If you’re just an average MSP, you probably have a pricing problem.
The majority of MSPs have great employees, sell to quite a few clients and have the expertise to back up their services. But, somehow, none of those positive attributes are adding up to high profit margins.
Find out how to fix what’s wrong with your approach to pricing your IT services, and learn the secret to successful MSP pricing.
MSP Pricing Guidelines
When developing your MSP pricing model, it’s important to follow these four guidelines.
- Keep it simple. Before you offer clients a price for your services, are you basically doing an entire network evaluation? You don’t need to dissect every detail to charge the right price for your services.
- Use AISP as your guide. How do you keep your pricing model simple when the systems you’re supporting are complex? Determine total cost by AISP (All-In Seat Price). Ask as few questions and do as little calculation as possible to arrive at the price. Be able to give a potential client a quick price calculation in the first five minutes of your sales conversation.
- Project the model. If you had 10, 20 or 100 clients for whom you were charging this amount for services, what would your gross margins look like? Don’t just assess how your average AISP impacts a single client. Project how your pricing levels impact your business across all clients.
- Focus on value. Don’t worry that you’re charging too much for your IT services. The price is not the issue – value is. Clients are willing to pay a much higher price for your services as long as you deliver on the value.
Compare the two companies in the graph below. They’re charging a difference of $45 for their AISP. When that difference is applied to one client with 20 seats to support, it may not seem that important. But, when you apply those numbers to 50 clients for a total of 1,000 seats to support, there’s a huge contrast in revenue – a $45,000 difference!
This is the problem that almost all average MSPs face. You’re charging too little for your services, when clients are willing to pay top MSPs significantly more. The top 5-10% of MSPs are making the majority of the money in the industry.
Leaning On Leverage
It doesn’t take a genius to know that charging more for your services means bringing in more revenue. The trick is to offer clients enough value for your services that they are willing to pay more. Developing a value-based pricing model is the key to increasing your monthly recurring revenue.
Let’s first look at your leverage, the relationship between an hour worked and a dollar billed. You’re trying to maximize the revenue you generate with the fewest employees. When you increase your leverage, you increase your revenue.
If all MSPs offer basically the same services, how do you maximize your leverage? The key to increasing the value you offer clients is unlocking your MSP Super Power. This is the skill or expertise you bring to the table that differentiates your company.
When you tap into the potential of your Super Power, you’ll find it’s easier to charge the right price for the services you offer.
Want to discover your MSP Super Power? Check out our free whitepaper to find out how.