Burden Rate Calculator: A Practical Approach to Pricing

By ConnectWise Guest Blog 1

Pricing. It’s a hot topic on seemingly every MSP’s mind. With so many approaches, it’s easy to feel overwhelmed and just leave price setting to your sales team. Big mistake.

If you leave price setting to your sales team, you could be unintentionally sanctioning low-profit or no-profit deals. They’ll do whatever it takes to meet their bonus goals, even if it’s not good for your organization’s overall well-being.

To be fair, some price cuts make sense. Once in a blue moon a low-margin trial for a big company can pay off. But you should be in charge of when and where those offers are extended.

Top 3 Pricing Considerations

The answers to these questions will help you determine base-level hourly pricing. (Get the Burden Rate Calculator to see where you stand.) 

At a glance, charging clients $100 per hour might sound amazing until you realize that your rent, utilities, insurance, salary and benefits add up to thousands more than your billable rate can cover. And then when you factor in taxes on top of that, it’s downright dismal.

Don’t fall into this common pricing pothole. We all know that we get what we pay for. And while there are small measures you can take to control pricing, there will be base levels you should maintain. Unless it’s for a good reason, don’t sell yourself short.

And don’t give in to the temptation to have the lowest price in town, either. If a competitor drops its price or adds on a fancy new service, you could match it. However, if you’re not comparing your services item-by-item to theirs, you might be costing yourself a lot of money. Stick to what you do best by offering your very best service at a price that allows your business to thrive.

Quick Tip: Aim for a 50% profit margin. You might start with less, but working up to at least 50% gives you the capital necessary to fund infrastructure enhancements down the road.

To help you find out if your pricing is right, use the Burden Rate Calculator. With just a few pieces of information, you can quickly determine what you need to charge per hour to achieve your desired profit margin. Get started now.

Kevin Gibson is Senior Product Manager & Evangelist, LabTech Software. Kevin’s deep understanding of the IT services space includes more than 17 years’ experience developing and managing enterprise information systems, including four years overseeing service and product development for a managed service provider (MSP) in the metro Atlanta area. In his current role, Kevin is responsible for driving key LabTech technologies, including availability management, LabTech Ignite, and professional services automation (PSA) and ModernOffice Suite integrations. As a member of The LabTech Actuators, Kevin joins the ranks of other IT service industry thought leaders who are tasked with developing and sharing best practices and industry foresight to ensure IT service providers and MSPs worldwide have the resources they need to improve efficiency, increase productivity and achieve overall business growth.

Guest blogs such as this one are published monthly and are part of MSPmentor’s annual platinum sponsorship.