I have an instructive story that one MSP will NOT find amusing. Let’s hope they don’t read it.
Roughly a year ago, I started looking for another MSP to outsource to (don’t ask). We narrowed it down to two MSPs, one of which was a client of ours but not active in a membership. In the sales presentation, they commented, sheepishly, that they weren’t “good clients” of ours because while they had the Toolkit, they didn’t do anything with it. I joked back, “Good…because if you were engaged clients, your prices would be exponentially higher.” Their response was, “Don’t you worry, we’re the highest-priced MSP in our market.” I’m not sure that was the right response to a prospect you’re trying to close, but okay…
Here’s the punchline
They proceeded to come in $36,000 cheaper than our current provider we were looking to replace. Playing along, I acted “shocked” when they told me the price. They never asked, nor did I tell, that we were paying over $3,000 a month MORE at the moment, fully expecting the next MSP to be priced higher. Sadly, the laugh was on me because they were a disaster of a vendor, and we’ve since moved on to a much more competent MSP. There is truth in “you get what you pay for,” although I wasn’t LOOKING for a cheaper alternative.
Point is, there are a LOT of prospects who would pay MORE for your services, but aren’t going to offer that information up unless you ask. And right now, due to rising inflation, a hard labor market and a growing need for advanced cyber security solutions being pushed not only by regulators but also insurance companies, if you’re not raising your rates, you’re an idiot.
Sorry, not sorry. If you’re not at $200 per hour for project work and in the range of $150 a seat for managed services, you’re losing money. Yes, that is a gross generalization, and every situation is different. But the most successful MSPs have raised their rates by 20% to 25% this year. What about you? If you weren’t making 20% net and then only raised rates 10%, you’re still underpriced (most likely) OR your operations are so screwed up that it’s killing your profits.
Here are three reasons why you MUST raise your prices right now:
No surprise here, but everything is costing more. Consumer prices are up 9.1% over last year and companies are raising prices across the board because THEIR costs are going up. Can you absorb a near-10% increase in your costs? If the price increases haven’t hit you yet, just wait. They’re coming. As a business owner, you set your prices (hopefully) on a markup from COGS. If the costs of goods go up, you must raise your prices or that comes directly out of YOUR pocket, your bottom line.
Technical talent is EXPENSIVE right now.
A client of mine had a highly paid engineer recruited away where he was offered triple the money he was currently making – going from $80,000 a year to over $240K with benefits, without relocating and with the luxury of working from home. In general, our MSP members are saying they are being forced to give 18% to 25% raises to their engineers or be faced with losing them. That is why we’re also seeing an increase in co-managed IT (Co-MITs). Companies are trying to outsource vs. recruit, retain and manage an in-house IT team. Since your growth and profits are tied directly to hiring staff to service those clients, you MUST raise your rates sufficiently so you can afford to hire good talent, not just someone who can fog a mirror – and those engineers do NOT come cheap.
Cyber security and compliance regulations are heating up, creating DEMAND for MSPs that can supply the solutions.
The next time you meet an insurance agent selling cyber liability or crime insurance, give them a hug. Coverage for crime and cyber liability are on the rise, and insurance companies are bleeding money for policies that cover security breaches. To remedy this, they are raising rates across the board for coverage and requiring stricter requirements to even underwrite a company, which means YOU have the ability to justify more sophisticated cyberprotections. One of the campaigns I’m urging my clients to conduct is to reach out to each client and review their current insurance policies to ensure that what they are agreeing to do in the policy from a cyberprotection standpoint IS actually being done.
Of course, the time to do all of this is NOW. There’s urgency to get ahead of this both BEFORE a recession and BEFORE one or more of your competitors aggressively triggers a campaign to secure the lion’s share of GREAT clients (and there is competition for HVCs, or high-value clients like never before).
This year at the Roadshow, my focus is on helping MSPs hit the RESET button on your business model, target market and marketing strategy.
To go UPSTREAM NOW for better, higher-paying clients and differentiate yourself from not only the ankle biters in your market area but also the larger, more well-funded MSPs and the more aggressive “Super MSPs” that are gunning for your BEST clients…as well as going upstream to sell co-managed, raising your rates and being able to compete for and WIN big contracts by delivering advanced cyber security protections and compliance-as-a-service. There’s much work to do. If this is important to you, then join us: www.ITmarketingRoadshow.com.