Avoid common MSP pricing mistakes that limit growth and profitability. Learn how flexible pricing, clear value communication, and smart bundling can help you win more clients and increase margins.
Setting the right pricing for managed services can make or break an MSP’s success. Yet, many MSPs struggle to find that balance, often leading to missed opportunities, squeezed margins, or losing clients to competitors.
According to the 2023 MSP & IT Professionals Pricing Report, 63% of MSPs raised their prices in the past year, with economic factors like inflation and rising labor costs cited as primary reasons for these adjustments. However, the same report stated that despite these increases, many MSPs still face challenges in effectively communicating their value, leading to potential client attrition.
If you’re finding it tough to nail pricing strategies that both attract clients and sustain profitability, you’re not alone.
This article explores the most common pricing mistakes MSPs make and offers actionable advice to help you avoid them. Understanding these pitfalls will empower you to design flexible, value-driven pricing that resonates with your clients while safeguarding your bottom line.
The MSP Pricing Problem
Pricing remains one of the most complex challenges MSPs face, and it’s no surprise why. The managed services landscape is crowded and constantly evolving, making it difficult to set rates that balance competitiveness with profitability.
Too low, and you risk undervaluing your expertise and burning out your team. Too high, and potential clients may opt for cheaper alternatives or demand costly customizations.
This balancing act is complicated by several factors unique to the MSP business model. Unlike traditional product sales, MSP services are ongoing, requiring ongoing support, upgrades, and responsiveness. That means pricing must account not only for initial service delivery but also for continuous resource allocation and risk management. Add to that the increasing commoditization of IT services, and you have a recipe for pricing pressure that can quickly erode margins.
Another layer of complexity is client diversity. MSPs serve businesses ranging from startups with a handful of users to enterprises with thousands of devices and highly specialized needs. A one-size-fits-all pricing approach rarely works; yet many MSPs default to rigid pricing structures that don’t adapt well to different client profiles. This inflexibility often results in lost deals or clients feeling they’re overpaying for services they don’t fully use.
The reality is that pricing mistakes aren’t just about numbers. They impact client perception, sales cycles, and long-term partnerships. Getting pricing right is a strategic imperative, not just an administrative task.
In the next section, we’ll explore five of the most common pricing mistakes MSPs make and how you can avoid them to position your business for sustainable growth.
5 Pricing Mistakes MSPs Make and How to Avoid Them
Below are 5 pricing mistakes MSPs tend to make, and how to avoid them:
Adhering to Inflexible Pricing Structures That Shrink Opportunities and Sink Deals
One of the most common and damaging pricing errors MSPs commit is sticking rigidly to a single pricing model or structure, regardless of client needs or market shifts. MSPs often rely on flat-fee or per-device pricing, fearing complexity or losing control over billing. But inflexible pricing can actually limit your ability to respond to client budget constraints, growth patterns, or changing service demands.
When clients feel boxed in by pricing that doesn’t reflect their unique requirements, they may hesitate to sign or renew contracts. For example, a startup with 20 users won’t have the same needs as a mid-sized firm with hundreds of devices, yet rigid pricing treats them similarly or forces MSPs into awkward negotiations. Without flexible options, MSPs risk losing deals to competitors who offer scalable, tiered, or customized pricing tailored to client realities.
The solution lies in adopting adaptable pricing models that align with client size, service scope, and preferred engagement style. Flexible options don’t have to be complicated; even a well-structured tiered model or value-based pricing that adjusts according to service levels can significantly expand your appeal and close more deals.
Pricing the Services Like Every Other MSP
Another frequent mistake is pricing purely based on what competitors charge.
While market benchmarking is a useful reference point, copying the “going rate” can lead MSPs into a commoditization trap, where services are seen as interchangeable and price becomes the sole deciding factor.
MSPs who undervalue their unique expertise, service quality, or niche specialization risk eroding their profitability and brand positioning. Instead of chasing the lowest price, MSPs should focus on differentiating their offerings by highlighting outcomes, response times, or added value features. By clearly communicating why their service is worth a premium, MSPs can justify prices that reflect the true cost and benefit of their work.
The goal isn’t to be the cheapest option, but the best fit for the client’s needs, and the pricing should mirror that positioning.
Fear of Raising Prices and Losing Deals
Many MSPs hesitate to increase prices, worried that clients will walk away or competitors will swoop in with lower bids. This fear, while understandable, can stall growth and even damage business sustainability.
The reality is that well-justified price increases, communicated clearly and backed by demonstrated value, rarely result in mass client loss.
Inflation, rising labor costs, and technology investments all demand periodic price reviews. MSPs who delay raising prices risk shrinking margins and burnout.
The key is transparency: educate clients on why prices need adjustment, emphasizing how your services continue to deliver critical business value. When clients understand the rationale, they’re more likely to stay loyal, especially if you tie pricing to measurable service improvements or expanded capabilities.
Caving to Commoditization
As more MSPs offer similar core services, the pressure to compete solely on price grows. This commoditization makes it tempting to cut prices just to win deals, but it’s a dangerous path.
Lowering prices indiscriminately reduces perceived value and conditions clients to expect discounts.
Instead of competing on price alone, MSPs must focus on specialization, quality, and service experience. Whether it’s industry-specific expertise, faster response times, or proactive security monitoring, these differentiators justify higher rates and build client trust.
Effective pricing strategies communicate this added value rather than simply matching the lowest bid on the table.
Overlooking Bundling
Failing to offer bundled services or packaging-related solutions into clear tiers can cause MSPs to miss out on upsell and cross-sell opportunities.
Bundling not only simplifies purchasing decisions for clients but also increases overall contract value and customer retention.
Many MSPs either sell services a la carte or cram everything into one broad package, leaving little room for customization or tiered engagement. A well-designed bundle aligns services with client needs at various levels, basic, standard, and premium, helping clients choose a fit that feels tailored and fair.
Bundling also enables MSPs to highlight the value of integrated services rather than commoditized individual offerings.
How Do MSPs Decide Their Prices?
Pricing is rarely arbitrary for MSPs. It’s shaped by a mix of strategic decisions, market realities, and client needs. Understanding the main drivers behind pricing decisions helps MSPs avoid common pitfalls and develop approaches that balance profitability and client satisfaction.
Pricing Models
MSPs often choose from several foundational pricing models, each with distinct advantages and challenges.
Per-Device Pricing
Charging based on the number of devices managed is one of the most straightforward approaches. It aligns costs with client scale, but it can incentivize clients to limit device usage or shift responsibilities elsewhere. Additionally, it may not reflect the complexity of device types or usage levels.
Per-User Pricing
This model charges by user, reflecting the fact that many services revolve around individual productivity and user experience. It’s easier for clients to understand, but like per-device pricing, it can overlook backend complexities or varied user needs.
Tiered Pricing
Offering service tiers, such as basic, standard, and premium, lets MSPs package different levels of support, features, or response times. It creates flexibility and transparency, enabling clients to select a service level aligned with their budget and priorities.
Flat-Fee / Value-Based Pricing
Flat fees simplify billing and help clients budget, while value-based pricing ties cost to the business outcomes delivered. Both require MSPs to deeply understand client needs and service costs to avoid underpricing or overcharging.
À La Carte Pricing
Some MSPs offer services individually, allowing clients to build a customized package. While highly flexible, this approach can complicate billing and reduce predictability in revenue.
Service Offerings
Pricing also depends heavily on what services MSPs include and how they deliver them.
Full-Service vs. Specialized
Full-service MSPs typically bundle a wide range of IT management tasks, which can justify higher prices due to breadth and convenience. Specialized MSPs focus on niche services (e.g., cybersecurity or cloud migration) and may charge premium rates based on expertise.
Standard vs. Bespoke Solutions
Standardized service packages streamline delivery and pricing but may not meet all client requirements. Bespoke solutions command higher prices by tailoring support and integrations to unique business environments.
Remote vs. On-Site Support
Remote support often costs less and offers scalability, while on-site services require more resources and justify premium fees due to travel and hands-on expertise.
Client Base and Specializations
An MSP’s target market strongly influences pricing strategy. Serving small businesses with limited budgets demands a different pricing approach than working with mid-market or enterprise clients who require complex, customized support.
Industry specialization, such as healthcare, legal, or finance, can also enable MSPs to charge more due to compliance knowledge and specialized service needs.
Unlock Your MSP’s Full Potential with Smart Pricing
Pricing isn’t just about numbers; it’s a strategic tool that can fuel your growth, strengthen client relationships, and set you apart in a competitive market.
Avoid common pricing mistakes by embracing flexibility, highlighting your unique value, and aligning your services with client needs.
Ready to transform your pricing approach and drive more profitable deals?
Start by reviewing your current pricing models and service bundles today. If you need expert guidance to tailor a pricing strategy that fits your MSP’s unique strengths and client base, connect with our team or explore MSPVendors.com for proven insights and resources designed to help you win.
Don’t let pricing hold your MSP back. Take control and position your business for long-term success.
