Ensuring there is more than enough revenue coming in each month to cover expenses is a top priority for every smart business owner, including MSPs. If you are struggling to find the best way to price your services in order to hit your revenue targets, here’s a quick piece of advice: Take the time to evaluate (and potentially change) how you currently package and price your services. Is there a methodology? Do you offer bundles? Or, do you just pick a round number and roll with it?
A best practice we promote to our MSP partners is to create service tiers that bundle those services most commonly requested with those which offer the most value, then price the bundle as a predictable monthly offering. A simple structure that many MSPs use is a three-tier service offering that ranges from basic to premium.
Why offer tiers? Put bluntly, it makes the day-to-day easier and the service more accountable as deliverables are spelled out clearly and client expectations are set up front. Additionally, a systematic approach to pricing tied to deliverables and a clear SLA will help ensure expenses are covered, and that consistent profit is being pulled in.
Not convinced yet? Here are four benefits that will illustrate how service tiers can make your life easier as an MSP.
- Predictable billing. By having a set number of tiered service packages, MSPs are able to better predict their revenues from month to month, and they no longer have to deal with fluctuating revenues that occur when customers are picking and choosing services on an a la carte basis.
- Faster sales cycles. Creating service tiers helps speed up the sales cycle because it is clear from the start what customers will receive in exchange for their investment, which leads to less haggling and negotiation.
- Emphasis on added value. When MSPs bundle their services, it gives them an opportunity to emphasize the value customers will receive when services are combined instead of being purchased separately.
- More recurring revenues. Service tiers provide MSPs with an opportunity to make services such as backup and recovery a standard offering, and ensure that all customers are receiving a basic level of data protection. This also helps to drive recurring monthly revenues and facilitate an MSP’s transition from a break-fix to a recurring revenue business model.
As you can see, service tiers are a great way to improve profitability, but they can also help differentiate a business in a crowded marketplace. Customers will appreciate the predictable billing and the easy-to-understand packages offered by the MSP. Additionally, the added value that the MSP brings to the table by bundling the services that customers want with the services they need (including data protection) helps to position the MSP as a knowledgeable resource and a trusted ally when it comes to fulfilling customers’ IT and business needs.
Rob Merklinger is vice president of sales at Intronis, a Boston-based provider of world-class backup and data protection solutions for the IT channel. He is an experienced software sales leader with a proven track record for driving success and developing sales talent. Guest blogs such as this one are published monthly and are part of MSPmentor's annual platinum sponsorship.