Rethink Your MSP’s Support Pricing Model

The first six months of 2020 may seem more like a decade to most people. A lot has happened since March, with the global pandemic affecting virtually everyone’s personal and business lives in some way, rarely in a positive manner. Unfortunately, it appears that those changes, at least at some level, may be with us for quite some time.

Many MSPs invested a lot to ensure their business continuity for their clients through the pandemic. Think of all the extra hours supporting equipment moves and the added costs of additional licenses and cloud services, not to mention managing all the projects, expedited implementation requests, and support calls.

Despite those headaches and increased expenses, many MSPs are still holding the line on pricing. Some have expressed concerns about asking for more during uncertain times.

Others freely admit not having taken the time to sift through the financial and tally their current costs for supporting each client.
After four months of holding the status quo and potentially putting their own businesses at risk, every MSP should re-evaluate their current pricing models. Are some of your clients costing your firm more than they were in January?

The Channel sets up

Business costs rise every year, even in the worst economic conditions. Most MSPs factor in potential expense increases when building their pricing models and only adjust those rates (or request changes if there are limitations in their contracts) in extreme circumstances.

Cybersecurity is one of the more common exceptions. With the rapidly changing threat landscape, as well as ever-increasing business compliance requirements, MSPs are continually upgrading data protection for themselves and their clients.

Is it better to maintain the status quo on security until annual renewals when the threats rise or invest in the solutions your clients need right now? Of course, IT professionals would always choose the latter option when available. The move to a WFH (Work from Home) environment during the COVID-19 pandemic left many MSPs, and their clients, in this type of situation. Whenever providers had the time, supplies, and access to end-user systems, they pushed hard to upgrade the security of those devices to “remote work standards.”

Some MSPs added other solutions and services during the pandemic to ensure greater insight into end-users’ systems, including new monitoring applications to gauge internet strength, or productivity tools so managers could track employee work habits. The channel-related online forums are filled with ideas, requests for information, and best practices for shifting workforces to a WFH environment.

MSPs often took that approach with little if any immediate concern for getting paid. As always, the tech community rose to the occasion and did what needed to be done in the best interest of the SMB, triaging issues, finding equipment and solutions, and bringing inexperienced remote workers up to speed. Now, with most, if not all, those changes implemented, MSPs must evaluate the costs of all these new client environments and address any profit shortfalls. Imagine how hard it will be to effectively support your clients if you run into cash flow problems due to too much generosity.

No more excuses

Every MSP should accept the premise that many things are different today than they were January 1st. Due to pandemic-related cost increases for solutions and support, a price increase may be in order sooner rather than later. Some providers were able to have those conversations and adjust monthly invoices in real-time to reflect added services and equipment.

Others held off making immediate adjustments to their billing. In some cases, the financial health of the client was a real concern, and others worried about appearing overly opportunistic during the crisis. Some business owners were so stressed that their providers simply didn’t want to add to their burden at that time, preferring to defer those discussions until things settled down.

Unfortunately for everyone, there’s no end in sight for the pandemic or any ensuing economic conditions. MSPs should be getting paid for ALL the valuable services they deliver right now, not in six months or a year. Your chances for recovering lost revenue diminish with each passing month.

Assess all the factors

What can you do to stop those added expensive “leaks?” Sit down and carefully evaluate your business model, from the current service stack to all the additional support options your team continues to deliver during the pandemic.

1. Assess your total endpoints under management. Is every client paying for what their end-users are consuming? In some cases, MSPs may be paying for monitoring or seat licenses for multiple employee devices while only charging the business for a single workstation.

2. Review the “exceptions.” Not all WFH situations are equal. If your client is allowing employees to use personal devices to access corporate systems, that situation can add to your team’s workload, and the cost of securing their operation is likely to be higher. You should be charging more for BYOD-type environments. Insist they upgrade to a “hardened” workstation that your team can effectively manage or raise your rates for these “exceptions’ to compensate for your extra labor and headaches.

3. Evaluate onsite support costs: if your clients expect WFH to remain an option for their employees, your technician utilization could take a hit. If an employee’s house is a sixty-minute drive further from your office, who pays for that two hours of lost time every time they need onsite support? Depending on the area, a two-mile trip could take hours, which means you should evaluate pricing options that recoup most, if not all, a technician’s travel time. Always use your office as a baseline. A tech may currently live closer to a client worksite, but if they quit or move, you may end up eating part of the labor costs.

Focus on cost side down

The reality is that some of your clients may have legitimate financial issues related to the pandemic. Some may use that situation as an excuse, but there might be cases where businesses may need your help to address their own cash flow issues. Whether you provide a short-term price break (not encouraged), extend their past due to payments across a longer timeline, or allow them to drop unneeded services, there are several options available to help lessen their pain.

Of course, that means your revenue may drop, at least temporarily, while client support demands may be rising due to cyberattacks and WFH environments being at an all-time high. The need for optimal efficiency has never been greater for MSPs.

Review all your toolset integration and automation options. Controlling payroll expenses is one of the most effective ways to improve cash flow, so pay close attention to applications that can replace labor-intensive parts of your operations. Integrations that eliminate manual entry (or dual entry) can trim many hours each month for the technical and billing teams.

Your PSA should connect with literally every external system possible to ensure information is automatically updated, distributed, and available to those who need to take some form of action. Accounting, billing, and payment processing systems should also be integrated so your company can send invoices and collect payments as soon as possible.

Find balance

Now is the time for decisions. MSPs cannot afford to wait for a cure or vaccine for COVID-19 to adjust their pricing models and address expense issues that may already be affecting their bottom lines.

Are you getting paid for the services you deliver? Are your clients truly not able to pay for the added support and solution costs brought on by WFH initiatives?

Those are just a few of the questions MSPs need to be asking themselves right now to ensure their own long-term business stability.


MSPS Guide to Predictable Cash Flow in Uncertain Times

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