Professional Documents
Culture Documents
MSP Pricing Strategy Guide
MSP Pricing Strategy Guide
Pricing
Strategy
Guide
WHITEPAPER
1 msp360.com
MSP Pricing Strategy Guide
Pricing is one of the most challenging aspects of running an MSP. There’s no fixed pricing pattern, and
sometimes it can be difficult to develop a proper pricing strategy. The initial strategy adopted by managed
services providers can make or break their businesses.
Price your services too low, and you will eat into your own profitability and affect business growth. Price them
too high, and you run into the risk of losing your potential customers to the competition.
MSPs need to find the right balance in pricing, based on the value of the services they offer, a market overview
and research into the competition.
There are many pricing factors unique to each service provider, and this makes managed services pricing a
complex thing.
Later in this guide, we will discuss how you can build the right offering for your clients, bundle your products
together and determine a proper pricing strategy.
MSPs that offer multiple products need to think about the best way they can bundle their products together and
sell them as a package. For example:
2 msp360.com
MSP Pricing Strategy Guide
Cloud
Storage
Help Managed
Desk Backup
System@ Hard)ar!
MonEtorEng Procurement
SysteY C4ang!
Management Management
BusEnes@
SystemK ContEnuEty<
SecurEty DEsaste9
Recovery
With a bundled package, MSPs can streamline their services and standardize their billing process. It also helps
MSPs to sell complete IT solutions even when customers are not aware of what they require. Most importantly,
MSPs can cross-sell or upsell various products they offer and improve their business growth.
Bundling is not just about grouping services together and selling them as a package. There is a reason that MSPs
bundle RMM, patch management, and antivirus solutions together in their basic package. This package takes
care of some of the most crucial IT issues faced by small businesses. Similarly, medium and large enterprises
need some additional solutions like cloud backup and network monitoring for their IT operations. Therefore,
MSPs need to have plans that take care of additional requirements.
It is also important for all the bundled solutions to work together; for example, an RMM solution. Many of the
larger RMM solutions have integrations with other platforms. So MSPs need to find solutions such as RMM, PSA,
cloud backup, etc. that can work in harmony, in order to simplify management.
3 msp360.com
MSP Pricing Strategy Guide
Here are points to keep in mind when bundling various services together:
Demand
You need to understand the ongoing demand for your services in the market. For instance, if cybersecurity is the
number-one priority for most businesses, it’s wise to include security solutions in all your bundles. Understand
the ongoing demand by performing research; look at trends in the technology space and bundle products
accordingly.
Business Valuation
In the MSP business, monthly recurring revenue (MRR) is an important metric to assess your business
valuation. Services that require long-term commitments, such as cloud backup, antivirus solutions, endpoint
management, and network monitoring, will result in steady monthly earnings and boost your business
valuation. Make sure you bundle these services into your offerings.
Sometimes, cost can be difficult to calculate. There might be seasonal expenses that lead to higher costs during
certain times of the year.
Oftentimes it’s better to play it safe and price your products higher than your actual costs. Also, check the
ongoing market prices for similar services before finalizing your price.
The next step in your pricing strategy involves choosing a pricing model that is suitable for your offering. You
can opt for either a flat-rate pricing model or a tier-based pricing model, based on your preferences.
4 msp360.com
MSP Pricing Strategy Guide
Tiered pricing is one of the ways to sell bundled packages. Here, clients can choose the desired package based
on their requirements and IT budget.
If you are charging a flat price, you can do it on either a per-device or per-user basis. This structure comes with
clear terms and conditions that are easy for clients to understand. When it comes to pricing, having clear and
concise conditions should not be underestimated. Keep in mind that there are always some clients who don’t
want to dig into the technicalities of your offering, and simply go for the cheapest option.
18% other
41% Per-device
23% both
18% Per-er
Per-User Pricing Model
This model charges based on the number of users in an organization. Irrespective of the devices these users
have, they are charged a fixed monthly price.
This means you could be managing your users’ workstations, smartphones, and tablets simultaneously. This is
an attractive model from the perspective of your clients, as it gives them a predictable IT budget every month.
According to ChannelE2E, top MSPs in the market charge around $150 per user per month.
And here is the statistics of how much MSPs usually charge per user, per month for ongoing user support,
according to the 2020 MSP360 Annual Customer Survey.
5 msp360.com
MSP Pricing Strategy Guide
Since there are organizations where users have multiple endpoints, this model provides better profitability for
MSPs. Here, MSPs charge based on the type of device they manage.
For instance, managing a desktop could be priced at just $50 to $70, while managing a server could cost as high as $300.
One challenge with this model is “bring your own device” (BYOD), the devices being the users’ own personal
mobile phones and tablets. Be sure only to support devices that are company-owned, since there are security
and litigation risks with supporting employees’ personal devices.
For instance, you can have a basic package with remote management, patch management, and basic
antivirus.
Your advanced package may offer everything, including remote management, business management,
network monitoring, cloud backup, premium antivirus, and 24/7 customer support.
6 msp360.com
MSP Pricing Strategy Guide
As with any pricing model, there are certainly challenges and potential pitfalls with the “all you can eat” (AYCE) model.
One common mistake is not being crystal-clear up front about exceptions, meaning the things that aren’t
covered. This can result in dissension with your customers and be a cause of friction. Take extra measures to
ensure that you and the client understand exactly what is and is not covered. The last thing you want is to write
off time because of a misunderstanding over the pricing contract.
With that said, flat pricing models continue to gain adoption, and for good reason. If you have the proper tools,
technical abilities, and structure to get AYCE right, it can be very profitable.
According to ChannelE2E, top-quartile MSPs in the market have an average EBITDA profit margin of 19.3
percent. However, typical MSPs struggle with an average EBITDA profit margin of just 7.3 percent. Every MSP is
different, and this applies to their clients as well.
While there are no specific rules on how to price MSP services, keep in mind that you need to price services in a
way that covers your costs and provides a healthy margin in order to ensure sustainable growth.
Competitive pricing is important, but don’t always try to beat your competition by pricing your products the
lowest. In some cases, this might backfire on you. Midsize companies that are growing do not go for the
cheapest solution on the market. Here, the MSPs that provide the best value will have the most success.
Conclusion
In summary, there is no one-size-fits-all solution when it comes to MSP pricing. MSPs can use the tips above to
understand their capabilities and price their services accordingly.
If you think your MSP business is not generating enough profit, you need to act right away and review your
current services. This could help you identify the profitability challenges and turn around towards more
profitable solutions. Incorporating all the changes suggested here might be a little challenging, but it is
necessary if you wish to boost your margins. In the long run, it will be worth the time spent and help you
transform into a leader in the industry.
7 msp360.com
MSP Pricing Strategy Guide
About MSP360
Established in 2011 by a group of IT professionals, MSP360™ (formerly CloudBerry Lab) provides cutting-edge
SaaS solutions that are simple, cloud-based, and profitable for Managed Service Providers.
MSP360™ Managed Backup (MBS) is the number one easy-to-use MSP backup solution for Managed Service
Providers and IT departments worldwide. MBS allows MSPs to leverage the power of public cloud storage like
AWS, Microsoft Azure, Backblaze B2, and Wasabi to increase profit while delivering best-in-class data protection
to their customers.
8 msp360.com