready to adjust your pricing structure accordingly. Regularly benchmark your prices against competitors to ensure that you remain competitive and avoid underpricing or overpricing your services. Market positioning also helps you identify new opportunities and areas where you can offer more value.
Avoid Underestimating Your Worth
Avoid the temptation to underprice your services in an attempt to win business. Charging too little can undermine your value proposition and lead to unsustainable profit margins. Be confident in the value your MSP delivers and ensure that your pricing reflects your expertise, quality of service, and overall worth.
Additionally, remember that establishing a successful MSP pricing strategy is an ongoing process that requires continuous fine-tuning and adaptation to the constantly evolving market. As you work on establishing your pricing structure, remain open to client feedback and be ready to make adjustments as needed. By staying proactive and adaptable, you’ll be well-positioned to capitalize on new opportunities and maintain a competitive edge.
Bottom Line: MSP Pricing Guide
Crafting the right MSP pricing strategy will contribute to your long-term business success and your ability to keep customers happy. By understanding the different pricing models, following the outlined steps, and keeping our top tips in mind, you’ll be well-equipped to establish a pricing structure that not only drives profitability but also resonates with your target market. Stay flexible, proactive, and attuned to industry trends to ensure your MSP continues to thrive.