Pricing your IT managed services appropriately is crucial for the profitability and growth of your business. How you price your services will depend on a range of factors; the market you operate in, the size of your target clients, whether you are a startup or an established company. There are several standard pricing models and strategies to look at when determining how to package your services and it’s important to look at these first. However there is no one-size-fits-all approach and there are many other models which aren’t on this list. Typically the only limiting factor is whether your PSA can support the model you choose.
Standard Pricing Models for Managed IT Services
Per Unit Pricing
One of the most common pricing models for small to medium sized providers. You charge a flat monthly fee per device or user. This model is easy for customers to understand but can be challenging to upsell once a price has been established. However it does allow for innovative pricing such as a single per-user price for support, software, and any hardware the users require.
One of the oldest methods of bundling managed services, with packages such as Bronze, Silver and Gold, each with an increasing number of features and benefits. Allows you some ability to upsell customers and makes it clear what the client can expect to receive, however it can be overly rigid.
Individual Managed Services
Price each service like helpdesk, security, infrastructure as an individual service. Client can use the specific service they want for them. This can help demonstrate maximum value but limits ability to provide or upsell profit heavy services.
As the above, this allows you to offer a bundle of related services such as network monitoring, helpdesk, security, backup etc; the Helpdesk service may include remote helpdesk and RMM with patching, for example. Simplifies buying for clients and allows each client to have access to a broadly tailored range of services; one may choose helpdesk and network monitoring, whilst another may choose to add onsite support or security assessments.
Value based pricing is probably the most challenging but also perhaps the most rewarding (and fun). Here you price your services based on the quantifiable business value you deliver, not just time and effort. Essentially “what is this worth to the client?”. This must be paired with clear reporting on ROI (Return On Investment) an cost vs time-saved.
SLA Based Pricing
A variation on the Value Based pricing technique, here you charge to deliver an SLA, or uptime. How you deliver that, and what resources that may require, may change overtime but with the expectation that you always achieve against a set SLA target. This requires a very solid foundation of PSA and RMM configuration and is mostly beyond most small MSPs and clients.
Best Practices for Pricing Your Managed IT Services
- Calculate Your Internal Costs
This may sound obvious but it’s amazing how many companies don’t understand how much it costs to service any given client. You can use the reports in your PSA to judge the true cost of servicing a client. Make sure that timesheets are used across the company when dealing with client facing work, you’ll be surprised how much time is spent by finance dealing with an invoice query, or by an account manager in meetings. All these things need to be factored in.
If you’re looking at a new service, or a new client, then use this historic data to create a good baseline average and work from there.
- Research Competitor Pricing
Unless you operate in some very niche markets, you’ll probably be coming up against the usual suspects when it comes to competition. Whilst everyone has their own way of bundling services, and pricing of those services, you do need to have awareness of where you fit in the market and how competitive you might be.
If you have a friendly client, as them to get pricing from competition. If you’ve taken on a new client, ask them what they were paying their previous provider. Even better, why not meet up with some competition and just ask. Look to run regular SWOT/TOWS analysis sessions with your staff and revisit these over time to understand how you compare.
- Consider Service Bundling
Consider bundling services together in order to maximise profit margins. You may want to include server-side anti-virus perhaps, or add regular vulnerability scans. Both would be a welcome benefit, and cost very little, but both would allow for you and the client to extend those services to maximise margins; vulnerability scans, as an example, would lead to a list of works that would be required but also make the client more secure, anti-virus on the server is nice, but would then incentivise the client to extend this to other devices and services.
Don’t consider such bundled services as “free”. Make sure you assign a value to them, even if you don’t charge the client for the entirety.
- Provide Easy Uplift Opportunities
Look at always having an uplift path for your services. This is most relevant for tiered packages (see above) such as Bronze, Silver and Gold, but you can also factor in uplift paths in to basic remote services; look at having a standard SLA, but offering a better SLA, and better reporting, or offering vulnerability scans but with an option to have them more frequently or to include some resolutions within that service. The list is endless.
Why not bring your staff on this journey as well, run a session where they can come up with ideas for uplifts or new services. Typically your on-the-ground staff are closer to clients than anyone else and may have useful insight.
- Regularly Review and Adjust Pricing
Regularly review each contract, not just at the end of the contract, or before renewal, but during the contract. Use the reports in your PSA to assess the time spent vs your expectation, the cost of that time compared to the cost predicted at the point of sale. How are you doing so far? Will a cost increase be required? Have you been over or under servicing the contract?
Structure your contracts to allow for unforeseen cost increases, either during the term or upon renewal. Nothing ever gets cheaper in life, and your clients won’t benefit if their trusted partner can’t pay the bills, so don’t be afraid to have a mandatory price increase upon renewal, and look to include a clause allowing for change to the contract with a pre-defined notice period (30 to 90 days perhaps).