The Easy Way To Raise Managed Services Prices To Protect Your Bottom Line

Robin Robins MSP Marketing Leave a Comment

Will Nobles is the owner of a $10 million per year MSP, Vector Choice, which has seven locations that he grew from scratch. He is also TMT‘s VP of Client Coaching and is dedicated to sharing his strategies to grow other MSPs. Below, he is going to explain how to raise prices to protect your bottom line.

If You Don’t Raise Prices, You’re Going To Start Seeing Your Bottom-Line Net Profits Erode Very Quickly

A topic that comes up a lot is raising prices. This is something I have been very actively taking on in my market and with my existing customers. The cost of services and providing MSP services is going up. The cost of everything is going up. And, if you don’t raise prices, you’re going to start seeing your bottom-line net profits erode very quickly with that.

We do contracts and I encourage everyone, even if it’s month to month, to have a contract in place. We do a 5% price increase every single year. On the annual anniversary of their contract, we raise it 5%. Back in 2018, when I took off and started growing the company, I was going through the Rapid Implementation program (which is a part of the Accelerators Club that TMT has) and I was sitting there, and I looked at Robin and said, “I can’t charge that in my market”.

You CAN Charge “That” In Your Market

I’m in Atlanta. Some say it’s cutthroat and a lot of competitors. Yes, Atlanta is one of those places. I was like, “I can’t charge that in that market.” From the back of the room, Jay Ryerse, who owned an MSP, sold it, started CARVIR, and sold that to Continuum, said, “Will, four years ago, I was charging that.” I’m like, “We’ve got to talk.” Literally, if I only took one thing from that Rapid, I increased my prices that day. I started landing more clients six, eight, and nine months after. That was in 2018 that I started raising my prices up and I’ve increased prices several times since then. As a matter of fact, this year, I’m probably paying on average about 15% to 16% more than I was paying even last year for employees. So, the cost is going up, but at the same time, you’ve got to keep those employees. There are some times you can’t. Robin mentioned someone at $80,000 that got a job at $140,000 or whatever. I had a senior engineer that I was paying $140,000 and I lost him to Microsoft for $240,000. I can’t compete with that. None of us MSPs could compete with Microsoft. I’m not asking you to compete but you need to have some wiggle room to be able to grow. And to be able to do that, you’ve got to get your prices up so you can charge higher as well as be able to pay better.

Use Contracts For Consistency And Predictability

It’s built into our contracts and because we’re religious about every year doing that 5%, that helps on that increase overall. At $10 million, you increase 5% just on an annuity basis. That’s a lot of money per month to increase. That helps cover some of the extra cost. But you also have to look at going to new clients and upselling. That’s why we do the whole year in our managed services package. We call it Managed Services Feature 2022 because, if I sell someone this year and I’m doing a QBR with a client, I want to be able to sell them my 2023 package next year. I’ll add some more cyber security things, more benefits, but I increase the price, not just the cost of the benefits but also overhead cost as well.

We give our clients notice by making my MSA, my master services agreement, very fair. We give a 60-day notice of that price increase. We actually send them an email saying, “As you know, as part of our contract, we’re taking the right to increase 5%.” I’m probably not saying it exactly right, but we give them a reason why. There are some years I might do 3% if things haven’t really changed that much. But I still keep it going and keep them used to it. That’s the thing, the first time you do it, it’s like, “I’m not going to pay that. You’re crazy. That’s not what I agreed to.” Well, actually, it is. But once you do it one time, they’re completely fine and they understand.

You Need More Than Just Sales And Marketing

If you just throw sales and marketing onto a business that’s dysfunctional, that doesn’t have pricing, packaging, contracts, a hiring strategy, all of that in place, which would cover all that in one of our memberships called MSP Launch, then you’re just going to throw more problems onto already a lot of problems. It’s probably a low-profit business in the first place and just creates a high-problem, low-profit business there. So, we really work, to slow it down to make sure that you get those things in place, while doing the marketing things so that you keep on growing. But you grow at a pace where you’re going to be able to sustain it and then be able to get to that.

If you want to get more high-value clients and raise your prices for current clients, join our next FREE marketing training that gives you the blueprint to adding 1-2 high value clients every month.