The Basic Price Modeling Guide for MSPs

4 Basic MSP Pricing Models

Small- to medium-sized businesses (SMBs) face constant challenges while managing their IT infrastructure. In an era of evolving IT technologies, it can be especially difficult to focus on both the main business and tech requirements. What’s more, most SMBs can’t afford to hire an IT team, though the need is clear.

Fortunately, this is where managed service providers can help. They have the ability to take on all of a business’ IT requirements, such as setting up a network and providing software installation and remote system backup.

As IT companies add new services, their MSP pricing models may change. This helps them to remain flexible and adjust offerings according to market needs.

Here’s the list of the most popular pricing models, which can give you some guidance on how to price your MSP services.

#1. Per device

This type of managed service provider pricing model is one of the most popular among service providers for its simplicity. Here, clients pay a fixed price for each monitored device, including servers and mobile devices.

A per-device pricing model best suits MSPs for which price is core to the foundation of their business, rather than the value provided to clients. A more seasoned IT service provider can adjust this pricing model as needed.

Pros

  • Simplicity. To bill your customer, you can multiply your price per machine by the number of devices you have to monitor, according to the contract.
  • Predictability. Simply increase the bill by the fixed amount as you add new devices.

Cons

  • Client cost. Price can grow significantly as the number of machines increases.
  • Fragmentation. This approach doesn’t allow a full view of network performance.

#2. Per user

The per-user pricing model is very similar to the per-device pricing structure. The core difference is that an MSP sets fixed pricing per user, no matter how many machines they use. From the customer perspective, this model can be very attractive if device utilization is high.

Pros

  • Simplicity and predictability. As with the per-device approach, it’s easy to calculate the final price to charge your clients.

Cons

  • Scalability. This approach makes it hard for MSPs to scale their businesses as the number of machines they have to monitor grows.
  • Storage pricing. If you charge your clients a fixed amount per user, you can lose money easily because there’s no way to control the amount of data backed up for each user. If storage providers charge you per GB, and if your clients use more storage than you expect, costs can add up rapidly.

#3. Tiered pricing

This approach to managed service provider pricing  involves setting up a number of packages, each one including a specific set of services. For example, a “Start” package may include basic remote support, virus removal and patch management, with a small, entry-level fee. You can add on-site visits to the “Standard” package, while the top-price “Premium” package may offer rapid-response support outside of business hours.

Pros

  • Universal approach. Because each tier comes with different levels of service that clients can choose based on specific requirements, tiers eliminate the need to determine pricing for individual clients.

Cons

  • Service coverage. The packages may not cover all needs of each specific client.
  • Slower decision-making. If you provide too many choices, it can be difficult for your client to make a final decision, which slows down the sales process.

#4. Value-based pricing

In this case, MSPs don’t divide their services into packages. Instead, they offer full support and a full set of services to all their clients, which lets them provide real value.

When selling your services under this MSP pricing model, ask your clients questions that reveal their biggest pain points, such as the cost of downtime, and how many hours their staff loses due to inefficient IT structure.

Pros

  • Profitability. When your clients see the value that you offer, they will be glad to pay more for your services.

Cons

  • Experience and trust. You have to be truly, fully experienced in all the services that you offer, and accurately convey that experience so that clients fully entrust their IT infrastructure to you.
  • Complexity. Selling “all-inclusive” services requires deep and up-to-the-minute IT expertise.

Conclusion

To find out which MSP pricing model suits you best, take the time to determine exactly what your clients need and what you can offer them. Don’t offer your clients 24/7 support unless you have specialists that are ready and willing to work on-call at all hours of the day or night. If your resources allow you to provide best-in-class service, then go for it—and plan and price accordingly.