MSP Pricing Survey – MSPs Grow but Size Matters

The Kaseya 2014 MSP Pricing Survey results clearly demonstrate that the managed services market is a significant growth opportunity. Almost 100% of the customer survey respondents had experienced positive monthly recurring revenue (MRR) growth over the past three years. We asked respondents to select from a range of MRR growth rates starting with less than 0% and ending in greater than 20% growth. The results were fairly evenly spread across all ranges – see chart below – except for a very small negative growth segment, suggesting that there could well be key differences in approach taken by faster growing MSPs. To examine these differences we split the responses into two, roughly equal groups, one for MSPs who had experienced MRR growth at greater than 10% per annum and one for MSPs whose MRR had grown at less than 10%.


msp-avg-growth-chart

MSPs with 10 or More Employees Grew Faster in 2014

One interesting survey result is the impact of organization size on MSP growth rates. MSPs in our higher growth segment (MRR >10% per annum) tended to fall into the larger employee size categories in comparison to their less rapidly growing counterparts – see chart below. Clearly MSPs with less than 10 employees found it much harder to grow faster than 10% per annum, despite the fact that they typically started with much smaller monthly revenues. Almost 50% of MSPs growing at less than 10% a year fell into the less than 10 employee category. In sharp contrast, the highest proportion of higher growth respondents fell into the 11 to 25 employee category, suggesting that once MSPs break through the 10 employee “barrier” they are able to generate higher MRR growth.

msp-growth-chart

Several factors contribute to the challenges facing smaller MSPs and their ability to get onto a higher growth track. In general, smaller businesses contract with smaller service providers and professional services firms; larger businesses like to do business with larger and more established organizations – see table below. This is because businesses judge other businesses based on their own level of maturity. Younger, smaller businesses having smaller budgets are, understandably, concerned more about price than reputation. As businesses grow, risk becomes an increasingly important purchase factor and firms look to suppliers and service providers who imply lower risk. Having more staff, a solid reputation, greater revenues, more clients, etc., are all indicators that a service provider might prove more reliable than a smaller competitor.

msp-size-chart

Fast Growing MSPs with Less Than 10 Employees – Keys to Success

Nevertheless, approximately 1/3 of the MSPs who fell into the less than 10 employee category were able to grow their MRRs at faster than 10% a year. The keys to higher growth include:

  • Value-based pricing – selling on value to the client not on cost plus or market match
  • Charging more to support larger clients who have more complex needs – not less because of higher volume.
  • Offering bundled services.
  • A clear path for existing customers to adopt additional service offerings.
  • Leveraging automation extensively to maximize the efficiency of their technician and engineering staff.
  • Focused managed services sales and/or marketing capabilities – less focused on resale.

Pricing MSP Services for Growth and Profitability

These topics and much more are discussed in detail in our webinar Pricing MSP Services for Growth and Profitability. The webinar highlights the results of the Kaseya 2014 MSP Pricing Survey which was completed in September 2014.

About the 2014 Kaseya MSP Pricing Survey

The MSP pricing survey was conducted in September and October. It’s the fourth annual Kaseya MSP customer survey and it attracted almost 700 responses from MSPs around the world. Respondents manage from less than 100 devices to more than 10,000 devices, operate from a range of different business models, and undertake a variety of different roles within their organizations from owners and principals to administrators and technicians. The survey included questions on a broad set of topics including demographics, growth rates, services offered, pricing strategies, the prices charged for a variety of services, and price revision plans for 2015.

Author: Ray Wright

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