Knowing when and how to raise your rates is critical for staying profitable and maintaining client trust. By using this checklist, MSPs can identify the right timing, approach, and communication strategies to make rate adjustments a smooth and value-driven process.
1. Have Your Operating Costs Increased?
If Yes:
- Determine the specific cost increases — such as higher vendor fees, employee wages, or software licenses — and calculate how they affect your profit margins.
- Plan to adjust rates incrementally to offset these costs without overwhelming your clients.
If No:
- Review upcoming expenses or planned investments, like hiring or new tools, to determine if proactive rate adjustments are necessary.
Next Steps
- Perform a cost audit every six months to ensure your rates reflect current expenses.
2. Are Your Margins Below Industry Standards?
If Yes:
- Compare your profit margins to industry benchmarks. It typically is 30%–50% for MSPs.
- Prioritize raising rates for low-margin services or clients.
If No:
- Evaluate whether higher margins could support growth initiatives, such as expanding your team or services.
Next Steps
- Track margins by service category to identify underperforming areas that may need a pricing review.
3. Has It Been Over a Year Since Your Last Price Increase?
If Yes:
- Review your historical pricing adjustments and consider small annual increases to avoid large, disruptive hikes.
If No:
- Set a recurring schedule for rate reviews, such as annually or biannually, to keep your pricing aligned with market trends.
Next Steps
- Notify clients well in advance of planned adjustments, emphasizing the added value you provide.
4. Are You Adding New Services or Enhancements?
If Yes:
- Justify rate increases by highlighting new features, improved support, or enhanced security measures.
If No:
- Consider bundling additional services or upgrading current offerings to provide more value with the price increase.
Next Steps
- Use client education materials to showcase the benefits of new services included in the rate adjustment.
5. Did Your Competitors Raise Rates Significantly More?
If Yes:
- Benchmark your prices against competitors in your region or vertical to identify gaps and opportunities.
- Highlight your unique value proposition to justify aligning with market rates.
If No:
- Evaluate whether your current pricing structure is attracting clients who undervalue your services.
Next Steps
- Regularly research competitor pricing and raise your rates to reflect your expertise and service quality.
6. Are Clients Frequently Exceeding the Scope of Their Agreements?
If Yes:
- Monitor clients that consistently require extra services beyond their contracts. Adjust rates to cover the additional workload.
If No:
- Ensure that current contracts clearly define service limits to prevent scope creep.
Next Steps
- Introduce policies for out-of-scope work with hourly or project-based rates.
Additional Insights on Raising Your Rates
How to Communicate Cost Increases to Clients
- Be Transparent: Share the reasons for the increase, such as rising costs or new value-added services.
- Focus on Value: Emphasize how your services meet or exceed client expectations.
- Provide Advance Notice: Notify clients 60-90 days before the rate adjustment takes effect.
- Offer Alternatives: Present options for adjusting service levels or exploring add-ons to fit their budgets.
How to Minimize Client Resistance to Higher Rates
- Incremental Increases: Instead of large jumps, apply smaller, regular adjustments annually.
- Loyalty Incentives: Offer discounts or perks for long-term clients to maintain goodwill.
- ROI Examples: Use case studies or reports to demonstrate how your services have positively impacted the client’s business.
Stay Up-to-Date on Pricing and Bundling Trends
Check out the Pricing and Bundling Answer Center for more information on this topic.
ChannelPro has created this resource to help busy MSPs streamline their decision-making process. This resource offers a starting point for evaluating key business choices, saving time and providing clarity. While this resource is designed to guide you through important considerations, we encourage you to seek more references and professional advice to ensure fully informed decisions.
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