How do I correctly price my services? This question often comes up when I stop to talk to MSPs after an event or webinar. The truth is that many MSPs set prices too low for their services. Very often, what happens is that there is a price war: if your . competitors lower the prices of their services, you will also be tempt to do the same thing. This risks triggering a vicious circle in which in the end there is no services from MSP margin left for anyone . How to get out of it? First you should understand what you do well and for whom you do. it well, avoiding taking on clients who are far from your. ideal client just to increase your turnover a little.
How to price services to maximize profits
Only after doing this will you be able to price your services the right way. How to price services to maximize profits . EBITDA (Earnings Before Interests, Taxes, Depreciation . and Amortization) is an index of a company’s financial performance . EBITDA is a company’s profit, minus new database interest, taxes, depreciation, and amortization. Simply put, it helps to understand if an organization . has profits (and how much they amount to) within ordinary operations. But how do you compare the EBITDAs of companies with very different turnovers and sizes? In these cases we use the EBITDA . margin , which is the ratio between the EBITDA and the company’s total revenue.
Pricing for your services
The data that emerges indicates,. to put it bluntly, the percentage of revenues that the company. really manages to “set aside” within ordinary management. Simplifying we CY Lists can use this formula: (Service margins – cost of sales – overhead) . / total service revenue = EBITDA margin Why am I telling you about this? Because 25% of MSPs have an EBITDA margin close to zero. Maybe they manage to pay all the salaries and the owner also manages to earn enough. The problem is that there is nothing left to invest or save for any “bad times”. The good news is that there is another 25% of MSPs that have a 20% EBITDA margin.