7 Ways To Command Premium Prices
For Your IT Services
Inflation has increased 260 % in the last two years . On May 11 , 2022 , the U . S . Labor Department published the annual inflation rate for the United States . For the previous 12 months , ending April 2022 , the annual rate is 8.3 %. ( Between 2012 and 2020 , it never rose above 2.3 %.)
With the hyperinflation we are in , you must raise prices . Even if you are only looking to break even , you ’ ll need to raise your prices by around 8 %. But even that might not be enough . Not only is the cost of goods rising , but we are also receiving reports from MSPs across the country about premiums on labor between 18 % and 20 %. MSPs are losing top staff to companies offering to double their employees ’ salary . In speaking with service leadership groups with best-in-class MSPs , we discovered that across the board , every MSP had raised prices by 20 % in the last eight months .
To help you feel confident in raising your prices , too , we spoke with three MSPs to find out how they charge premium prices for their MSP services .
Michael Glasser , founder of Glasser Tech , started his business out of his house in 2008 and has charged premium prices from day one . He also doesn ’ t use contracts . His billable rate is $ 195 –$ 225 per hour . With profit margins nearly four times that of the average MSP , Glasser ’ s business was acquired by Frontline Managed Services in 2021 .
Will Nobles , founder of Vector Choice Technology Solutions , used to believe his market wouldn ’ t tolerate premium prices . But when he raised his prices in 2018 , his company took off and has grown at a blinding pace , increasing by $ 1 million year over year . He charges between $ 100 –$ 250 per computer / per month , plus projects .
Mike Bazar , founder of Bazar Solutions , Inc ., has been growing at a rapid pace , even through this economic downturn . While he charges 47 % more than the competitors in his market , he says there is room to charge more . “ We have solid pricing , but we are not charging an astronomically high rate ,” he says .
Here are seven things they recommend you do to charge premium prices .
Don ’ t Undervalue Your Services . Make sure you are profitable . Never discount . And know your
1 worth . Even if you are only getting started , serve a certain market segment , or don ’ t have all the resources in-house , it doesn ’ t mean you can ’ t charge premium prices . “ You don ’ t need to have a cybersecurity person on staff to charge premium prices ,” Nobles said . “ You can partner with a company that has that expertise to build out your package .” Glasser does not use an “ all you can eat ” model where everything is included . Instead , he offers an entry-level managed services plan with two requirements : advanced endpoint protection and system recovery backup system . Everything else is a billable event . “ Robin Robins told me , ‘ You can charge anything you like , as long as you ’ re backing it up with the service ,’” Glasser said . “ The value you provide , if you ’ re giving excellent service , you can certainly charge for it as long as you back it up with what you promise .”
Control Your Costs . Bazar uses an “ all you can eat ” model . The key to maintaining profitability with
2 this model is to control your costs so you can keep
your margins where you need them to be . “ What is your labor budget ? What are the major projects you want to do this year included in your ‘ all you can eat ’ quote ?” Bazar said .
“ We look at what isn ’ t urgent and could be done further down the road . A lot of people approach it that they are going to fix every single thing right away , especially engineers who go down a rabbit hole and fix every little nook and cranny . They can spend 20 – 40 hours on a project when it should be 10 – 12 . Internally monitor those costs to make sure you don ’ t have runaway costs .”
14 | MSPSuccessMagazine . com • VOLUME 3 ISSUE 6