GUEST APPEARANCE
Which MSP Pricing Model Should You Be Using To Deliver The HIGHEST Profits Without Pricing Yourself Out Of The Market ?
Here ’ s an age-old question : How should you price your managed services offering ? This has been a moving target for years , with different camps fighting between a per-device or per-user approach to a hybrid approach of a flat fee for managing critical network functions plus billable hours for projects and help desk . So , which one will deliver the higher profit margin without pricing you out of the market ?
As the market has matured , so has the complexity of pricing . Without a doubt , the most common pricing models are per-device or per-user . But following the herd is not always “ right ” for everyone , and the model doesn ’ t guarantee high margins . If you ’ re operationally inefficient with underutilized techs , or if you price services too low , you can lose money on this model .
Instead , do your own research . Many organizations in the channel do pricing surveys each year , so there is plenty of guidance available . If you haven ’ t seen these surveys , check with your vendors and any peer groups you may belong to . They can help you understand the market at large . ( Find a good survey at MSPSuccess- Magazine . com / msp-pricing-survey .)
When I owned a managed services business , I was an early adopter of managed services and offered what we called the “ IT Plan .” ( Original , right ?) Simply put , for $ 250 per month , we monitored the server and reported on uptime , downtime , and general services availability using a product called WhatsUp Gold . ( There ’ s a blast from the past !) From there , we matured from the per-device model to the per-user model .
Personally , I believe the per-user model delivers the most value to the end user , so let ’ s start there . One of the main benefits of the per-user model is that it allows the MSP to set a flat fee to manage all of the devices used by a single user . At minimum , these are often a computer , a mobile phone , and a tablet . In some cases , there may be more of each . The key to the per-user model is knowing how to support the operating environment as efficiently as possible , leveraging tools for automation to ensure profitability . Keep in mind that per-user pricing needs to account for the support you are providing at the infrastructure level , too . In other words , you don ’ t charge per user and also charge per device for servers , networks , and more .
Of course , what you charge per user depends on your services . Whatever you charge , you want your gross margin to be in the 60 % range . Most MSPs are generating less than that and tend to play in the 50 % gross margin range . Let ’ s look at some per-user pricing models and strategies : Per-user pricing generally costs customers $ 90 –$ 300 per user . The higher dollar amounts would be necessary for complex environments , compliance solutions , and “ all-inclusive ” pricing . The lower price points typically include remote support in addition to proactive monitoring , patching , anti-virus / anti-malware , and spam filtering . Even the least expensive per-user pricing models include some form of basic security , usually in the form of anti-virus or anti-malware software , spam filtering , and web content filtering . As the price moves to $ 100 or more per user , you ’ ll see on-site support included in the monthly price . You rarely see one-time projects included in per-user monthly pricing . They are occasional unique projects , such as moving a server or a big migration project . Be sure to clarify in your agreements what is included and what is not included .
As you move above $ 150 per user , more advanced security and response services are included . It ’ s not until you reach $ 150-plus that you start to see two-factor and single-sign-on solutions , as well as more advanced security services included . The most common per-user price point is between $ 125 –$ 150 per user and includes remote and on-site support and basic security . At the $ 250-plus price point , you begin to see true managed security services bundled together . This would include SIEM , NAC , and other services that require a more security-centric partner and level of expertise .
The other prevailing model is the per-device model . I generally encourage MSPs to not use per-device pricing because it positions you as a commodity player . You want to differentiate your services and value , which is very difficult to do using per-device pricing . That said , these per-device price ranges are the most common in the market today :
• $ 25 –$ 50 per PC
• $ 100 –$ 400 per server
• $ 20 –$ 30 per peripheral device ( i . e . network printers , network scanners , etc .)
• $ 100 –$ 200 per network
However , you can bundle value more effectively in the per-user model . Consumers are becoming increasingly savvy when it comes to purchasing , and they are looking for value . Many will pay a premium for high value , so focus on the per-user pricing model . Use this guidance to evaluate your current pricing and potentially make adjustments .
Ultimately , how and what you charge is not as important as the value and service you deliver . Most clients don ’ t know which pricing “ model ” is best . They simply want a responsive , reliable MSP to keep their network protected , functioning , and running .
Whatever you include , never sell a client less than what they need , and make sure your processes , procedures , and service actually deliver the proactive support you ’ re promising . n
MJ Shoer