How to price managed IT services
A support contract can look profitable on the invoice and still lose money every month. Tools get added per seat, a few users raise most of the tickets, onboarding eats a fortnight nobody billed, and the fee stays where it was signed. This guide is for managed service provider (MSP) owners, IT support companies and freelance IT consultants who price recurring support. Every number comes from your own records: your PSA and RMM invoices, vendor licence bills, payroll, ticket reports and contracts. Each section links to the calculator that does the arithmetic.
1. Know your loaded hourly cost before you quote anything
Every support price is labour plus tools plus margin, so start with what an hour of technician time really costs. Take gross salaries from payroll, then add employer taxes, pension contributions, benefits, training and certifications. The employee cost calculator turns a salary into the full annual cost of each person. Next, count productive hours. A technician paid for a full week does not spend all of it on client work: internal projects, documentation, meetings, holidays and sick days all come out. Your time entries in the PSA show how many hours were logged against clients, and the utilization rate calculator compares those with hours paid. Divide the full cost by productive hours and you have the loaded hourly cost. If you work alone, the hourly rate calculator does the same job from your overhead and income goal.
2. Build the per-user price from tools, labour and margin on price
A per-user price is only safe if you know what each user costs you. Go through your vendor licence bills and split them into tools charged per seat, such as endpoint protection, backup and email security, and fixed tools you pay for regardless of headcount, such as the PSA, RMM and documentation platform. Then take support hours per user from your ticket reports over the last few months. Enter users, per-user tool cost, fixed tools, support hours per user, your loaded hourly cost and your target margin into the MSP per-user price calculator. It returns cost per user, price per user, monthly revenue and monthly profit. Set the margin on the price, not as a markup on cost: a markup of a given percentage always produces a smaller margin than the same percentage taken from the price. The markup and margin calculator converts one into the other when a vendor or partner quotes in markup.
3. Check every existing contract's margin and break-even hours
New pricing helps new clients. The contracts you already hold are where the money leaks. For each client, take the monthly fee and seat count from the contract, tool costs from the vendor bills for that tenant, and labour hours from the PSA time entries. Add anything else the contract costs you, such as third-party projects you absorb or travel. The IT support contract margin calculator shows gross profit, margin percentage, cost and fee per seat, and the break-even hours: the number of labour hours at which the contract stops making money. Compare break-even hours with the hours actually logged over the last few months. A contract that regularly runs close to break-even is one bad month away from losing money. The break-even calculator is useful at business level, to see how much contract revenue covers your fixed costs.
4. Measure cost per ticket so the heavy clients show up
An all-you-can-eat contract hides which clients consume the most. Pull tickets per month from your PSA, technician cost from payroll, tool and overhead costs from your bills, the number of technicians and the average minutes spent per ticket from time entries. The cost per ticket calculator returns cost per ticket, labour cost per ticket, tickets per technician and the hours your team spends on tickets. Run it for the whole service desk, then multiply each client's ticket count by the result and set it against their fee. The clients whose ticket cost approaches their fee are the ones to reprice, retrain or put on a stricter scope. Tickets per technician also tells you when the desk is full: the client capacity calculator shows how many more clients your team can take before you need to hire.
5. Price block hours with unused hours in mind
Prepaid blocks suit smaller clients and project work, but the discount you give and the hours that expire both change what you earn. Decide the hours in the block, your standard rate, any discount for buying in advance and when unused hours expire. Look at past blocks in your contracts and PSA to see how many hours clients actually used before expiry. The block hours price calculator gives the block price, the effective rate after discount, the effective rate on the hours actually used and the price per month. Do not plan your margin around hours going unused. Price so the block pays your rate even if every hour is used, and treat any unused hours as a bonus. If a client wants a monthly commitment rather than a block, the retainer calculator sets that up.
6. Charge onboarding separately or spread it over the contract on purpose
Taking on a new client means discovery, documentation, agent deployment, licence changes, cleanup and often a site visit. Absorbing that inside the first months of the monthly fee means the contract starts in the red. Estimate onboarding hours from your last few onboardings in the PSA, add setup costs such as hardware or migration tools with your margin, and note the contract length and monthly fee. The client onboarding fee calculator shows the onboarding fee, what it comes to per month if you spread it over the contract, the total contract value and the share of that value the onboarding represents. Charge it up front where you can. If you choose to spread it, write the amount and an early termination clause into the contract so you recover it if the client leaves early.
7. Review contracts yearly and reprice the ones below target
Pick a fixed month each year to review every contract. Rerun each one through the IT support contract margin calculator with this year's seat counts, vendor bills and logged hours, and recheck your per-user price in the MSP per-user price calculator with this year's payroll and licence costs. When vendor prices or wages have risen, the price increase calculator shows the rise needed to keep the same margin. Give clients written notice as the contract requires. If you want the routine in one file, the MSP Contract Pricing Workbook keeps your loaded cost, per-user prices, contract margins and ticket costs together so the review is a matter of updating figures.
The mistakes that cost the most
- Pricing per user without a loaded hourly cost. Salary alone leaves out taxes, benefits and the hours nobody can bill. Work out the full cost per productive hour first.
- Using markup when you mean margin. A markup on cost always leaves less than the same percentage taken from the price. Set the target as a margin on price.
- Never checking old contracts. Seats grow, vendors raise prices and tickets climb while the fee stays put. Compare logged hours with break-even hours every year.
- Giving onboarding away. The first weeks are the most labour-heavy of the contract. Charge for them or spread the cost on purpose with a clause that recovers it.