Recurring revenue models have become a hallmark of the modern service economy, especially for MSPs in IT. Clients also expect subscription-like relationships with their service providers, making the model easier to sell than in decades past. Predictable cash flow allows you to budget, allocate resources, and forecast growth more strategically. However, these benefits hinge on finding a pricing model that accurately reflects the value you deliver. Various models help align pricing with client perception, manage overhead, and maintain flexibility. By applying these principles, you can build a pricing structure that drives long-term success.
Recurring revenue models provide financial stability and predictability for MSPs. The consistency in expected revenue helps companies better allocate resources, plan financially, and craft realistic growth models. The benefits touch all parts of the business, including:
Recurring revenue models provide more operational stability as it’s easier for employees to forecast incoming funds. With a predictable revenue stream, you can plan hiring schedules, project expansions, marketing initiatives, and upgrades to internal systems without the same level of uncertainty and guesstimations that come from sporadic or purely project-based revenue. This stability helps you scale your service delivery capabilities and improve your client experience.
When clients pay consistently rather than on a project-by-project basis, you cultivate more touchpoints. Regular check-ins become part of the arrangement, enabling a deeper understanding of client needs. This dynamic encourages trust, gives early insight into whether a client has an issue, and encourages MSP teams to consider how to use any unallocated service hours best to promote the client’s goals.
Recalling the high acquisition cost of new clients, a recurring revenue model ensures that each client relationship continues generating income and justifies your upfront marketing and onboarding costs. It’s easier to upsell to an existing client than to capture an entirely new one. By optimizing recurring streams, you maximize the lifetime value of each client, an essential metric for profitability.
Project-based payment plans typically require clients to go through scoping and discovery each time they want something different. If the final price exceeds their budget, they may decline the work altogether. If you have a recurring payment plan that is flexible enough to support the services each client needs, it’s more likely the client won’t switch companies. They are already invested in your MSP and know precisely how much each month they’ll spend, which provides as much predictability to their expenses as it does to your MSP’s income. High-value, convenient, and predictable services with transparent pricing encourage long-term commitments, reducing churn rates and stabilizing your revenue base.
Recurring revenue models come in various forms, allowing you to tailor your pricing structures to different client needs and service offerings. Below are some of the most common approaches MSPs use to generate predictable income while delivering long-term value to clients:
Many MSPs offer ongoing support and maintenance in return for a monthly or annual fee. These retainers might include a predetermined selection of services, such as help desk, proactive monitoring, and regular software patching and updates. You can create different packages for clients to choose between.
MSPs charge clients a fixed recurring monthly fee for each endpoint they manage. This method simplifies billing, as clients multiply the number of devices by the monthly rate. Per-device subscriptions can cover software licenses and paid platform usage, so clients have uninterrupted access to the necessary tools.
Similar to the per-device model, this approach charges a flat monthly rate based on the number of users requiring services. This plan also allows for easy monthly revenue projections, though it can cause complications if some devices need more attention or specialized work.
In some cases, MSPs might supply and maintain on-premises hardware through a lease or extended service contract. Clients pay monthly for both the equipment and upkeep.
Combination or hybrid models can be popular for IT service providers with diverse offerings. You might have a base monthly retainer that covers standard management services plus pay-as-you-go rates for specialized tasks or significant implementations.
A MSP can charge clients a monthly flat rate that covers all potential services and additional requests. Clients may enjoy this model because there are never surprises for their billing. It benefits MSPs when the work-to-revenue balance remains in their favor, and the subscription covers all the tasks employees complete for the client. However, this model can backfire if a client consistently asks for work that exceeds what the actual payment justifies, making the ROI on the payment plan low.
The recurring revenue model you choose depends on the type of clients you serve, your company’s growth stage, and the services you provide. The best option is the one that supports your needs most without being a burden to overcome when in discussions with new leads. Below are common models that MSPs often use:
What it is: Value-based pricing means you set your rates according to the benefits you deliver to the client. Rather than focusing on a cost-plus margin, you lean on measurable outcomes such as reduced downtime, increased security posture, or ongoing compliance.
Why it matters: Clients who see clear returns on investment are less price-sensitive. If your managed security service saves them thousands in potential breach costs or your network monitoring system keeps them operational during critical business hours, a higher monthly fee is easier to justify.
Example: An MSP that provides 24/7 monitoring for a retailer might charge a premium based on the revenue the retailer retains by avoiding disruptions. Instead of focusing on the time technicians spend, the pricing highlights the value of uninterrupted transaction processing.
What it is: Tiered pricing typically involves multiple service bundles that increase in features and cost. MSPs commonly use tiers like “basic, standard, and premium” or “small-business, enterprise, and custom,” depending on the services delivered. Clients pick which tier aligns best with their budget and service requirements.
Why it matters: Not all clients have the same needs or financial resources. Offering tiered packages provides options for smaller companies, mid-market businesses, and enterprise organizations. It’s also easier to upsell over time as clients grow or realize they need extra features.
Example: A Basic tier might focus on essential help desk support and patch management, while a Premium tier includes advanced threat protection, dedicated account management, and strategic IT consulting hours each month.
What it is: Bundling offers multiple services at a discounted rate compared to what they would cost individually. Clients can choose which bundle they want month after month depending on the productized services and pay the recurring cost.
Why it matters: Bundles encourage clients to embrace more of your offerings, fostering deeper relationships and discouraging them from seeking a second provider for other needs. From a marketing standpoint, bundles simplify the purchasing decision and can highlight the value you deliver as an integrated solution.
Example: You might combine infrastructure monitoring, endpoint protection, and virtual CIO services. While the nominal discount provides a price advantage, your client gains simplicity and a single partner for a broad scope of IT needs.
What it is: Sometimes called consumption-based pricing, usage-based pricing aligns costs with how much a client actually uses. This could be per device, per user, gigabyte of data processed, or hour of specialized consulting.
Why it matters: It’s fairer for larger clients to pay more if they have more devices, seats, or data usage. Meanwhile, smaller clients aren’t overpaying for services they don’t need. This approach can make your offering more accessible to varying sizes of clients while ensuring your revenue scales with usage.
Example: You might price a managed backup service based on total data stored in the cloud. As the client’s data footprint expands, so does your monthly fee, allowing your revenue to grow in tandem with their usage.
What it is: This straightforward approach offers a slight discount (e.g., 5% or 10%) for clients who pay annually upfront rather than monthly. MSPs can also combine this model with other options, such as tiered pricing and bundled services.
Why it matters: Annual prepayments provide a large amount of cash flow, enabling you to invest in infrastructure, talent, or new tools. Clients also benefit from cost savings and the stability of an expected expense.
Example: If your monthly service costs $1,000, you might offer a 5% discount for an upfront annual payment, so the client pays $11,400 instead of $12,000. You secure more cash and can allocate it towards growth initiatives.
You can easily manage cash flow and financial forecasts when you have predictable profit. When you optimize the way you scope, monitor, and adapt pricing, you protect both your margins and your client relationships. Keep in mind the following factors when creating a reliable and repeatable revenue model:
Money and payment can sometimes be a sticky conversation with new leads and existing clients. Communicating recurring pricing ensures that clients recognize your services' real value and feel like they’re receiving what they signed up for. Combining transparency and outcome-focused discussions minimizes confusion and fosters long-term loyalty. Below are some core principles to keep in mind:
Tools like ScopeStack CPQ allow MSPs to automate and standardize the scoping process. By centralizing scoping tasks into a platform that factors in service level, resource requirements, and time estimates, you minimize guesswork and reduce the risk of underpricing. You can form more accurate pricing tiers or service bundles from the get-go. The same line-item quote comes in an easy-to-read format that demonstrates precisely what clients will be paying for, which improves transparency and minimizes uncertainty on their end.
As your clients scale, your pricing might need to change. Because ScopeStack captures baseline data, it’s easier to adjust scopes, refine tiers, or add incremental services. Instead of reinventing your pricing model from scratch, you simply build on your established data and workflows.
Predictable profitability is more than just a financial metric. It underpins strategic growth, client satisfaction, and operational excellence. By choosing a functional and transparent recurring revenue model, MSPs can align costs with client outcomes, promote loyalty, and invest in growth. Embracing these strategies will help your MSP to foster steady revenue and thrive in the competitive IT services landscape.
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