How to contract monthly rate

I’ve been in IT for about 15 years and over the last 6 months I’ve decided to go out on my own. Right now I’m challenged with how to charge for my monthly MSP services.

I know some companies charge per device that is managed, and some charge blocks of hours, while some do both. I know it kind of depends on the client, but is it reasonable to charge per managed device AND a block of hours every month or do most folks roll a block of hours into their monthly device pricing and keep it on the per device model?

Does that make sense?

Thanks.

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The thing about business compared to working for someone is that you have to define the billing structure that works for you and your clients. We charge per device and the bill separate for things that are out of scope.

Thanks a lot for the reply! So do you include any “hours” in your device pricing? Or do you just consider that the charge per device covers any work that is expected for that device?

No simple answer to this question I hate to say it but it depends on a plethora of variables.
Among the variables: how much do you want to pay yourself: what are your competitors charging and how are they billing, hourly by device, monthly do they offer annual plans retainers? How many competitors are you up against? Office or WFH other biz expense. The biggest mistake you can make is to undercharge.

I charge an hourly rate by the man-hour and do offer a retained rate. Client buys x hours with upfront payment and gets a discounted billing rate for man-hours over the x number of mhs initially purchased. This works for me since my business model is consulting oriented.

I would suggest you sit down with a good CPA, oyeah don’t forget taxes. lots to consider.

Thanks! Yes, I understand what you’re saying. I’m just going to have to keep digging a bit on this.

Yup, no easy answers.

I’ve been doing “MSP” for about 30 years now, started before it was called “MSP”…back then we just called it “monthlies”.

We do Level 1 (gets our tools onboard, antivirus, patching, monitoring, access to our helpdesk, documentation, an SLA, and a lower rate for when we do bill), Level 2 (adds remote support), and Levele 3 (adds onsite support). Remote and onsite support is unlimited…“within reason”. Also need to have your scope defined of what you include. I detest “block hours”. I suggest reading some books from Nigel Moore (such as package, price, profit), and Karl Palachuk (managed services in a month).

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This was super helpful! Much appreciated…

Why do you detest block hours? A reasonable and simple method of billing for one’s time and knowledge.

The overhead on your time. Micro managing time like a lawyer…worrying about 15 minutes here, 30 minutes there, …and “Whoops…your time is up, next question from you and I invoice!”. And having to have the office person deal with the invoicing.

Personal decision, I did not say block time never works, or block time sucks. I just gave my opinion of it, I’d rather avoid it like a herpe on my right nut. For our MSP clients, it’s either…Level 1 plan, Level 2 plan, or Level 3 plan.

Also forgot OPs question about billing “device” vs “user”…we bill by workstations/servers…so “device”, and assuming smart phones are in the picture…we just cover those, quite easy with 365 and InTune. Also we have quite a few layers to our monthly billing…we don’t just bill per server and per workstation, we also have a “Core” charge up at the top…125 or 150 or 175 bucks just to be on an MSP plan, covers our tools, etc. And then we bill by server, workstation, and even have a line item for 365 tenant management. And…resell 365 licensing via PAX8 CSP, and add backup, etc.

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Have the " Micro managing time like a lawyer" is under control with time tracker and link to my CRM. Easier than maintaining price and package lists. To each his own, but time based works for me besides I am not an MSP in the classic sense.

I appreciate all the input from everyone!

Thanks this really helps, I have always been a Break/Fix person, I started my company when the pandemic hit in 2020 while doing a lot of research I noticed that MSP would be a good fit for my company. I was having an issue with packaging the different services we offered, this response helped to put a few questions in perspective.

It’s being a while.
But the matter is critical.
Sure, the right answer would be: “Every customer has his own SLA,(OLA,OLP) etc, etc.”
But this should be taken with a care.
Many my clients doesn’t even know what a SLA means. Question(one of many) is: Is your goal to develop IT-conscious of your client, or it should go as it is?
Funny, but this is the most important question. What is your goal? How you suppose to spend next 3-5 years of your life? Every path has it’s own obstacles, and if somebody desire is a HappyLife he’s got a wrong business.
But in the end all would happily die off-course. =)
Service model seems viable, just by design. Maybe something like “Value Stream Mapping” might help.