“Do you have any managed services pricing strategies or tips?” That’s the single most common question I get asked by business owners trying to evolve from a break/fix model to a managed IT services model. Ultimately, you understand the need to evolve your product portfolio and expand into offering more proactive IT support.
As a business model, managed IT services provides monthly reoccurring revenue and aligns your interests with those of your clients, thereby making those clients stickier. But still, MSPs with varying levels of maturity often lack confidence in your current pricing strategy. So what is there to consider when pricing managed services, and what are some of the most popular pricing approaches today?
No One Right Pricing Answer
Let me start by saying that there’s no one right answer to pricing managed IT services. The vast differences in local economies and the overhead the business owners currently have are just two factors that affect what an MSP can charge. When it comes to pricing, the key to success lies in being knowledgeable of these factors, understanding what your margins must be for maximum profitability and knowing which model is the best fit for your business.
When building an IT services portfolio, there’s no one-size-fits-all formula that can guarantee success. Instead, you must understand the various pricing options available to you. Examine the solutions in your technology stack, calculating the cost of delivering goods and services to clients, and evaluating your target margin and revenue goals. Only after completing this analysis can you identify which of the following models is the right fit for your business:
MSP Pricing Models
Although many different models exist for pricing your managed services, the five most common approaches we see today are tiered, a la carte, all-inclusive, per device and per user. According to a recent survey we conducted with Spiceworks, here’s a breakdown of each model’s adoption rate among MSPs:
- Tiered: 51 percent
- A la carte: 59 percent
- All-inclusive: 61 percent
- Per device: 49 percent
- Per user: 43 percent