In selling cloud-based data backup and disaster recovery, solution providers must take care to price the service properly--lest you underestimate your costs and end up losing money. It’s definitely a challenge, considering there is fierce competition to sell BDR services.
The important thing to remember is that you are selling a service, not a software or hardware product, so you must keep an eye on the future as you figure out how much to charge for a contract that could last several years.
Here are best practices for pricing your BDR service:
1. Treat It as Service
BDR over the years has become an entry point for solution providers to get into managed services. It’s a good way to introduce customers to a recurring-fee model that creates an ongoing revenue stream for your business.
2. Focus on Value
Managed BDR is about delivering business value. You’re providing a sort of insurance to clients in case something goes wrong. With that in mind, steer the conversation away from pricing when discussing BDR with clients and prospects. Focus instead on the value of keeping the business operating in the event of a major data loss or disaster. If you do this right, the client will be more interested in your ability to prevent costly downtime than how much you charge.
3. Offer Choices
Depending on the business, industry and applicable regulatory requirements, different clients have different needs for data backup and recovery. Therefore, it makes sense to create a tiered pricing structure to accommodate varying levels of need. You should start with a core data backup offering and build on that. If clients require only onsite replication for some files but need off-site backup for others, take that into consideration when pricing the service.
4. Mind the Margin
Whether you use a flat monthly fee or price your services based on the amount of data you back up or number of devices in use, be sure to get a clear handle on your overhead, staffing and the technology used in delivering the service. MSPAlliance President Charles Weaver recommends setting margins of at least 30 percent. You should probably aim for 50 percent or more. Whatever you do, don’t misjudge your costs because that could really hurt your profits.
5. Offer Business Continuity Planning
As part of your BDR offering, you should consider also offering consulting services to help customers prepare and execute business continuity plans. That is, after all, the point of backing up data--ensuring a business’ survival after an outage. By offering consulting services, you add value for clients while boosting your business revenue.
These five tips should get you on your way to selling data backup and disaster recovery at a healthy margin. Keep in mind there may be regional and vertical industry-related factors that may have an effect on 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.
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