Kaseya Community

The Price Is Right

  • CeruleanBlue

    What we do when we quote is use a modified version of Erick Simpson's "Cost Analysis" that we found in the first book I posted. Coincidentally, this is almost the same exact thing to what Terry Hedden from Infinity Business Systems presented at Kaseya Connect with "Pricing Strategies: Developing the ROI Value Proposition". I know that Kaseya filmed all presentations, but I am not sure when they are releasing the video. Anyway, without getting into too much detail we have a sheet that we fill out with figures after asking potential clients (and their employees) key questions. We then calculate the cost of downtime is/was, lost productivity (employee wages, etc.), true cost of previous break/fix IT support and come up with an overall figure.

    Commonly this figure is fairly large, but clients have a hard time refuting it because all the figures are derived from their own payroll and employees mouths. Example: If their Exchange Server was down for 8 hours last year and it severely effected the productivity of all 50 employees and the average salary is $45k/year (or $23/hr) that is a "soft" loss of about $9300. That's just lost productivity from the result of downtime. Then you add what the previous IT provider charged them to fix it (say 4 hours of work at $100/hr) and that figure goes up to $9700 just for the Exchange Server alone. Figures quickly add up when you take into account workstation issues and all the other problems that they faced.

    We also add in the time that "Bob in accounting" spent doing the daily computer help "because he knows computers". Well, they hired and pay Bob to do the accounting, and not IT right? How much do they lose by Bob doing 8 hours a week helping co-workers with their email? If they hired Bob to do their accounting at $50k/yr. and he is spending 416 hours a year doing computer stuff they are losing $10k that could be made by keeping Bob in accounting. Remember Bob makes the company money when he is doing accounting, not when he is fixing computers.

    Soon enough, you have a sheet in front of them that says they either spent or lost $30,000 last year without you or your managed services. Sure most of it is "soft" costs, and you will get people that object and say "my employees can continue to work with the server down", but let's get real here. Downtime is the most unproductive time ever. The boss might think that employees will continue to work, but both you and I know that is not the case. Even if that were the case, there is time spent on catching up with that downtime.

    So we take this sheet into them and go over it. We deflect objections as well as we can, and generally quote them right around 5%-10% less what the ROI sheet says they spent. So using the $30,000 figure above we quote them $27,000 per year ($2,250/Mon.) for Managed Services. We obviously remind them that that figure is still cheaper than hiring an internal IT staff.

    Granted this seems like a large figure. And it is. It is a tough sell to convince a company with 20 workstations and a server that they need to spend $2,000/month for your services (not including projects!). But the question is, how many $2,000/month clients do you need to be profitable? Not that many I'd imagine. The bonus is that they are all "A" clients and they get it. So you are now dealing with better clients and because you don't need as many clients to be profitable you don't need a huge staff.

    Say you are pricing by the device, to get that $2,000/month for that same client (20 workstations, one server) you would probably be pricing workstations @ $75/month and servers @ $500/month. Judging from what I have heard from other MSPs those figures would be nuts to ask. The average that I have found is around $45-$50 per workstation and around $199-$299 for servers. A Kaseya agent can cost as low as what...$4 for a workstation? Even less over time because agents are purchased not leased. It costs your company maybe $25/Mon to support a desktop including salary, insurance and other overhead.


    Newbie to the MSP world as well - incidentally, we've been quite successful with our MSP rollout and getting clients to sign on, especially when they hear the word "unlimited" (which I hate). We've come up with a model that works for most, is profitable for us, and is afforadble for the client. Our model works on a specific number of desktops and servers - different packages have different pricing for "up to" a certain amount of machines. If they add more they can either move up a tier to the next pricing model OR just pay an additional monthly charge for either the desktop or the server.

    Which leads to my question - I like your idea of working up the figures based ROI part of things and I'm going to read that book, however what do you do when your clients add 5 or 10 new PCs to their network or a new Terminal Server to the mix? How do you adjust pricing for that based on your ROI model?

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: strategicmicro
  • CeruleanBlue,
    Would you mind describing what type backgrounds (experience and/or certifications) you require for your L1, L2 and L3 people?
    Also, what software do you cover in your "unlimited plan"? Where do you cross the line as far as what you will upgrade for a client (covered) vs. what will be a "project"? If you cover L1 Support for Client Buisiness Apps, do you charge them extra per month?

    Thanks!

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: billmccl
  • So now you have convinced your prospect that paying $2700/month will fix all their problems based on the soft and hard calculations. The hard ones are easy to defend. But how about the soft ones. Like the exchange server that went down for a day and had people twiddle their thumbs for a day. Which was a soft cost loss of $10,000 or whatever.

    HOW is going MSP preventing the loss of this soft cost?

    Because a client can STILL be down for a whole day. Sure, we can catch a lot of stuff. But if a RAID controller tanks or a internet connection goes down for a day (yes, even FCC regulated T1's do that). What then? How do you sell this? Just curious. As this is our thoughest discussion when it comes to convincing clients.

    Thanks!
    Daniel

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: ddenhoed
  • Jeepers Creepers. Missed all of these.

    Again, I / We are not experts at this, we have simply followed other advice passed down from other MSPs, books, blogs, etc.

    Anyway...

    strategicmicro

    Which leads to my question - I like your idea of working up the figures based ROI part of things and I'm going to read that book, however what do you do when your clients add 5 or 10 new PCs to their network or a new Terminal Server to the mix? How do you adjust pricing for that based on your ROI model?


    While we have a nice little sheet for ROI, things are still loosely based on a "per device" formula. We just adjust that formula to ensure best profitability for each client. We do have a minimum goal inside our heads that we go by.

    We allow a 20% change in our agreement. Meaning if they sign our contract with 10 workstations, then can add 2 at no extra monthly fee. If they have a single server, we would deduct 20% of the difference in monthly price off. (Ex. Exchange server #1 is $299/Mon, they can add #2 for $240/Mon).

    Anything beyond the 20% allowance requires a new Agreement to be signed. This also means that they extend their contract with us for an additional 3-years since our minimum term is 3-years. We do not do another ROI sheet, we just take and use the internal per device price and add it on.

    Even though we quote a single number, all clients know exactly what each device, service and software costs them Beerafter]/b] they sign. That way they don't try to nickle and dime us to death.

    strategicmicro
    CeruleanBlue,
    Would you mind describing what type backgrounds (experience and/or certifications) you require for your L1, L2 and L3 people?
    Also, what software do you cover in your "unlimited plan"? Where do you cross the line as far as what you will upgrade for a client (covered) vs. what will be a "project"? If you cover L1 Support for Client Buisiness Apps, do you charge them extra per month?

    Thanks!


    There is another post on the forums somewhere about certs. Personally, I think people put to much weight on paper certifications and not enough on actual real-world experience. Anyone can download a braindump and become "MCSE Certified" these days. Requiring or only accepting resumes from 'certified' is asking for trouble if you ask me.

    At a conference last year I heard someone speak about their hiring practices. One of the things that struck me was how unique and flat out brilliant their interview process was. The first interview was a 'round table' style group interview. They would bring in 5-10 applicants at time and see who knew what (technically, socially, business sense), who took charge (leaders), who had the best ideas, etc. etc.

    That seems to be a good way to out the fakers is you ask me. Then you break up L1 / L2 / L3 based on both skill and social abilities. Remember your helpdesk people (L1) are talking directly to your clients at all times.

    As far as covered software goes, we cover whatever the client will pay for. Typically, we start with the most used line of business software IF and only IF it is up to date and vendor supported. If we can't call the vendor and make them fix it, we don't support it either.

    strategicmicro
    So now you have convinced your prospect that paying $2700/month will fix all their problems based on the soft and hard calculations. The hard ones are easy to defend. But how about the soft ones. Like the exchange server that went down for a day and had people twiddle their thumbs for a day. Which was a soft cost loss of $10,000 or whatever.

    HOW is going MSP preventing the loss of this soft cost?

    Because a client can STILL be down for a whole day. Sure, we can catch a lot of stuff. But if a RAID controller tanks or a internet connection goes down for a day (yes, even FCC regulated T1's do that). What then? How do you sell this? Just curious. As this is our thoughest discussion when it comes to convincing clients.

    Thanks!
    Daniel


    Your right. We can't guarantee 100% uptime. We can however, reduce it as much as financially possible or at least ensure that we put a recommendation out there and let them turn it down. That way they can't come back and bicker about those soft-costs later.

    If a raid controller tanks on a server and it goes down, we use a solution that automatically virtualizes that server. It's an additional box that sits there and backs up data every 15 minutes. I can't say who makes it.... However, with some preparation and proper hardware you should be able to come real damn close using Kaseya's BU/DR. We use both solutions depending on the situation, btw.

    Even the internet going out can be reduced by getting a redundant internet connection for your clients. If they are already on a T1, get them cable internet too. What's another $60 a month to ensure that some connectivity always remains? We all have redundant connections to manage our clients....right?

    There is a solution to everything, it's up the client to figure out how far they want to take it.

    We can't prevent their building burning down, but I will be damned if we can't have a make-shift virtualized office up for them with their data intact within a matter of hours. Of course, that would be the least of their worries.

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: CeruleanBlue
  • I was wondering if anyone would be willing to discuss how they have dealt with the remuneration to technicians since going to a managed services model.
    Currently we offer a base salary and then a % of the hours they bill.
    This has worked “Fairly” well in ensuring the technicians track billable time correctly

    One of the things I like about the idea of moving all customers to some form of managed service is knowing I will bill regardless if one of the techs forgets to track his time.
    I know there is another thread where I read .. “just sack one .. they will make sure they do” and I know will still need to track what we do .. but if something is forgotten in an “All you can eat” agreement it’s not hurting the company’s bottom line.

    I am thinking that once I go all MSA then ill put them all on fixed salary but that may not ensure I get the most from them.

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: Steve Morris
  • Steve, do you assign your tech to a certain set of Managed Service accounts?

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: boudj
  • boudj
    Steve, do you assign your tech to a certain set of Managed Service accounts?


    We really only have one true MS account which is our largest customer.
    It is not possible for one tech no manage this and there are generally 3 techs time spent on it.

    IF we are able to get some of our smaller customers accross then it may be possible but is not really how I would like to do it. Perhaps as a technical lead but not to do all the work that comes in for the customer

    Do you incent or just have a salary for your guys?

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: Steve Morris
  • Right now I have a salary (I've been spending 3 years working on getting a Managed Service strategy in place). However, now that I've crossed that threshold to being a primarily MS provider, I am now giving my guys set accounts (3 or 5 fixed clients depending on size) and setting up metrics that they need to achieve each Q. I should have this going out to start the 2nd Q of this year. My goal is to motivate them to be really good at managing their clients. Also, as they get better, I can then add another account or 2 to them raising their bonus (their bonus will be based on the revenue amount they bring in) and raising my income!

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: boudj
  • boudj
    ... I am now giving my guys set accounts (3 or 5 fixed clients depending on size) and setting up metrics that they need to achieve each Q. ...


    This is an interesting idea and one we have been thinking about. We are a very small shop, and I worry that by assigning a tech to a account might bring trouble when that person is unavailable. Do you find that to be an issue? Do you assign multiple techs to an account, or a "backup" tech, in case the regular tech is unavailable?

    Thanks,
    Jason

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: jasonmh
  • An even bigger concern than that tech being unavailable, is that he is the face of your company to the client. The one tech builds relationships with YOUR clients.

    If a time should come where you and your tech part ways don't be suprised to see those clients go too!

    Our Small and Medium sized business are all about relationships. We don't assign anyone to any particular account, but let all our techs work on all accoutns. It also helps build good documentation of the network when EVERYONE has to support it rather than one individual.

    Just my thoughts...

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: GrantB
  • I have been in business for 10 years now and I have not had the issue with a former employee taking a client. Why? Because:


    • Because all of my employees sign an "at will" contract that protects my company's interests and keeps them from touching any of my clients for 3 years after leaving (this also includes if they go to a competitor and try to solicit my client away).
    • I make sure that a relationship with my client is more than just one of my guys. either I or my Service Manager makes sure to have some kind of contact will all clients periodically.
    • I keep a good relationship with my employees. If they leave me they know I worked hard at being a good person/boss with them (especially people that have been with you a year or longer).
    • As soon as someone leaves, I have someone ready to fill their shoes. I make sure the replacement is ready to step in (I'm a small company, but it doesn't hurt to make sure you continually cross train your guys at job sites).


    Eventually I expect that I'll lose a client to a former employee... and that's Ok. I do not see how a former employee could ever provide that client with the level of support we give them, and I will let the former client know that if he ever wants to come back, the door will be open for him (unfortunately he'll be at the new client rates instead of his old established rates). And if he doesn't, then good riddance. I need clients that are looking for a long-term relationship that will be mutally beneficial to both of us.

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: boudj
  • CeruleanBlue has had some great input and I'd like to play off of it a little bit. Sometimes these conversations get bogged down in the minutia of objections, price points, etc. Another way to start the conversation is instead of "what should I charge" would be "what is the customer willing to pay" or "what is their alternative"?

    Many successful Kaseya customers sell the concept of "We are your Outsourced IT Department." If that is the vision the MSP has for their business, then the closest approximation or alternative of this model is an Internal IT Department. In deciding what to deliver or how to price your "Outsourced IT Department," what would the customer pay for an Internal IT Department? What would they do? etc.

    Well, the answer to "What would an Internal IT Department do?" becomes the basis of your service offering. Perhaps they maintain the systems, keep the server room and patch panels clean and organized, provide support to the users, replace Flash Player 9 with Flash Player 10, deal with Daylight Savings Time patches (okay, that one is getting old now, but the concept still holds true). If they would not pay extra for it with an Internal IT Department, you may consider not charging extra for it in your service plan. If they would pay extra for it with an Internal IT Department (e.g. working after hours or weekends means overtime, bringing in outside help to supplement like with a project, etc), then you can charge extra for it with confidence.

    The answer to "What would an Internal IT Department cost?" becomes the basis of your prices and your value proposition. If we know a middle-of-the-road Sys Admin costs let's say $65,000/year + burden costs like taxes, benefits, overhead, training, etc, winds up being somewhere in the ballpark of $7,000/month. How much capacity does one Sys Admin have? Depends on where you get your statistics, but a nice round number is 100 users/endpoints (plus or minus a few dozen depending on the environment, the skills of the person, etc).

    So if you're doing all the things an Internal Sys Admin would be doing, but your customer is only 25 people instead of 100 (i.e. 25% of the capacity of one SA), you can roughly equate your value at $7,000 x 25% = $1,750/month (or roughly $50/user x 23 users + $299/server x 2 servers).

    Now of course you're using Kaseya and using far less than 0.25 of an FTE to deliver that service Smile (Sorry, shameless plug)

    This is perhaps a bit of an oversimplified way of looking at the issue, but the issue really boils down to, "What value are you providing your customer that they need?" If they need an IT Department but can't afford or justify a full time staff, align your services and value/price accordingly.

    (Disclaimer: These are just my personal thoughts, not necessarily Kaseya's)

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: jason.paquette@kaseya.com
  • I thought that was a well written post Jason, then I happened to glance at the poster and realised it was a Kaseya employee!

    I'ts really great to have you guys share your own thoughts on pricing and marketting the MSP product. In fact, it's really great to have Kaseya employees, beyond level 1 support, using the forum more and more.

    Top show good sir!

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: LANWorx
  • jason.paquette@kaseya.com
    ...Many successful Kaseya customers sell the concept of "We are your Outsourced IT Department." If that is the vision the MSP has for their business, then the closest approximation or alternative of this model is an Internal IT Department. In deciding what to deliver or how to price your "Outsourced IT Department," what would the customer pay for an Internal IT Department? What would they do? etc.

    ...So if you're doing all the things an Internal Sys Admin would be doing, but your customer is only 25 people instead of 100 (i.e. 25% of the capacity of one SA), you can roughly equate your value at $7,000 x 25% = $1,750/month (or roughly $50/user x 23 users + $299/server x 2 servers).



    This is the approach we have been taking when marketing our services. We try to find companies who are close to the point where they are thinking they may need an internal person or staff, then we try to show them how we can do the same things for them for 15-40% less than an internal person would cost. Although we really didn't use the same formula, it is interesting that the pricing we use works out almost identically to the pricing you've mentioned. Although for smaller companies we are now charging $60 per seat a month, with different levels of price breaks as the number of seats increases.
    The hard part that we found with our orginal "per dekstop" pricing is that it didn't scale well. So for some of the larger clients we were finding it hard to stay relevant with our pricing. We got around that by giving a drop in the cost per desktop as the client size increases, and also by going with the theory that once a company gets well above the 100 seat mark they are probabaly going to be looking at a senior and junior guy on staff. The senior person is probably going to be $55,000 to $75,000, and the junior is going to be atleast $30,000 to $35,000, plus about a 30% additional burden for payroll taxes, benfits, PTO, etc. Then what you are selling against is really your services VS $100,000 plus for an internal staff.
    I will admit that going this way we sometimes will lose out on a new prospect to another company who seems to charge less up front, but charges alot extra for the stuff that is included with our service. But, our clients seem to love the idea and our client turnover is extremely low.

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: jasonmh
  • Not to mention that it is easier to sell total network management by one rate (e.g. $2,000/month) instead of showing the per-PC/Server rates and then the customer begins trying to talk you into, "Well these 5 executive machines and the servers should be on your Premium Plan, but the receptionists and the assistants shoudl be on your Basic Plan, and everyone else can be on the Standard Plan..." Forget that... The service covers the entire enviroment... They can choose Basic Services for the entire environment or they can choose Standard Services for the entire environment or they can choose Premium Services for the entire environment.

    At any rate, those that sell their value as an IT Department "Outsourced vs. Internal" seem to do better at sales and retention than those that sell "break-fix vs. monitor vs. managed."

    Legacy Forum Name: MSP General Discussion,
    Legacy Posted By Username: jason.paquette@kaseya.com