Deciding how you’re going to charge your clients for your services is a crucial decision when starting an MSP business. Your choice of pricing model can affect cash flow, profitability, and ultimately, the scalability and growth potential of your business.
As with most things, there’s no one-size-fits-all formula when it comes to pricing, which is why it’s good to familiarize yourself with the different ways you can charge clients. In this guide, we take a look at the different types of pricing models for IT businesses and why some might suit you better than others.
Key considerations for pricing your MSP business
Before we jump into the different pricing structures, it’s advisable to have the following factors in mind:
Profit Margin and Cost of Service
When deciding the best pricing structure for you, profit margin and fixed costs of service should be at the top of your mind. This means thinking about the price of your tools and tech stack that facilitate your service, as well as your staff costs. Another key consideration is marketing and advertising. You need to provide for the cost of client acquisition — especially when you’re just starting out.
Regardless of the pricing structure you choose, your fees should incorporate a robust profit margin instead of just breaking even.
Variety of pricing
As far as possible, you want to elect a pricing structure that allows you to offer a variety of pricing bundles. This not only helps you to appeal to a wider spectrum of clients (and budgets), but also the ability to up-sell to existing customers when their needs grow.
Scalability
You want your pricing structure to grow with your business. Incremental price increases over time are natural, and as your business grows, you’ll want to be able to scale your prices to match.
Your target audience and clients
Your pricing isn’t just about you and your business, it’s also about your clients. You need to carefully consider the type of fee structure that is most likely to appeal to your target demographic, as well as the type of service that they’ll be looking for.
How your competition are pricing themselves
Lastly, it’s advisable to take a look at how competitor MSPs are pricing themselves. This will give you a good idea of what your target audience responds to as well as the kinds of prices you should be aiming for.
Different types of pricing models of IT businesses
Per device
Per device pricing structures are simple and straightforward. All you need to do is come up with a price for each type of device (laptop, printer, server etc), and charge your clients according to the number of devices that you are supporting.
This pricing structure is easy for clients to understand, easily scalable, and therefore marketable too. One thing to note, though, is with the proliferation of BYOD policies and remote working, this pricing structure may get a little complicated.
Per user
Per-user pricing is another simple and easy to understand framework. This works well for organizations where each end-user works across a number of devices, so a per device pricing structure would likely be uneconomical.
Value-based
MSPs who are looking to cover all of their client’s IT needs should probably look to work on a value-based pricing structure. In this kind of contractual arrangement, you’re essentially working as an outsourced external IT team, so you can price yourself according to the service you’ve been asked to provide, whilst taking into account the specific client’s profile.
Monitoring Only
If you provide network monitoring services, you can come up with a price for this service alone. This is great for clients that need an MSP to monitor their network status and alert them of any issues that arise but who have an in-house team that can deal with the issue themselves.
À La Carte
This allows you to offer each type of service for a fixed price, meaning clients can build out a bespoke package that matches their specific needs.
This benefits the client because they only need to pay for what they use, and MSPs likely earn more per service than if they were offering it as part of a package.
Tiered Pricing
Tiered pricing is becoming an increasingly popular way of pricing MSP’s services. This involves scaling service bundles that have different fixed monthly prices and packaged features included.
In order to work on this kind of pricing structure, MSPs need to carefully curate different subscription packages that offer clients good value for money, but also create opportunities for upselling as clients’ needs grow.
Hourly Rate
An hourly rate is based on hours worked. MSPs who run this type of model only provide their clients with IT support when and if they need it. This works best for clients who have minimal and ad hoc IT needs and who are seeking a reliable but flexible service.
For MSPs on the other hand, offering an hourly rate may get you more clients, but also leaves you with a bit of unpredictability about how much work you’ll be getting.
Unlimited Support / All-Inclusive
You could choose to put a price on your unlimited services. Meaning a client pays you a fixed monthly cost to have you at their disposal for every single IT need. This is highly advantageous from the clients perspective because it allows for accurate cost projections and control of cash flow and they’re never without essential IT support.
Atera: Unlimited Devices for a Fixed Price
Here at Atera, we enable you to opt for the unlimited support pricing model. We offer our clients unlimited devices for a flat monthly fee, so you can add as many devices as you’d like without spending a penny more. We’re all about transparency, which is why we are very clear about how we charge and for what.
If our clients want additional services, we have a fixed cost for our other features that are quick add-ons to their monthly subscription. This means our pricing plans can grow with our clients and scale to reflect our range of services as we continue to expand. A win-win for everyone.
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