How to Set Managed Services Pricing

How to Set Managed Services Pricing

MSP pricinglIt's the question I hear all the time: "How much should I charge for managed services?" The obvious answer (as my dad often tells me): As much as your customers are willing to pay. Still, that's over simplifying matters. I realize MSPs use a range of metrics and formulas to set pricing. But perhaps it's time to go back to basics.

During a sit-down meeting with LegalCloud, an MSP that serves the legal vertical, CEO Mark Hadfield told me his company charges most customers a fix per-employee monthly fee. In separate conversations with Kaseya Senior VP Dan Shapero, I've heard about the 3X100 rule: MSPs should try to target 100-seat engagements within 100 miles and charge about US$100 per seat for a range of services.

Pricing models will surely vary from MSP to MSP -- based on the verticals and geographies you serve, and the services you deliver.

Back to Basics

As I considered the pricing quandary a bit further, I stumbled onto this article from Entrepreneur magazine. In it, author Joseph Benoit offers six detailed pricing tips. Not all of them apply to MSPs but many of the tips can at least help you to get your arms around a pricing strategy.

Benoit tells readers to (1) check out the local competition's prices (2) join local associations to keep your finger on the pulse of pricing and local economic issues (3) survey your customers to learn how they feel about the value of your products and services (4) pay attention to local supply and demand (are rival MSPs moving in or are they imploding?) (5) consider new market segments that will help you boost prices and (6) calculate your costs.

Again, basic stuff. But how many MSPs actually sit down and go through that process? And why -- oh why -- is calculating your cost the final tip? Shouldn't costs be one of your first considerations?
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