Pricing your services is one of the most vexing challenges MSPs face. There’s always the risk of charging too little if you fail to take into account the full cost of delivery, and the threat of commodity is always present in the IT industry.
Cloud-based data backup and disaster recovery pricing can be especially challenging because the service has become a basic staple of the managed services model. Competition is fierce. Still, as an MSP you must be disciplined and resist the temptation to compete solely on price, which can seriously erode profit margins. Here are four tips on how to price your BDR service:
1. Focus on Value
Like any other managed service, managed BDR is about delivering business value. So whenever engaging a new customer, steer the conversation away from pricing and focus on value. Discuss with the client how much downtime they can stand and which systems they would prioritize for rebooting in the event of a disaster.
Once you have an understanding of the client’s requirements and priorities, you’ll be better prepared to make a case for the value you deliver. If you approach this correctly, the client will be more interested in your ability to prevent costly downtime than how much you charge for he service.
2. Give Them Choices
Different clients have different needs when it comes to data backup. Depending on the business, industry and applicable regulatory requirements, some clients will need a higher level of services than others.
With that in mind, it makes sense to create a tiered pricing structure to accommodate varying levels of need. Start with core data backup offering and go from there. Apply different prices to services such as instant virtualization, level of redundancy and immediate recovery.
3. Mind the Margin
No matter what pricing formula you employ for your services, you need a clear handle on your service costs, including overhead, staffing and the technology used in delivering the service. Once you calculate your costs, build your margin on top of that.
According to MSPAlliance President Charles Weaver, anything below 30 percent is too low. You should probably aim for 50 percent or more. What you definitely don’t want to do is underestimate your costs because, if you do, your business could be facing a fight for survival down the road.
4. Offer Business Continuity Planning
The point of data backup and recovery is to help businesses survive data losses and major outages. As part of your offerings, you should offer consulting services to help customers prepare and execute business continuity plans. This allows you to add value for clients by addressing a critical need while creating a consulting revenue stream for your business.
These four tips should help you avoid some common pricing missteps, but keep in mind that every MSP business is different. There are regional and industry-related factors you should consider that might affect how you price your services. The more factors you take into consideration, the more likely you are to come up with the right pricing formula.
Marvin Blough is StorageCraft's Vice President of Worldwide Sales where his focus is on expanding the company's global reach by establishing channel partnerships that enhance the profitability for the channel partner.
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