How to effectively price your MSP contracts using assessments

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    Written by Richard Tubb on 2018-09-10 Last updated 2018-09-10 - 6 minute read

A common challenge for IT Solution Providers selling Managed Services contracts is pricing their offerings correctly.

While most Managed Service Providers (MSPs) broadly know what they need to charge for their services to be profitable, the real challenge comes when you meet with a prospective client and they ask you for a specific quote.

How can you know how many computers this prospect has? How many servers? What software are they running? All of these factors will contribute towards the quote you give the prospect for ongoing Managed Services.

The way you can find out the answers to these questions is to perform a customer assessment.

 

The benefits of a client assessment report

 

A client assessment is a project where you observe, research and audit the prospects IT infrastructure and produce a report on what technologies they are using and what state that tech is in. You conclude the report by highlighting any gaps between where they are with their current IT and where you recommend they should be -- along with costs for this work.

The benefit to the customer is they have a snapshot of their current IT setup, and professional advice on what needs updating/replacing/tweaking.

The benefit to you as the MSP is that you know exactly what you are quoting for in your Managed Service contract, and, very importantly, it allows you to avoid any disasters waiting to happen. There’s nothing worse -- and less profitable -- than taking on a new client and inheriting an absolute mess of an IT infrastructure that has now become your responsibility.

 

Should I charge for the client assessment?


A common question from MSPs is “Should I charge for the client assessment?”.

The answer is absolutely -- yes. This assessment is a significant piece of work and whether you charge for this work or not sends a huge message to your prospect on whether they should value your expertise.

Many MSPs don’t charge for this initial assessment as they are eager to win the new Managed Services client. That’s a gamble. What if the client has a chaotic, old, creaking IT infrastructure? You can’t always assess this by visual inspection alone. A client could have wonderful shiny new IT equipment which is configured incredibly poorly. How are you going to support that profitably?

There’s also the fact that if you don’t charge for the assessment, then the client can (and probably will) grab your assessment report, thank you for all that free consultancy, and then go to another MSP and ask them for a cheaper quote to remediate the work.

Of course, this can still happen if you charge for the report -- but most MSPs who charge for the report highlight the offer that the report charge can be credited against any future work the client asks the MSP to do.


Before the assessment

 

It’s important that you set out the process of the client assessment.

I’d recommend providing a project plan for the client (as you should for *every* project) which outlines what you will be doing for the assessment, what information you’ll need from the prospect, and what the prospect can expect in terms of a delivered report.

The delivered report will typically include an audit of the client's current IT infrastructure, and your recommendations (and quotes) for remediation and upgrades you recommend.

It’s also very important to highlight that if the customer highlights any immediate issues such as “Can you fix this while you are here?” then they need to be put to one side as a separate and chargeable piece of work. Prospects can and will look for you to jump in and eliminate their pain immediately. Don’t!


What is included in an MSP client assessment?

 

Your assessment needs to be a high-level overview of what equipment the prospect has, how it is configured, how it is used, and any issues you find.

Remember, as well as producing a report for the prospect, you want to be looking for any potential tripwires to you taking on the prospect as a Managed Service client.

Some key areas to assess include:-

  • Network Cabling -- is it professionally installed, or has it, more likely, been installed by the local electrician. If so, has it been tested? Some time spent producing a basic cabling assessment can eliminate a whole swathe of network-based issues going forwards.
  • Uninterruptible Power Supplies -- do the servers and key workstations have UPS installed?
  • Backup - how does the prospect backup their data?

You can also make your life easier by using network assessment tools to get an idea of the equipment in use within the infrastructure. You want to look to see how old this equipment is, and how it has been configured.

Once you have all this information, you should collate it into a summary report for the prospect. Highlight any areas of concern -- I prefer a green (all good), orange (cause for concern) and red (this needs fixing immediately) -- and include a quote for remediation.


Meeting with the client

 

When you’ve completed the assessment report, do not email it to them. Instead, organise to meet with them to hand the report over. This means you can gauge their reaction to the issues you’ve highlighted and talk to them about a plan of action.

It may be that the prospect doesn’t want to remediate any of the issues you’ve found. That’s a huge red flag! It probably also indicates that the prospect isn’t a good one for you. Congratulations! You’ve just avoided months (if not years) of hurt in taking on board a poor client.

If the client wants to discuss how to proceed, then you can outline a schedule of work for the remediation. I’d typically suggest this takes place over a few months rather than trying to make too many big changes immediately.

You can also use the client assessment as leverage during your Managed Services contract negotiation. Does the client want a discount on your MSP quote? You can offer to fix certain issues you’ve found in your assessment for free if the prospect comes on-board as a Managed Services client.


Conclusion


Taking on-board new Managed Service clients without performing a client assessment is a real risk.

Without having full visibility of the client's IT infrastructure, you just don’t know what you’re inheriting -- and by the time the prospect has become a client, it’s too late. That IT infrastructure is now your responsibility!

A good assessment allows you to uncover any areas of concern and provide quotes for your prospect to remediate these issues before they become a Managed Service client of yours.

Client assessments also allow you to gauge whether the prospect is a good fit to work with you. Prospects who baulk at the idea of paying to remediate issues probably don’t value IT and just want to abdicate responsibility for their systems.

The bottom line here is, client assessments allow you to find out whether a prospect is a good fit for you -- both technically and culturally -- and to maintain a profitable MSP business!

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About the Author: Richard Tubb is probably the most well-known face within the British IT Managed Service Provider (MSP) community. His track record speaks for itself, as he launched and sold his own MSP business before creating a leading MSP blog and consultancy practice. As the former owner of an IT Managed Service Provider (MSP) business, Richard understands the challenges IT business owners face every day and can help you to overcome them while retaining what's left of your precious sanity. Follow Richard Tubb on or LinkedIn


Tags: client profitability reporting, MSP Business, MSPs, profitability analysis

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