When was the last time you increased prices for your clients? If the answer is a year or longer (especially if it’s never), this post is for you. Raising prices is vital to the health of your business. Nothing in your world gets cheaper. If you’re not raising prices on a regular basis, you will start feeling it on the financial bottom line. NOTE that this is a longer blog post. It’s designed to walk you through the whole process.
I’ve been in the MSP space for the better part of a couple decades. I’ve been a part of many price increases. Most of them work out just fine. Let’s talk about what it means to raise prices: how to do it, why to do it, when to do it, and build a process to help your business along the way.
The Reality: You Will Not Lose All Your Clients
I know what you’re thinking. You’re worried about losing clients. I get it. This concern comes up in Peer Groups often. Especially this time of year when MSP owners are wringing their hands about whether or not to raise prices.
Here’s the reality: nothing gets cheaper. Not your talent, not your tools, insurance doesn’t get any cheaper. If you keep your prices flat, you are shrinking your business. You’re doing the same amount of work for less money every year. That’s not a healthy way of doing business.
One MSP that I worked with hadn’t ever raised prices. They were worried about losing clients, and rightfully so. This is a scary thing if you’ve never done it before. Over the course of doing a bunch of math we determined that most of their clients needed a 15% price increase. Then there was a handful of clients that got bigger ones (50%, 100%, a couple even as high as 300%).
As they rolled it out and increased prices, they lost only one or two clients. We were shocked that even the ones that moved up 300% largely stuck around. It was some of the ones that were in that middle range, and it was only a couple. After they increased prices, their financial metrics went up because the new revenue outpaced any client losses.
So, the short answer is no, you won’t lose all your clients. The reality is that you may lose a client or two. They may blame rate increases, but if you’ve been providing good service they will probably stick around. I believe that clients that leave after a modest price increase were looking for an excuse to make a change.
How to Raise Your Rates
Don’t over complicate it. Pick a date, pick a rate, and let the client know that you’re going to raise your rates.
For modest increases (5% or less): Send an email along with an invoice and say on date X we’re going to raise your rate by Y dollars, and you move on. If it’s a small number like $35 a month, people are going to look at that and go, “Yeah, whatever. Moving on.” You probably won’t even hear from most of them.
For larger increases (5% to 15%): Send an email directly to them and let them know what’s going on. They’ll let you know if this is a concern. It likely won’t be, especially if you haven’t raised prices recently.
For anything more than 15%: You should consider having a meeting, especially if you’ve not raised rates in recent history. I think it’s a good idea to have a conversation about this. You don’t want to alienate them just because of how you deliver the message, not because you’re raising rates.
Should You Explain Why?
You may be tempted to explain why you’re raising prices. This makes sense if you haven’t done it in a little while (or ever). Let the know how you’ve improved service, reduced their risks, and set them up for success (presuming you’ve done so).
Just don’t apologize for it. When your clients went to the grocery store, the store isn’t apologizing because an avocado costs more now. If you want the avocado, this is what it costs. They’re raising their own prices. They should be expecting it. And when you don’t do it, you’re putting yourself at a disadvantage.
Phasing In Rate Increases
Depending on the size of the increase, you may want to consider phasing in a rate increase over time. If it’s a 15% price increase, I’m not going to phase that in. But if it’s more dramatic (think 50%+) you should consider phasing that in over time to give them a little bit of a runway.
When to Raise Your Rates
There are really two logical times: One is at the end of a year (calendar or fiscal), and the other is at the end of the client’s contract.
The deciding factor here is going to be what the contract language says. If your contracts are month-to-month or you don’t have contracts it’s easy. Raise them whenever you feel like it. If your contract paints you into a corner, you’re should honor the contract.
I would still do the price increase at a logical point in time. You will need to consider when that is for your business and your clients.
The Budget Cycle Exception
One caveat I’ll put out there: If a client has a budget cycle you MUST work within that process. Do not raise rates on them willy-nilly just because it felt right or because it worked for you.
I’ve seen a situation where a large client of an MSP had their rates increased outside of budget cycle. Mind you, the MSP knew the budget cycle for this client and chose to ignore it. Guess what happened? That MSP got fired. And for good reason. They screwed up, raised the prices at the wrong time of year, and that was the end of that relationship. Their hubris cost at 5 digit MRR client.
This is where knowing your clients and their processes is important. Are you in the government sector? You better know when their Fiscal Year ends and their budget process. Do you have schools as a client? What is their process and budget cycle? Knowing your client is key here.
How Much Can You Raise Your Rates?
In a perfect world, all your clients are stack compliant and don’t overuse your services. That would be great, except we don’t live in a perfect world. Clients don’t always listen, cause their own trouble, and lag behind in their tech stack.
You’re going to have clients that fit into one of three different categories: overly profitable clients, average clients, and your problem children. Let’s talk about all three.
Current Market Rates
Before we dig into client segments, let’s talk about what you should be charging. Current market rates for most MSPs should be in the $175-250/hr range depending on your market and service level. If you’re doing advanced project work or consulting, you could go even higher.
If you’re below $175 an hour, you need to ask yourself why. Are you intentionally positioning yourself as the budget option? Or have you just been avoiding the conversation? I’m still seeing MSPs with sub $100 hourly rates on occasion. I was charging ~$100/hour in 2002 and was likely under priced then.
I mention hourly rates here because I believe your hourly rates inform your managed service pricing. I’ll loop back to the hourly conversation in a moment.
Your Overly Profitable Clients (Top 5-10%)
These are your clients that don’t use you very much. They’re probably heavily stack compliant, are fairly technical on their own, or simply don’t need much from you. You want to avoid losing these clients because it’s a huge hit to lose a highly profitable client. In fact, it might be time to show them some love.
This is an opportunity for you to take a little bit of a victory lap with them. I might send them an email or letter saying something to the effect of, “It’s price increase time, but you’re such an awesome client that we’re not going to give you a price increase.” That’s a letter I wish I received more from my vendors.
Even if you aren’t going to raise prices, I love the idea of just maybe going and spending a little bit more time with them. Keep that relationship strong because those are the clients you really don’t want to lose.
Your Middle-of-the-Road Clients (80% of Your Book)
In this middle-of-the-road section (the biggest section that you’ve got). Here you can simply find a reasonable percent to raise their rates. Basically, model out what a 3% increase looks like, then model out a 5%, and see how it looks. Obviously, use your own numbers and judgment.
Also review tool costs. If those have been climbing on you, you will want to pass those costs to your clients. Figure out the best average price increase and roll this out to them at the appropriate time.
Your Problem Children (Bottom 10-20%)
The bottom 10-20% of your client base are your least profitable. They use your services too much, they’re too noisy, or they’re not stack compliant.
The first thing is you need to understand is their agreement profitability. Compare their time per endpoint or user to your middle section. Or take their average time per month, multiply it by your hourly rate, and compare that to what you actually billed them. I talked about this in my Gross Margin post and video.
As clients fall further and further down the list you can increase rates more. For example, your middle section is getting a 5% increase. Client A that is just barely worse than the middle section gets and 8-10% increase. Clients further down the list get 15% (or more).
But if they’re way behind or if they are just super noisy, super not stack compliant, this is an opportunity for you to to do one of a couple things:
- Sell them projects, training, or other ways to make them less noisy. Sometimes they just need some project work or some refreshed hardware and their profitability moves up.
- Raise your prices more significantly, and make it so they become more profitable for you. You aren’t a non-profit, so don’t act like one.
In some cases, this may have you generate what I affectionately call the FU price. This FU price really is here to get these clients to pick one of two paths. Either they become profitable by paying a couple hundred percent more than they were paying before, or leave and take all of that time, energy, and effort away.
In both cases, you win because you either become more profitable or you lose a client that isn’t profitable enough.
Here’s the funny part: I’ve seen many clients take that FU price. They understood that they are a pain in the butt to deal with. You actually almost have a healthier relationship after that. I wouldn’t be terribly surprised if a client takes that pricing and sticks with you for quite a while.
You have options with these bottom-tier clients. Get stack compliant and/or perform some project work to quiet them down. If this isn’t an option, then they either pay the FU price or you should let them go. Those bottom-tier clients eat up your service team’s energy, and they’re not making you a whole lot of money.
Don’t Forget Time and Materials and Project Rates
Don’t neglect raising your time and materials and your ad hoc pricing as well as your project pricing. For the most part, all you do at that point is you raise them internally. Then adjust as you quote projects or time and materials work to your clients.
If you’re doing hourly work for many clients or doing projects by the hour this is something you should communicate. Simply make a note in any price increase messaging and move on. I would even increase the rates on your highly profitable clients if you’re changing your project rates for example. If your projects are fixed fee you can just increase the rates on future quotes behind the scenes.
Make sure that you do this all in one process. Don’t raise hourly rates for a subset of clients. Raise them across the board and make everyone’s life simpler.
Handling Push Back
If you raise prices about once a year at a modest rate, most clients aren’t going to push back. If you’re providing good service at a fair rate, your clients are likely to stick around. Even with a larger-than-average price increase. The truth is, switching MSPs is a pain in the butt. If you’re doing a good job for them, they will value that good relationship and that good work.
On the other hand, if service is struggling and you raise your prices, expect more push back. You can expect your clients to go in the same direction as your services. The better the service the more likely they are to stay (and vice versa).
If you’re super terrified that if you raise prices they’re all going to leave, it’s probably not your pricing. It might be a service or a relationship issue. You should investigate why you’re feeling that way. If you deliver good service and have a solid relationship with your clients you should be fine.
Prepare Your Talking Points
Before you send anything out, come up with several talking points to be prepared. That way you’re not arguing with the client, you’re just explaining to them what’s going on. Having talking points helps you be more confident in your conversations. You can use your favorite AI tool to help you prepare for these conversations as well.
Usually when you prepare those talking points is when fewer people push back. It seems that when you don’t prepare the talking points that you get more push back. It’s a classic case of better to have it and not need it than the other way around.
This Is About Sustainability, Not Greed
Raising prices isn’t about greed. This is about your company’s longevity and long-term financial health. If you do this the right way, you’re going to be a better MSP. This helps everyone. You, your team, and yes your clients. When you take care of your team they take care of your clients. When these things are in alignment, things are so much better.
You don’t want to look back in three years and figure out the hard way that you’re working more for less money. That’s not how you sustain and grow your business.
Final Thoughts
Raising rates is something you MUST to do over time. Your clients should expect it, and the vast majority won’t leave you. If you raise them fairly and consistently, you’ll be just fine.
So while potentially uncomfortable, this is a thing you have to get good at because you need to do it on a regular basis. Right now, as we head into 2026, your clients are finalizing their budgets. If you’re going to raise rates, the conversation needs to happen in the next few weeks.
Get it on your calendar. Draft the email. Have the conversations. Your future self will thank you.
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