I heard a stat recently that 50% of the channel is now selling managed services. I know from talking to lots of VARs that it’s not that the other half doesn’t want to earn recurring revenue, it’s usually that there’s some other obstacle preventing them from making the move. One of the primary challenges resellers face with managed services is finding the right price point — an amount that yields a healthy profit margin for the MSP and doesn’t give the customer buyer’s remorse a few months into their contract.
Rob Merklinger, VP of Sales at cloud backup and disaster recovery provider Intronis, recently shared five insights to finding the right price strategy for selling manage services. Here’s a quick summary:
1. You Account for More Than Just Hard Costs. “If you’re charging for just raw storage, you’re cheating yourself and risking turning your service business into a commodity,” he says. Instead, he advises MSPs to think about the other factors that comprise cloud backup services, such as installing software, performing upgrades, providing support, monitoring backup appliances and processes, testing the data, and helping customers create appropriate backup and recovery plans.
2. You Build In Incremental Charges. This step requires MSPs to understand the vertical and geographic markets they serve to create a baseline price and then to create price tiers. For example, maybe you’ll charge $4 per GB for up to 9 GB, then $3 per GB up to 19 GB. Customers in major metropolitan areas might be worth nearly twice that amount per each tier.
3. You Include “Additional Service Fees.” Merklinger advises MSPs to not overlook extra tasks that require labor and should be accounted for in your fee structure, such as helping a customer migrate from a legacy backup or security system and/or backing up SQL databases or Exchange servers.
4. You Bill Monthly. I’ve heard this advice from a few MSPs that discovered months after the fact that a client purchased additional software licenses, but it was never reflected on their bill. These little slip-ups can really add up across your entire customer base, and billing monthly is one way to reduce the chances of this happening.
5. You Show Your Value Regularly. If there’s one trend I’ve noticed lately is that more and more MSPs are signing shorter and shorter contracts with their clients — some are even adopting monthly managed services contracts. One of the factors behind this trend is that customers question why they’re paying their MSPs each month when nothing seems to be breaking. There are lots of reporting tools available that can help show customers all the things you’re doing behind the scenes to keep them up and running. Be sure to includes these reports with their monthly bills and discuss the highlights during your quarterly business reviews.
To read Merklinger’s complete article check out “Priced To Sell: 5 Insights To Finding The Right Price Strategy For Your Managed Services Business.“