The short version
- Price from your costs: price = direct delivery cost ÷ (1 − target gross margin). $84 of cost per user at a 55% margin needs $187.
- Markup isn't margin. A 50% markup on cost gives you a 33.3% gross margin, not 50%.
- Use PSA time entries for support hours per user: 300 hours across 500 users at $65 an hour is $39 of labour per user.
- Set a minimum monthly contract value so small customers still cover the fixed cost of looking after them.
- Cutting delivery cost from $4,200 to $3,500 lifts margin from 55% to 62.5% without touching the price.
Are you pricing your managed services for profit, or just to win customers?
One of the most important decisions a Managed Service Provider (MSP) makes is how much to charge for managed IT services. Yet after working with hundreds of MSPs and IT service providers, we regularly meet businesses that have never properly calculated what their services cost to deliver.
Instead, pricing is set by what competitors charge, what customers seem willing to pay, or a price fixed years ago and nudged up since. None of those approaches guarantees a profitable business.
Two MSPs can charge the same fee per user and land on very different results: one at a healthy 60% service gross margin, the other struggling to reach 35%.
The difference is usually not the price. It's the cost of delivering the service. On fixed-fee agreements, every extra ticket, inefficient process, unnecessary escalation and rise in engineering cost eats into profit without bringing in a dollar more.
So the real question isn't how much you can charge. It's how much you need to charge to deliver an excellent service at a sustainable profit. This guide covers the main MSP pricing models, how to calculate your cost of delivery, a practical way to set a price per user, per device or per customer, and how better delivery efficiency lifts margin without constant price rises.
How much should an MSP charge per user?
So how much should MSPs charge? There's no single right number, because agreements differ so much in scope, complexity, security and support. Basic endpoint monitoring with business-hours help is a different service from comprehensive cybersecurity, unlimited support, backup, compliance reporting and 24×7 cover.
Published market guides in 2026 commonly put comprehensive managed IT services pricing at roughly $100–$250 per user per month, with wide variation in what's included. Here's where the price from this page's calculator sits against that range:
Your price vs the published 2026 range
The marker follows the pricing calculator further down. Change your numbers there and it moves.
Published guides: $100–$250
Market figures are useful context, but they're no substitute for knowing your own delivery cost. The right price depends on:
- The fully loaded cost of your engineers
- Average support required per user
- PSA, RMM, cybersecurity and other tool costs
- The number and complexity of managed devices
- Service desk hours and SLAs
- The scope of security, backup and cloud services
- How standardised the customer's environment is
- The service gross margin you need
- Additional services and risks in the agreement
Rather than starting from a competitor's rate card, start with your own cost of delivery and work backwards from the gross margin you want.
The MSP pricing calculator formula
Take the direct cost of delivering the service and divide it by the share of revenue left to cover that cost once your margin is set aside. Express the margin as a decimal.
The formula
Price per user = direct delivery cost per user ÷ (1 − target gross margin)
$70 ÷ (1 − 0.50)$140
At 50%, $70 of cost per user needs a price of $140. At 60%, the same cost needs $175. That gap is why your margin target matters so much: the price has to cover both the cost of the service and the profit the business needs to run and grow.
Gross margin is not the same as markup
One of the most common MSP pricing mistakes is confusing the two. Markup is a percentage of cost. Gross margin is a percentage of revenue. Drag the markup and watch the margin it really delivers:
Markup on cost vs the gross margin it produces
On a service costing $100 a month to deliver.
Monthly price$150
Gross margin33.3%
| Pricing method | Monthly price | Gross margin |
|---|---|---|
| 50% markup on cost | $150 | 33.3% |
| 50% gross margin target | $200 | 50% |
| 60% gross margin target | $250 | 60% |
A 50% markup does not produce a 50% gross margin. To reach 50% you need a 100% markup; to reach 60%, a 150% markup. Applied across hundreds or thousands of managed users, the difference is substantial.
The 6-step method for pricing managed IT services
- Calculate your true cost of delivery Cost
- Work out support cost per user Cost
- Calculate the price per user Price
- Choose the right pricing model Structure
- Set a minimum contract value Structure
- Know how price drives margin Margin
01
Calculate your true cost of delivering managed services
CostBefore you can decide what to charge, you need to know what the service actually costs. That's more than adding Microsoft 365 licences, RMM subscriptions and a guess at engineer salaries. Direct delivery costs fall into three groups:
Technical labour
Usually the biggest direct cost: the allocated, fully loaded cost of L1, L2 and L3 engineers, service desk management and external technical resources delivering contracted services.
Technology and software
PSA, RMM, endpoint security, backup, monitoring, identity, documentation and security awareness platforms, billed per user, per device, per customer or by consumption.
Other direct costs
Customer-specific cloud infrastructure, outsourced NOC or SOC services, service delivery management, third-party support and dedicated infrastructure.
Gross profit line
Below the line, not in service gross margin: sales, marketing, finance and administration. Classify costs with one consistent accounting method so nothing is counted twice.
For labour, include salaries, superannuation or pension contributions, statutory employer costs and relevant direct employment expenses. An Australian L2 engineer on $90,000 can easily cost more than $110,000 a year once employer obligations and operational allocations are added (see our MSP engineer salary guide). But the most useful number for pricing is the cost of the engineering capacity customers actually consume: time spent supporting users, resolving tickets, doing proactive maintenance and delivering what the agreement includes.
- A common mistake: adding a new security or management tool to an existing package without updating the price to reflect the higher delivery cost.
02
Calculate your average support cost per user
CostThe amount of engineering effort a customer needs is one of the biggest swings in managed services profitability. Two customers with 50 users each can need very different amounts of support:
Customer A
Standardised Microsoft 365, modern endpoint management, few recurring issues.
Support hours per user0.4
Labour cost per user at $65/hr$26
Customer B
Legacy applications, inconsistent device builds, many more support requests.
Support hours per user1.2
Labour cost per user at $65/hr$78
Illustrative hours. Same seat count, three times the labour cost per user.
That's why you should measure support hours per managed user: total monthly support hours ÷ number of managed users. Try it with your own figures:
Support cost per user
Pre-filled with 300 hours across 500 users at $65 an hour.
Hours per user a month0.6
Calculation0.6 × $65
Labour cost per user$39
Use real PSA time entries wherever you can, including time from several engineers on the same ticket, and count proactive work, routine maintenance and other contracted work that never shows up as a reactive ticket. For the hourly rate, use the cost of productive delivery capacity, not annual salary divided by every paid hour.
03
Calculate your required price per user
PriceSay you're preparing a proposal for a 50-user customer. You expect 30 hours of engineering work a month at a fully loaded $65 an hour, a technology stack at $35 per user, and $500 of other direct delivery costs. Change any number to price your own deal:
MSP pricing calculator
A managed services pricing calculator, pre-filled with the 50-user example. Prices round to the nearest dollar.
Enter between 1 and 1,000,000 users.
hrs
Enter 0 hours or more.
$
Enter an hourly cost between $0 and $1,000.
$
Enter a cost of $0 or more.
$
Enter a cost of $0 or more.
%
Enter a margin from 0% up to 95%. A 100% margin would need an infinite price.
Required price per user a month
$187
$84 of cost per user at a 55% gross margin
- Monthly contract value
- $9,333
- Total direct delivery costs
- $4,200
- Monthly gross profit
- $5,133
- Cost per user
- $84
- Equivalent markup on cost
- 122%
The margin ladder
Required price per user (bar) and monthly contract (right) at each gross margin target. Yours is highlighted.
| Monthly cost component | Amount (AUD) |
|---|---|
| Engineering labour: 30 hours × $65 | $1,950 |
| Technology stack: 50 users × $35 | $1,750 |
| Other direct service delivery costs | $500 |
| Total monthly direct costs | $4,200 |
| Cost per user | $84 |
Illustrative example. Assumes software and labour costs are fully allocated, with no duplication between cost categories.
| Target gross margin | Required monthly contract | Required price per user |
|---|---|---|
| 40% | $7,000 | $140 |
| 45% | $7,636 | $153 |
| 50% | $8,400 | $168 |
| 55% | $9,333 | $187 |
| 60% | $10,500 | $210 |
| 65% | $12,000 | $240 |
Prices rounded to the nearest dollar. Calculations use unrounded values.
At a 40% margin you need $140 per user; at 55%, about $187. That doesn't mean $187 will sell in every market or to every customer. The price still has to be justified by scope, requirements and value. But it sets a financial floor:
If you can't sell the service at a price that earns an acceptable return, change the scope, the delivery cost or the commercial arrangement. Discounting and hoping volume fixes it rarely works.
04
Choose the right MSP pricing model
StructureEach way of structuring a managed services agreement has strengths and limits:
UPer-user pricing
A fixed monthly fee for each supported user. Predictable recurring revenue that's easy for customers to understand.
- Suits
- A steady link between headcount, devices and support needs
- Watch for
- Odd device-to-user ratios, shared accounts, several devices per user, specialist apps
DPer-device pricing
Priced by the number and type of devices managed.
- Suits
- Support driven by endpoint or infrastructure counts
- Watch for
- Multiple devices per person, shared workstations, cloud services tied to no single endpoint
TTiered packages
Levels of service, from monitoring and essential support up to advanced security, compliance, consulting or extended hours.
- Suits
- Giving customers a clear upgrade path
- Watch for
- Tiers whose differences aren't meaningful or commercially sustainable
FFixed monthly agreement
Predictable costs for an agreed scope of services.
- Suits
- Simple invoicing and customer budgeting
- Watch for
- Environments or expectations that change without the agreement changing too
HHybrid pricing
For example: per user for support, per device for specific security or backup products, and a separate monthly fee for infrastructure management or consulting.
- Suits
- Recovering cost accurately where services have different cost drivers
- Watch for
- So much complexity that customers can't follow it and you can't administer it
Which model is best? There's no universal answer. For many SMB-focused MSPs, per-user pricing is straightforward, especially with clear minimum charges, a defined scope and separate pricing for exceptional requirements. Pick the model that best reflects what drives delivery cost in your target market, and keep it easy to understand, predictable for customers and profitable for you.
05
Set a minimum monthly contract value
StructureThe cost of supporting small customers is easy to overlook. A five-user customer can need much the same onboarding, administration, monitoring, account management and reporting as a 30-user one. Price purely per user and they may not cover those fixed costs: $175 per user × 5 users is just $875 a month.
How a minimum contract protects small deals
The $1,500 minimum is an illustrative figure. Set yours from your fixed cost of onboarding and looking after a customer, plus your margin.
$
Enter a minimum of $0 or more.
Per-user price alone$875
Billed with the minimum$1,500
Protected each month$625
Base the minimum on the fixed cost of onboarding and maintaining the relationship, the minimum technical effort and the margin you need. Another option is a base monthly management fee plus a per-user component. Either way, don't price small agreements by multiplying users by a rate designed for larger environments.
06
Understand how your pricing affects gross margin
MarginGross margin measures how much revenue is left after paying the direct costs of delivery:
Service gross margin = (managed services revenue − direct delivery costs) ÷ managed services revenue × 100
As a planning objective, many MSPs work towards managed services gross margins of 50% or higher, with mature, efficient recurring operations targeting 55% to 65% or more. Targets vary with scope, accounting method and business model, so treat them as direction rather than an industry standard. (See what a good gross margin looks like for an MSP.)
Small improvements add up fast:
What a margin improvement is worth
Pre-filled with $5 million of annual managed services revenue, from 45% to 55%. Assumes revenue stays the same.
Each margin point is worth$50,000
Change in margin+10 pts
Extra annual gross profit$500,000
That improvement can come from higher prices, lower delivery costs or both. For many MSPs, the bigger opportunity is a more efficient delivery model rather than asking customers to pay more.
Seven common MSP pricing mistakes that destroy profitability
-
Pricing from competitors, not costs
Positioning just below the market ignores that a rival's price may reflect a different scope, stack, labour cost or profit target. Matching it blind creates unprofitable agreements.
-
Underestimating engineering labour
Optimistic assumptions about ticket volumes, environments or productivity under-price the work. Use historical PSA data and account for customer complexity.
-
Including too much in the fixed fee
Unlimited support needs clear boundaries. Projects, after-hours work, major remediation, onboarding, security incidents and specialist consulting may need separate pricing.
-
Failing to recover technology costs
Every platform added to a package raises delivery cost. Review PSA, RMM, security, backup and other tool costs, and make sure the price reflects what you deliver.
-
Not reviewing prices regularly
Salaries, subscriptions, insurance, compliance and operating costs move. An agreement that was profitable at signing can drift. Run a structured annual pricing and contract review.
-
Ignoring customer-level profitability
Customers with high ticket volumes, specialist needs or non-standard environments consume far more support. Reviewing each agreement shows where pricing, scope or operations need to change.
-
Discounting without understanding the margin impact
A small discount does disproportionate damage. On a service costing $100 that sells for $200, a 10% discount takes the price to $180, the margin to 44.4% and gross profit from $100 to $80: a 20% fall in gross profit dollars.
Gross margin44.4%Gross profit$80Gross profit lost20%
How to increase MSP gross margin without raising prices
Price is one lever. For many MSPs, how services are delivered is the bigger one:
Reduce reactive service desk tickets
Proactive monitoring, root cause analysis, endpoint management and standardisation cut avoidable demand and improve the customer experience. See 10 ways to reduce ticket volumes.
Invest in automation
Onboarding, offboarding, password resets, licence management and ticket admin eat capacity. Rewst, Pia and n8n, alongside native PSA and RMM features, remove manual work. Compare them in Rewst vs Pia vs n8n.
Optimise your L1, L2 and L3 mix
Senior engineers on simple work raise cost; too many juniors create escalations and duplicated effort. Allocate by complexity and judge the total cost of resolution. See L3 vs L2 support engineers.
Build a Centralised Services capability
A Centralised Services Engineer removes the causes of recurring incidents through maintenance, standardisation, scripting and automated remediation, so you support more users without more reactive headcount.
Consider dedicated offshore engineers
For many Australian MSPs, engineering labour is the largest direct cost. Dedicated offshore engineers bring experienced skills at a lower fully loaded cost while you keep operational control. The benefit depends on capability, integration and maintained service quality, and the extra capacity can support new customers and free your senior engineers. See what an offshore L2 engineer costs.
The impact of reducing delivery costs on MSP pricing
Back to the 50-user customer: $4,200 of monthly delivery cost, priced at about $187 per user for a 55% margin. Now suppose better engineering productivity, fewer repetitive tickets and a leaner team structure bring that cost down. Keep the price where it is and move the cost:
Same contract, lower cost to serve
Contract revenue stays at $9,333 a month.
Today
$4,200$5,133
55%Optimised
$3,500$5,833
62.5%Monthly gross profit$5,833
Extra gross profit a year$8,400
Margin gain+7.5 pts
| Pricing metric | Current delivery model | Optimised delivery model |
|---|---|---|
| Monthly direct delivery costs | $4,200 | $3,500 |
| Monthly contract revenue | $9,333 | $9,333 |
| Gross profit | $5,133 | $5,833 |
| Gross margin | 55.0% | 62.5% |
Illustrative example. Assumes the reduction in delivery costs is realised, no additional implementation expenses are incurred and the contractual price remains unchanged.
Cutting delivery cost lifts the margin by 7.5 percentage points without touching the customer's price. You could also use part of the gain to sharpen your price, fund more cybersecurity capability or improve service.
The most profitable MSPs don't simply charge more. They build delivery models that get more value from every dollar of revenue.
How to review the profitability of your existing managed services agreements
A profitable pricing model matters for new customers, but your existing book deserves the same scrutiny:
- List revenue and direct costsEach customer's recurring revenue, plus technical labour, software and licensing, third-party services and other delivery costs.
- Calculate customer marginGross profit and gross margin for every customer, side by side.
- Look for patternsSmall customers dragged down by fixed costs? Legacy environments driving tickets? Security or support requirements never priced in?
- Decide what to changeAdjust pricing, standardise environments, reduce support demand or renegotiate scope.
Sometimes an unprofitable customer becomes viable through operational improvements rather than a big price rise. Make customer profitability a regular management discipline, not something you check only when margins become a problem. Tracking cost per ticket by customer shows where to look first, and a clear ideal customer profile helps you win more of the customers who are profitable at your prices.
How Dijital Team helps MSPs improve their pricing economics
Sustainable MSP profitability comes from the right mix of people, processes, technology and financial discipline. The right price matters, but so does the cost of delivering it. Through our dedicated offshore staffing model, we help MSPs build technical capability while improving the economics of service delivery.
Dedicated L2 and L3 Engineers
Experienced engineers who join your service desk, lift resolution capability, manage escalations and add engineering capacity.
L2 Engineers →Centralised Services Engineers
Proactive maintenance, standardisation, monitoring and remediation that shrink reactive workload.
What they do →Automation Engineers
Rewst, Pia, n8n, Microsoft Power Platform and scripting skills to remove repetitive work.
Automation Engineers →Transparent fixed monthly pricing
One fixed monthly fee per role, so you can forecast technical labour cost with no surprise employment surcharges.
See all roles →The Better Business Pathway
Beyond staffing: operational maturity, profitability and growth without delivery costs rising as fast as revenue.
Explore the Pathway →Improving margin isn't just about cheaper technical salaries. It takes an understanding of how the business earns revenue, delivers services, runs its teams and creates value. The goal isn't simply to help MSPs build offshore teams. It's to help them build better businesses.
The bottom line: price for the business you want to build
Your managed services pricing strategy is one of the biggest drivers of long-term MSP profitability, but the right price can't come from what other MSPs charge or what customers will tolerate. Start with your true cost of delivery, then calculate the price that achieves a sustainable gross margin, allowing for each customer's complexity, the services delivered, your technology stack and the engineering capacity the agreement needs.
Then look beyond price. Automation, proactive delivery, standardisation and a more efficient engineering team all reduce your cost to serve, so profit doesn't depend on price rises alone.
The goal isn't to be the cheapest MSP in the market. It's to deliver exceptional value at a price that earns a sustainable profit.
Frequently asked questions
It depends on your cost of delivery, the scope of support, technical complexity, security requirements and the gross margin you need. Calculate the direct cost per user and divide it by one minus the target gross margin to find a financially sustainable starting price.
Many MSPs plan for a service gross margin of 50% or higher, while highly efficient recurring managed services operations may target 55% to 65% or more. The right benchmark depends on the services included and how direct delivery costs are allocated.
Add the monthly technical labour, software, licensing and other direct costs of supporting the customer. Divide by the number of users to get cost per user, then divide by one minus the target gross margin to get the required selling price.
Per-user pricing generally works when support demand follows employee numbers. Per-device pricing can suit shared workstations, infrastructure-heavy setups or unusual device-to-user ratios. Hybrid models fit where different services have different cost drivers.
Reduce reactive tickets, automate repetitive tasks, standardise customer environments, improve engineer utilisation and lower the cost of delivering technical services. Dedicated offshore engineers can also be a more cost-effective staffing option when they're well integrated.
It can work when the scope is clearly defined, pricing reflects expected demand and delivery is efficient. Agreements should spell out exclusions, customer responsibilities and how projects, after-hours support and exceptional requirements are handled.
Monitor customer profitability regularly and run a structured pricing review at least once a year, or sooner if scope, labour costs, technology costs or customer environments change materially. Respect contractual notice periods and pricing provisions.
Ready to improve your MSP margins?
If revenue is growing but profit isn't keeping up, we can help you improve delivery efficiency, optimise technical labour costs and create capacity for sustainable growth.
- Experienced L2 and L3 engineers
- Automation Engineers
- Centralised Services capability
- The Better Business Pathway
