By Frank Colletti, GVP, Worldwide Sales, SolarWinds MSP
Many MSPs look forward to the six-month mark of a new managed services contract. At this point, much of the upfront work of learning the customer’s business and IT challenges – and setting up and optimizing their network and equipment – is done. After that, the customer is typically easier to manage. This is where the wisdom of managed services and the recurring revenue business model starts paying off.
Fast forward a few more months or a year. Everything’s running smoothly, and the customer is paying a flat fee every month for your company’s expertise and proven ability. The challenge for many MSPs then becomes, How do you go about increasing your price when in the customer’s eyes you’re not necessarily doing anything new and different — and in some cases, it may appear you’re doing less now that everything is “being managed”?
First things first. Inflation is a reality, and any good business leader knows that charging the same price each year really means accepting a smaller profit margin. To avoid a prolonged price freeze and customers questioning your value, keep the following three best practices in mind.
1. Take a Price Increase Tip from Apple’s Latest Flagship Phone
Earlier this year, Apple unveiled the iPhone X, a smartphone that starts at $1,000 for the 64 GB model and goes up to $1,150 for the 256 GB model — that’s several hundred dollars more than previous iPhones, including the newly released iPhone 8. While Android fans may scoff at some of the “new” features, like longer battery life, an end-to-end display screen, and wireless charging, the point is these features are new to Apple’s ecosystem, and Apple is not adding them for free.
As an MSP, not every price increase has to correspond with a game-changing new service or technology offering, but you should tie the increase to some kind of additional value-add, so it’s not just about funding your growing operating costs. Perhaps you’re extending your help-desk hours, providing an additional layer of security, and/or guaranteeing faster recovery times or quicker service response times.
2. Ditch Per-Device Pricing for a Per-User Model Whenever Possible
In the past, one of the most popular pricing models used by MSPs was the “per-device” model. Oftentimes, assets were assigned different values. For example, the monthly cost for managing a server was higher than managing a computer or mobile device. When the majority of IT infrastructure was on-premises and employees were starting to bring their own devices to work, this was an easy way to increase managed services pricing. The problem with this model nowadays, however, is that many IT assets are moving to the cloud. So, MSPs that stick with the per-device model have to continuously reduce their prices.
To avoid the per-device pricing pitfall, many MSPs are using a …