How to Price MSP Services: The UK Guide

Introduction

Pricing is the most critical business decision an MSP makes—and the most often gotten wrong.

Price too high, and you lose deals to competitors. Price too low, and you can't afford to hire the people who deliver excellent service. Get it right, and your margins fund growth, hiring, and investment in better tools.

This guide walks you through:

1. How to calculate your true cost of delivery
2. Common pricing models (and when to use each)
3. Real UK price ranges (so you know if you're competitive)
4. Common mistakes (and how to avoid them)
5. How to transition customers to better-margin service tiers

---

Step 1: Calculate Your True Cost of Delivery

Before you can price anything, you need to know what it costs you to deliver it.

The Hidden Costs Most MSPs Don't Account For

Example: A technician earning £35,000/year seems like a straightforward cost. But the true cost is much higher:

Cost	Amount	Notes
Salary	£35,000	Base salary
Employment tax (NI)	~£3,500	Employer National Insurance
Pension (auto-enrol)	~£1,500	Mandatory contribution
Equipment (laptop, phone, tools)	~£2,000	Amortized over 3 years
Training & development	~£1,000	Keeping skills current
Office overhead (desk, space, utilities)	~£2,000	Per-person share
Management/support (HR, admin)	~£2,000	Percentage of management time
Insurance & compliance	~£1,000	Professional indemnity, etc.
Tools & software licenses	~£2,000	PSA, RMM, security, collab tools
True Annual Cost	~£50,000	43% higher than base salary

Billable hours available:

• 52 weeks × 40 hours = 2,080 hours
• Minus holidays: -20 days × 8 = -160 hours = 1,920 hours
• Minus training, meetings, admin: -10% = ~1,730 hours
• True billable hours: ~1,700/year

Cost per billable hour: £50,000 ÷ 1,700 = £29.41/hour

If you price a technician at £40/hour, you're barely covering cost.

---

Build Your Cost Model

Step 1: Define cost categories

• Personnel costs (salary + NI + pension + benefits)
• Equipment (laptops, phones, tools; amortized)
• Office (rent, utilities, desk space per employee)
• Tools (PSA, RMM, security, productivity software)
• Training (certifications, courses, conferences)
• Management (HR, finance, admin; allocated as % of revenue)
• Sales & marketing (allocated as % of revenue)
• Insurance (professional indemnity, liability)

Step 2: Calculate total annual cost

Sum all costs, then divide by billable hours per year.

Example (5-person MSP):

Category	Cost
Personnel (5 techs @ £50K each)	£250,000
Equipment & tools	£15,000
Office & overhead	£30,000
Sales & marketing	£20,000
Insurance & professional	£8,000
Total Annual Cost	£323,000

Billable hours (5 technicians × 1,700 hours): ~8,500 hours/year

Cost per billable hour: £323,000 ÷ 8,500 = £38/hour

To achieve 30% gross margin, price at: £38 ÷ 0.70 = £54/hour

---

Step 2: Choose Your Pricing Model

There are three main models. Each has trade-offs.

Model 1: Per-Device Monitoring (RMM Only)

How it works: Charge per device (server, PC, printer) monitored and patched. Flat monthly fee.

Example: £5–15/device/month

When to use it:

• Small break-fix shops scaling into managed services
• Customers with small networks (under 50 devices)
• Customers who don't want to commit to full managed services

Pros:

• Simple to explain and invoice
• Easy for customers to forecast costs
• Low barrier to entry (customers think "that's cheap")

Cons:

• Doesn't align with your costs. Your cost per device is proportional to the customer's complexity, not device count. A single server with high availability requires more support than 10 PCs
• Unprofitable at scale. As you add devices, your margin shrinks if the customer doesn't grow in complexity
• No incentive for efficiency. The customer benefits when you add devices, but you don't benefit

UK pricing range: £5–12/device/month

---

Model 2: Per-User / Per-Seat

How it works: Charge per user (technician, staff member) who has IT support. Monthly fee, tiered by service level.

Example: £25–80/user/month depending on tier

When to use it:

• MSPs with mainly office/professional clients
• Customers paying for support of their teams
• Aligns with customer growth (more staff = higher cost)

Pros:

• Aligns cost with customer size (more staff usually means more complexity)
• Simple to invoice (count headcount once per month)
• Scalable (grows with customer)
• Good for SaaS-like recurring revenue

Cons:

• Doesn't account for infrastructure complexity (a 50-person customer with 2 servers is very different from one with 10)
• Can be perceived as expensive if customer has many contractors/part-timers

UK pricing range:

• Bronze (business hours, 24h response): £25–35/user/month
• Gold (24/7, 4h response): £50–70/user/month
• Platinum (24/7, 1h response): £80–120/user/month

---

Model 3: Fixed Monthly Fee (Comprehensive)

How it works: Flat monthly fee for all services (monitoring, patching, support, help desk) up to a defined scope.

Example: £400–2,000/month for all services

When to use it:

• Established MSPs with well-defined service offerings
• Mid-market customers (20–200 staff) who want predictability
• Customers who value simplicity (one monthly invoice)

Pros:

• Highest margins. Once costs are covered, additional services add profit
• Customer value clarity. "£1,200/month covers everything"
• Predictable revenue. Less month-to-month variation
• Service alignment. Incentivizes you to deliver excellent service (they don't leave because price changes)

Cons:

• Requires upfront definition of scope ("what's included?")
• Complex to calculate (must account for all possible services)
• Risk of scope creep (customer asks for more, you're stuck)

UK pricing range (per company, not per seat):

• Small (10–20 users, 2–3 servers): £400–800/month
• Mid-market (50–100 users, 5–10 servers): £1,200–2,500/month
• Enterprise (200+ users, 20+ servers): £3,000–6,000+/month

---

Step 3: Build Tiered Service Levels

Most customers don't need 24/7 support. Create tiers so customers choose what they need.

Typical UK MSP Service Tiers

Tier	Support Hours	Response Time (P1)	Resolution SLA	Price (Per-User/Month)
Essentials	9am–5pm weekdays	4 hours	8 hours	£25–30
Standard	8am–6pm weekdays	2 hours	4 hours	£40–50
Premium	24/7	1 hour	2 hours	£70–90
Enterprise	24/7 + dedicated account manager	30 mins	1 hour	£120+

Key: Customers self-select the tier they need. A small dental practice wants Essentials. A financial services firm wants Enterprise.

---

Step 4: Real UK Price Ranges

Here's what MSPs in the UK are actually charging (2026 data):

Small MSPs (1–5 technicians)

Service	Price
Per-device monitoring (RMM)	£4–8/device/month
Per-user support	£30–40/user/month
Flat monthly fee	£300–600/month
Break-fix (one-off support)	£60–90/hour

---

Mid-Market MSPs (5–20 technicians)

Service	Price
Per-device monitoring (RMM)	£6–12/device/month
Per-user support	£40–65/user/month
Flat monthly fee (small customer)	£600–1,500/month
Flat monthly fee (mid customer)	£1,500–3,500/month
Break-fix (one-off support)	£75–120/hour

---

Large MSPs (20+ technicians)

Service	Price
Per-device monitoring (RMM)	£8–15/device/month
Per-user support	£50–85/user/month
Flat monthly fee (large customer)	£3,500–8,000+/month
Break-fix (one-off support)	£100–150/hour
Custom/enterprise pricing	Negotiated

---

Step 5: Common Pricing Mistakes (And How to Avoid Them)

Mistake 1: Underpricing to Win Deals

The problem: You bid low to win a customer, thinking you'll make it up in volume later. You don't.

Why it fails:

• Customer locks in the low price for the contract period (usually 12 months)
• You can't easily raise prices mid-contract
• You attract price-sensitive customers who leave for cheaper alternatives

The fix:

• Price based on value, not to undercut competitors
• If you lose a deal on price, it wasn't a good customer anyway
• Build value (quality, responsiveness, results) to justify higher pricing

---

Mistake 2: Not Adjusting for Complexity

The problem: You charge £10/device to every customer. A customer with a single critical server costs you as much to support as a small office with 20 PCs.

Why it fails:

• You're unprofitable on the complex customers
• You don't have spare capacity to take on simpler customers

The fix:

• Use tiered service levels (Essentials, Standard, Premium)
• Charge more for on-site support, urgent response, or custom configuration
• Document what's included and what's extra (scope creep protection)

---

Mistake 3: Not Accounting for Unpaid Work

The problem: Customers call with urgent issues. You spend 2 hours debugging. Is that billable?

Why it fails:

• If it's not in your contract, you likely don't bill for it
• Over time, "not billable" becomes 5–10% of your revenue

The fix:

• Define scope clearly in the contract (included vs. extra)
• Set a threshold: "Included are up to 8 hours/month of ad-hoc support; above that is billed at £X/hour"
• Track all time spent, mark as billable or not—you'll spot patterns

---

Mistake 4: Pricing Tied to Fixed Services, Not Outcomes

The problem: You charge £60/month for "support." The customer expects unlimited support. You expect minimal contact.

Why it fails:

• Scope creep: customer starts asking for things "not included"
• Tension: customer feels overcharged; you feel underutilized

The fix:

• Define what's included: "Includes up to 4 hours/month of hands-on support, 24-hour response SLA, unlimited monitoring"
• Define what's extra: "Onsite support, custom development, server upgrades, vendor management"
• Review quarterly: is the customer within scope? Are they outgrowing the tier?

---

Mistake 5: Not Increasing Prices Year-Over-Year

The problem: You charge £1,200/month for a customer. Costs rise (salaries, tools, rent), but you don't raise the price.

Why it fails:

• Margins erode over time
• After 3 years, what was 40% margin is now 25%
• You can't afford to invest in better tools, hiring, training

The fix:

• Plan for 5–10% annual price increases
• Communicate to customers: "On renewal, price will increase 5% to cover cost increases"
• Offer value to justify the increase: new tool, faster response, additional user seats
• Most customers accept 5–10% annual increases

---

Step 6: Pricing Strategy by Customer Lifecycle

New Customer (Year 1)

Goal: Win the customer and establish a good foundation.

Strategy:

• Price competitively but not undervalued
• Use Essentials or Standard tier (lower margin acceptable)
• Define scope clearly to avoid creep
• Over-deliver on support quality (build trust for upsell)

Action: Month 6, discuss moving to a higher tier or adding services

---

Growing Customer (Year 2–3)

Goal: Increase services and margins as they grow.

Strategy:

• Review their usage: are they hitting limits of current tier?
• Suggest upgrade (Essentials → Standard → Premium)
• Identify new needs: "I see you've added 5 servers; you might need…"
• Consolidate under a flat fee if they're nearing complexity limit

Action: Quarterly business reviews to identify growth/needs

---

Mature Customer (Year 4+)

Goal: Deepen relationship and defend against churn.

Strategy:

• Move to fixed monthly fee (higher margin, more predictable)
• Annual price increases (5–10%)
• Proactive recommendations (security upgrades, compliance, infrastructure)
• Dedicated account manager (if appropriate)

Action: Annual price increases, added services, account management

---

Real-World Example: Pricing a New Customer

Customer Profile:

• 30 staff
• 2 office locations
• 1 server (file server, backup)
• 25 PCs, 1 printer
• Currently unmanaged (no IT staff)

Your costs (blended):

• Support time: ~4 hours/month (initial setup + ongoing)
• Monitoring tools: ~£30/month
• Travel time (2 locations): ~2 hours/month
• Total monthly cost: ~£220 (at £38/hour effective rate)

Pricing options:

Option	Model	Price	Margin
Option A	Per-device (30 PCs + 1 server)	£8 × 31 = £248	11% ❌
Option B	Per-user (30 staff)	£45 × 30 = £1,350	83% ✅
Option C	Flat fee (Standard tier, medium company)	£1,200	82% ✅

Your pitch:

• "Option B or C: £1,200–1,350/month, covers monitoring, patching, support, backups, and quarterly check-ins"
• "As you grow (more users, more servers), we scale with you"
• "Includes business hours support; after-hours is £80/hour"

---

Pricing in Practice: FAQ

Q: What if a customer wants me to go lower?

A: Negotiate on value, not price.

• "Our price is £1,200/month. That covers X, Y, Z. If you want to skip Z (backups), we can do £900."
• Or: "We can offer a 10% discount if you sign a 2-year contract."
• Or: "The price reflects our SLA and quality guarantee. If you need a lower-cost option, I'd recommend self-managed IT or a cheaper competitor."

Key: You're not desperate. Discount to keep good customers; don't discount to win bad ones.

---

Q: How do I justify a price increase?

A: Value + transparency.

• "Your support costs have risen 8% (staff salary increases). Plus, we've added new capabilities (EDR, cloud backup integration). Your new price reflects that value."
• Or: "Market rates have increased. Your new price brings us in line with UK MSP averages."
• Or: "You've grown: 35 staff now vs. 30. Your tier has moved up."

Key: Annual increases of 5–10% are normal. Customers accept them if you deliver value.

---

Q: Should I match a competitor's lower price?

A: Rarely.

• If a competitor is cheaper, ask why: are they cutting service? Running unsustainably?
• If they're genuinely cheaper on value, you have a business problem (your costs are too high, or you're not capturing enough value).
• Better: Find customers who value quality, not price, and price accordingly.

---

Q: How do I transition a customer to better pricing?

A: Gradually, with notice.

• Year 1: Per-user pricing (£45/user)
• Year 2: Move to flat fee (£1,200/month) as they grow
• Reason: "Your infrastructure has grown. A flat fee is simpler to budget and aligns better with our SLA."
• Or: Annual renewal with slight increase (5–10%)

---

Conclusion

Pricing is a cornerstone of your MSP business. Get it right, and you can afford excellent people, invest in tools, and build a sustainable business. Get it wrong, and you're stuck in low-margin, high-stress delivery.

Key takeaways:

1. Know your costs. Calculate true cost per billable hour, including overhead.
2. Choose a model: Per-device, per-user, or flat fee—each has trade-offs.
3. Use tiers. Offer Essentials, Standard, Premium so customers self-select value.
4. Price for value, not volume. Underpricing damages margins faster than under-utilisation.
5. Define scope. Clear contracts prevent scope creep and customer friction.
6. Plan for growth. Increase prices 5–10% annually; add services as customers grow.

Next steps:

• Calculate your true cost per billable hour
• Choose a pricing model aligned with your business
• Build your 3-tier service ladder
• Price your next customer based on this framework

---

Use our MSP Pricing Calculator to model your costs and margins.
Ready to streamline your billing and PSA? See how Aerie OS works