How to Charge for Managed IT Services
The MSP model can be very profitable, but there’s one major consideration every IT business owner will need to face before taking the leap: How will you charge your clients?
What, exactly, will appear on their invoices? How do you price your offerings? What should you charge for, anyway? Get it wrong, and your recurring client hopefuls will quickly start looking elsewhere. Fret not, though—we’ll walk you through it.
When it comes to how to charge managed services and MSP billing, there are three areas to focus on: contracts, bundles and pricing.
Ever feel like legalese has been designed specifically to confuse non-lawyers? You don’t want to be on the receiving end of an impenetrable, labyrinthine contract and neither do your clients. Keep it simple! Let us be clear, though—you absolutely need one to outline your scope of work. It’s your guarantee should things go awry. You don’t necessarily need the help of a lawyer to draft a document that specifies what is (and isn’t) included in your services. A little research will yield good results to start with, which you can then adapt to your specific situation. All it will cost you is a bit of time!
One approach is to include everything except changes, with the exception of on- and off-boarding. Be specific about what’s billable, don’t over-promise, and always add assumptions; for instance, how many machines you can support before additional charges go into effect. Remember, your contract’s language will be subject to change over time as you learn what works and fine-tune it by adding or removing details.
Bundles are the secret recipe to keeping your clients happy while you maximize your monthly earnings. They’re all about the different ways you can organize your offering for clients.
You can have different bundles for different needs, such as productivity or security. Start with a core offering, with the basic services sold as a single unit. A Microsoft 365 bundle will cover most of your client’s productivity needs, for example, with licenses sold in packs.
Your bundle should be big, bold and beautiful. On a related note, don’t forget to make your bundle offer broad enough. You can always have a few minor additions available as extras, but all the basics really need to be included. So, when a customer approaches you and says ‘I need X’ or ‘I have a Y problem,’ you can prove your value by replying: ‘Yeah, that’s all included in your bundle. Let me show you how to use it.’
Ease of use for your customers means fewer headaches for you. Since all of your MSP’s services are hosted in the cloud, the customer is always using the latest versions tools and software, fully patched and upgraded. And with a bundle, this uptime is guaranteed across even more business areas.
Now that you regularly sell more software to satisfied customers, how do you go about pricing?
You have the final say on the margins you want to earn. A word to the wise, though: competing solely on price is unsustainable long-term. There’s always someone who will do it cheaper. Do you want to engage in the race to the bottom? And do you really want to serve clients whose main criterion is invariably the price, anyway?
Show your value and make your offer difficult to refuse. There are some unique selling points you can leverage here. When it comes to security, for example, the daily headlines are disturbing. Security and privacy breaches are now a fact of business life, and every company needs to protect themselves before a catastrophic attack occurs. It’s your job to make your clients and prospects understand that.
For backup, the cloud is a clear winner in the event of truly unforeseen circumstances. Save a physical server in a flood or flick a switch to restore operations in seconds? It’s a no-brainer, really.
But showing your value doesn’t always have to revolve around saving your clients from catastrophic events like security breaches and natural disasters, either. How does your offering help clients do their jobs better? The price of your Microsoft 365 bundle, for example, can be rationalized to clients based on the productivity, communication and collaboration capabilities provided by the suite, plus the addition of dedicated technical support or training from your MSP business.
However you choose to price your offerings, focusing on the value of each service for clients as a whole will always serve you better than drilling down on the exact cost of each individual billable task.
Bonus tip: Consider Professional Accounting Software
It’s not an expense, it’s an investment. If you put in the hours now to automate invoice creation and client management, you’ll save time in the long run not having to deal with laborious, ad-hoc solutions or workarounds. For instance, Sherweb offers a whole range of integrations to simplify your life, including QuickBooks Desktop & Online.