MSP Pricing: The Complete Guide to Raising Your Rates

If you only read one thing about MSP pricing, make it this post. I’ve covered price increases a couple of times before, and I’ve talked about how to build your agreement pricing in the first place. This post pulls all of that together into one place, the why, the when, the how much, and the piece most MSPs still get wrong: what to do about your tools.

One caveat before anything else. Everything in this post assumes your underlying pricing is sound to begin with. If your baseline hourly rate or your agreement pricing formula is out of whack, a price increase just moves a bad number to a slightly less bad number. I’ve got a full video on how I build out agreement pricing, and it’s worth watching before you touch any of what follows.

Why You Need to Raise Prices

Nothing in your world gets cheaper. Your staff wants raises. Your tools cost more. Your insurance goes up. If you’re not raising your rates on a regular basis, you’re giving yourself a pay cut every year. After a couple of years of that, you’ll feel it on the bottom line.

This is also just a normal part of running a business. It’s not something to feel guilty about or apologize for. Every business you interact with raises prices over time. MSPs are no different, and clients generally understand that, even if the conversation can feel uncomfortable.

When You Can Raise Rates

The answer depends almost entirely on your contract.

If you have a month-to-month arrangement (or no contract at all) you can raise rates pretty much whenever you want. Typically with 30 days notice. That doesn’t mean you should do it constantly or without a plan, but you have flexibility.

If you have a multi-year contract, hopefully it includes an escalator clause, something that lets you raise rates annually tied to cost of living or a set percentage. There’s usually a specific date built in, January 1st, the start of your fiscal year, whatever it happens to be. That’s your trigger point. If it’s not in your contract, get it in there the next time you are doing updates. A multi-year contract should account for price increases along the way especially those tied to cost of living / general inflation.

If you need a bigger increase than your escalator allows, that’s usually a conversation for contract renewal time, not something you force mid-term. You could try, but I’d be prepared for a contentious conversation. That said, if the client has changed in size and added more people you should be able to account for that. Again, that should all be in your contract (both your MSA and SOW) language.

One more thing worth building into your process: if a client runs a formal budgeting cycle, work within it. If they set their budget every October for the following year, get your pricing conversation in front of them before that happens. You’ll get a lot more goodwill working with their timeline than springing a number on them after their budget’s already locked. I’ve talked to several MSPs that lost clients by trying to raise prices out-of-band when they knew the budget cycle.

How Much to Raise Rates

This depends on where your rates currently sit relative to market.

Market rate for most MSPs falls somewhere in the $150 to $225+ per hour range. This is somewhat dependent on your region and positioning. If you’re well under that, you may need a bigger correction than a single annual bump. Rather than jumping straight to market rate in one move, which can spook clients, consider a graduated plan. Move from, say, $95 to $115 at the start of one period, then $115 to $130 a few months later, working your way toward $150 or wherever your real target is over the course of a year or so.

My observation is that in the US the absolute floor for your hourly rate should be $150/hr. Your hourly rate informs all of your other labor related pricing, so this is important. If you’re not at least at $150 it’s time to start moving in that direction. . . pronto.

If you’re already close to market, this gets simpler. Take a look at cost of living for the year and adjust by roughly that amount, plus or minus a percent or two. Plenty of MSPs run their entire pricing strategy this way and do just fine.

Will You Lose Clients?

Short answer: probably not, and if you do, it’s usually not really about the money. The key here is that you MUST be doing good work for them.

Do the math on what a typical increase actually costs a client. A 5% increase on a $150/hour rate, for a client spending $1,000 to $2,000 a month, works out to maybe $50 to $100 extra. That’s not enough to break a relationship on its own, presuming you’re doing good work for them, taking care of their needs, and managing their risk the way an MSP should. If $50 or $100 is enough to cause real friction, that’s usually a sign of something else going on. Either in their business or in how they feel about the relationship, not really about the rate itself.

If you need a larger correction because your rates are far under market, you might lose a client or two. That’s a reasonable trade. Your competitors are pricing near market already, so a well-served client comparing your new rate to what they’d pay elsewhere isn’t likely to find a better deal by leaving. Losing an underpriced, high-friction client usually frees up time you can spend more profitably elsewhere.

For more on this, including a full breakdown of what actually happens when MSPs raise prices, with real numbers from an MSP that had never raised rates before:

How to Actually Deliver the Increase

How you communicate a price increase matters as much as the increase itself.

For small increases, a few percent, an email alongside an invoice is usually enough. Let the client know the date and the new rate, and move on. For increases in the 5 to 15% range, a more direct one-off email or a short conversation is worth the extra effort. For anything above 15%, especially if you haven’t raised rates recently, have an actual conversation. The goal is making sure a client’s frustration (if there is any) comes from the number itself and not from how they found out about it.

If the increase is large, 30% or more, consider phasing it in over time rather than delivering it all at once. That’s not required, but it can soften the landing for clients who’d otherwise be caught off guard. The conversation should be more about when to do the price increase versus if you’re going to raise their prices.

Don’t apologize for the increase. Frame it plainly, as a normal part of doing business.

This is also a good moment to take a bit of credit. If you’ve added a new tool to your stack, brought on new staff, picked up a certification, or expanded what your team can do, that’s worth mentioning when you explain a rate increase. Clients should understand that the number going up reflects something real on your end, added capability, reduced risk, better coverage, not just a number changing in isolation. You don’t need to write a page about it. A sentence or two is plenty. Don’t be shy about it. You earned it.

Not all clients should be treated identically when you raise rates. Think in three tiers:

Your most profitable clients: Clients who rarely call, are fully compliant with your stack, and pay on time. They deserve special handling. These are the clients you’re most at risk of losing over a feeling of being taken for granted. This is a good place for a genuine victory lap. Let them know you’re doing your annual increase and that you’ve chosen not to raise their rate this year, because you value the relationship. It’s a strong goodwill move that costs you very little.

Your middle-tier clients: Likely the majority of your book, get your standard increase. Rebuild your pricing the same way you built it originally. Adjust your hourly rate, recalculate your service-side pricing, factor in any changes to your cloud and tool costs, and land on a new number.

Your problem clients: You know, the ones who are noisy, non-compliant, or otherwise costing you more than they’re worth, are where a larger increase makes sense. If they’re only a little underwater, a bigger-than-average bump, say 15% instead of 7%, is reasonable. If they’re significantly unprofitable or genuinely difficult to work with, this is where what I call the “FU price” comes in. A substantial increase that either gets you to real profitability on that account or gives the client a reason to leave. Either outcome works in your favor.

For a deeper walkthrough of this client-tier approach, along with more on messaging and timing:

Don’t Forget Your Tools

Most MSPs treat pricing as an annual event. One conversation, once a year, covering labor rates and agreement pricing. That leaves a gap, because your tool costs don’t move on your schedule. Vendors raise prices whenever they raise prices.

A simple rule: if a tool’s price goes up late in the year, close to your normal increase date, just roll it into that conversation. If it goes up earlier in the year, use the increase itself as your guide. A vendor price increase of more than 5%, especially if you’re not already comfortably above a 50% margin on that tool, is worth addressing when it happens rather than waiting. Smaller increases can usually wait and get batched in later. You don’t want to be going back to clients over a dollar or two here and there. That reads as nickel and diming, even if you’re technically right to do it. A couple of dollars here and a couple of dollars there multiple times per year is going to irritate your clients, so find natural times to do this.

That said, if you’re passing through MSRP pricing (think Office 365 licenses) and their prices go up mid-year follow their lead. Communicate this well and move on.

The same logic applies when you add a brand new tool. Mark it up the way you would anything else in your stack, and use the moment to tell your clients what they’re getting, not just what it costs. Be a bit strategic here. Don’t randomly add a tool in March that costs $5 per endpoint and then not have a plan to roll that pricing into your stack pricing.

I go into this in more depth on this video:

Bringing It Together

Price increases should be a regular activity. They’re an ongoing part of running a healthy MSP. Labor rates adjusted deliberately on a known cycle, tool costs tracked and passed through as they happen, and client relationships handled with a little more nuance than a flat percentage across the board. Get your foundational pricing right first, then build these habits on top of it, and this stops being the uncomfortable conversation it feels like the first time you have it.