The Price Is Right: 5 Steps to Pricing Managed ServicesThe Price Is Right: 5 Steps to Pricing Managed Services
How can managed service providers (MSPs) maximize their profits? Len DiCostanzo, Autotask's senior vice president of community and business development, provides five steps MSPs can follow to price their managed services.
September 3, 2014
How much should managed service providers (MSPs) bill their customers? Professional services automation (PSA) platform provider Autotask pointed out it is often difficult for MSPs to determine the right price for their managed services. However, there are several ways to ensure the price is right for an MSP and its customers every time.
Autotask’s new “Smart IT Guide: 5 Steps to Pricing Managed Services” outlines five basic steps MSPs can follow to create a customizable pricing framework that is designed to optimize profitability.
“IT service providers (ITSPs) often struggle with pricing services to achieve desirable profit. Managed services and resulting managed services contracts have also added a bit more complexity to the process,” Len DiCostanzo, Autotask’s senior vice president of community and business development, said in a prepared statement. “[This model] provides guidance for how to transition a client from a break/fix (B/F) contract to a managed services contract.”
DiCostanzo noted a pricing model that includes managed services gives MSPs:
More efficient resource allocation
Predictable revenue streams
The ability to quickly scale to add new customers and manage more devices without adding resources
He said customers also can benefit from this model because it provides:
More predictable IT costs
More reliable performance from technology assets
Single point of contact for all technology
Ready to price your managed services? DiCostanzo offers five steps for MSPs to maximize their profits:
Calculate an hourly rate — DiCostanzo recommends calculating the hourly cost and sell rate for one technician before pricing other services.
Determine costs and profits for break/fix services — Evaluate the costs and profits for break/fix services to better predict your revenue and increase your chances of building a long-lasting relationship with your customers.
Determine costs and profits for managed services model — DiCostanzo points out “using automation in a managed services model removes break/fix model weaknesses and improves profitability while providing an opportunity to build a long-term, professional relationship with clients.”
Calculate price per desktop for managed services model — After you determine the hourly cost and sell rate for a break/fix technician who will provide automated managed services, you can develop a price per desktop for managed services.
Price additional services and develop a price per user — By pricing all of your services and developing a price per user, you can offer bundled managed services to customers.
DiCostanzo added MSPs should review their prices regularly to optimize their profitability.
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