7 Reasons You Should Charge Your IT Customers More

By Dave Rosenberg, Vice President, SDTEK, ASCII Group member since 2013

The landscape for managed services providers (MSPs) has changed significantly over the last 10 years.  A decade ago most IT companies were providing break-fix service and then hoping for the occasional project work.  Early adopters to the MSP model sold proactive service and the uptime promise to their clients meant they could charge more because they sold on the value of the increased productivity that is a result of well-maintained IT infrastructure.

A decade later, and the business landscape is dramatically different. The break-fix model is all but dead, or at the least relegated to one person shops catering to the consumer or SOHO business. The SMB market is now inundated with a wide variety of MSP offerings. As Adam Smith predicted, with the increase of the supply of managed services providers there have been corresponding downward pricing pressures. No doubt, as the owner or senior manager of an MSP you are being pressured by your sales team to reduce prices as well. I can tell you with over 20 years of business experience, primarily in the technology sector, lowering prices is the wrong thing to do. The following are 7 reasons why you should actually be charging your customer more.

1. Culling Of The Herd. The Pareto principal states that 80 percent of your profits come from 20 percent of your customers. Although the percentages aren’t exact the concept is valid. Most of your profits come from few of your customers. When you sell you services too cheaply you attract a buyer that is price sensitive. They will try to grind out every penny they can and lower your gross profit and therefore your net profit. If you raise your price you will scare them away, let them become your competitors’ headache. 

Please log in or register below to read the full article.