Key Takeaway: New MSPs underprice because they compare their rate to their employee salary rather than to the fully loaded cost of delivering the service. The math for a solo MSP targeting 0,000 in income requires charging 16 to 24 per user per month just to break even at a 50% margin. Price for the business you want to build, not the business you have today.
The most common financial mistake new MSPs make is pricing their first contract too low. Not slightly too low. Significantly too low. They look at what they are currently earning as an employee, divide by hours, and set their rate there. That math ignores the cost of running a business, and the clients acquired at below-market rates are still at those rates three years later.
This guide covers how managed services are priced, what the math actually looks like, and how to set rates that build a sustainable business rather than an expensive job.
Why New MSPs Underprice
The underpricing problem has three causes. First, new MSPs compare their rate to their employee salary rather than to the fully loaded cost of delivering the service. Second, they underestimate how much time non-billable work consumes. Third, they are afraid that market-rate pricing will cost them the client.
On the first point: if you are currently earning $70,000 per year as an employee, your employer is paying significantly more than that to have you. Payroll taxes, benefits, overhead, and the cost of the tools you use to do your job add 30% to 50% on top of your salary. When you start your own MSP, you are now paying all of those costs yourself, plus the cost of running a business: insurance, accounting, legal, marketing, and the tools your clients need you to have.
On the second point: in a managed services business, a significant portion of your time is non-billable. Sales conversations, proposal writing, vendor management, invoicing, and the administrative overhead of running a business do not generate direct revenue. A realistic estimate is that 30% to 40% of your working hours will be non-billable, especially in the first year. Your pricing needs to account for that.
On the third point: the clients who leave because your pricing is at market rate are not the clients worth having. The clients who stay at market-rate pricing are the ones who understand the value of what you deliver. The ones who leave for a cheaper option will leave again when the next cheaper option appears.
The Pricing Math: What You Actually Need to Charge
Start with your costs. For a solo MSP with 10 to 20 clients and 100 to 200 endpoints under management, the minimum viable tool stack runs approximately $900 to $1,300 per month in 2026. That includes RMM, PSA, backup, EDR, and DNS filtering. Add business insurance ($150 to $300 per month for a small IT services business), accounting software and services ($100 to $200 per month), and miscellaneous overhead, and your fixed monthly costs before labor are approximately $1,200 to $1,800.
Now add your labor cost. If you are the only technician, your labor cost is your target income divided by 12, plus the self-employment tax premium (approximately 15% on top of your income target). If you want to earn $80,000 per year, your monthly labor cost is approximately $7,500 after accounting for self-employment taxes.
Total monthly cost to run the business: approximately $8,700 to $9,300 for a solo MSP targeting $80,000 in personal income.
Now divide by your client base. With 10 clients averaging 15 users each (150 total users), you need to generate $8,700 to $9,300 per month from 150 users. That is $58 to $62 per user per month just to break even. At a 50% gross margin target, you need to charge $116 to $124 per user per month.
The market rate for standard managed services in 2026 runs $85 to $130 per user per month for a comprehensive agreement. The math works. But only if you price at market rate from the beginning.
The Per-User Model vs. Per-Device Model
Most MSPs price on a per-user basis. The client pays a fixed monthly fee for each employee who uses the managed services. This model is predictable, easy for clients to understand, and scales naturally with the client’s headcount.
Per-device pricing charges for each device under management: workstations, servers, network equipment. This model is less common for full managed services but appears in co-managed arrangements and in environments with complex infrastructure relative to headcount.
For a new MSP, per-user pricing is simpler to explain and easier to manage. The per-user rate should reflect the full scope of services included: monitoring, patching, helpdesk support, backup, endpoint security, and any additional services in the base agreement.
What to Include in the Base Fee vs. What to Bill Separately
The scope of your base managed services fee determines your margin. Include too much and you are delivering services you cannot sustain at the price. Include too little and you generate surprise invoices that erode client trust.
The base fee should include: remote monitoring and management of all covered devices, helpdesk support with defined response times, patch management and software updates, endpoint security (EDR), backup with verified restore testing, and DNS filtering. These are the services that define managed services. They should be in every agreement.
Bill separately for: project work (migrations, deployments, major upgrades), hardware procurement, software licensing, and after-hours support beyond a defined threshold. These are legitimate separate charges. The key is defining them clearly in the agreement before the client needs them, not after.
Pricing for the Business You Want to Build
The most important pricing principle for a new MSP is this: price for the business you want to build in three years, not the business you have today.
If you price at $60 per user per month to win your first clients, those clients will still be at $60 per user per month when you have 20 clients and need to hire your first technician. Raising prices on existing clients is one of the hardest conversations in the business. The clients you price correctly from the beginning are the ones who understand your value and stay. The clients you underprice to win are the ones who will resist every price increase and leave when you finally enforce one.
Set your rates at market level from the first client. If a prospect will not pay market rates, they are not the right client for a business built on delivering genuine value.
The Conversation About Price
When a prospect pushes back on your pricing, the response is not to lower the rate. It is to explain what the rate includes and why it is what it is.
The conversation goes something like this: the rate covers monitoring your environment 24 hours a day, patching your systems before vulnerabilities become incidents, backing up your data and testing that the backup actually works, protecting your endpoints with enterprise-grade security, and providing helpdesk support when your team needs it. That is what managed services costs. If you want a lower rate, we can talk about what comes out of the agreement, but I would not recommend it.
Most clients who push back on pricing are not actually unwilling to pay market rates. They are testing whether you believe in your own value. The MSP that holds the line on pricing signals confidence in what they deliver. The MSP that immediately discounts signals the opposite.
Frequently Asked Questions
What is the average MSP price per user in 2026?
Standard managed services agreements in 2026 run $85 to $130 per user per month for a comprehensive agreement including monitoring, patching, helpdesk, backup, and endpoint security. Agreements that include vCIO services, compliance support, or advanced security run $130 to $200 per user per month. The national average for comprehensive managed services reached $125 to $300 per user per month in 2026, according to industry benchmarks.
Should I offer a discount to get my first client?
A modest discount for a first client who agrees to serve as a reference is reasonable. A significant discount that sets a rate you cannot sustain is not. The distinction is whether the discounted rate covers your costs and leaves a margin, or whether it requires you to subsidize the client relationship from your personal income.
How do I handle clients who want month-to-month agreements?
Month-to-month agreements are legitimate, but they carry a risk premium. An MSP that invests in onboarding a client, documenting their environment, and deploying the tool stack needs a reasonable period to recoup that investment. A month-to-month agreement that allows the client to leave after 30 days transfers that risk to the MSP. Price accordingly: month-to-month agreements should cost 15% to 25% more than annual agreements.
What should I do when my tool costs increase?
Pass them through. Your managed services agreement should include language that allows for annual price adjustments tied to cost increases. If your tool costs increase 20% due to the RAM shortage or vendor price increases, your clients’ rates need to reflect that. The alternative is absorbing the increase yourself, which compresses your margin and eventually makes the relationship unsustainable.
About Brent Lacy: Brent Lacy is a technology advisor and the voice behind Rewired MSP. He helps MSPs operate with greater maturity and helps business owners make IT choices that make them more secure and more efficient. He is the author of Rewired MSP: Mastery, Scalability & Performance, vCIO Rewired: Virtually Conquering IT Obstacles, and Near Miss: Preventable IT Failures Threatening Your Business Security.
Related Reading
- What Does Managed IT Services Cost? A Transparent Pricing Guide
- Your MSP’s Pricing Model Is Either Building Trust or Eroding It
- The MSP Starter Stack: What Tools You Actually Need
- How to Get Your First MSP Client
- MSP Growth and Sales Hub
