How to Create An Effective MSP Business Model | WisePay
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It’s an exciting time for managed service providers (MSPs). The rapidly evolving landscape in 2025 offers many opportunities for forward-thinking MSPs to innovate and differentiate themselves.
In 2024, experts foresaw MSP trends such as increased artificial intelligence (AI), more holistic cybersecurity, and applications being transformed into platforms. These predictions have all held and continue to shape the ecosystem into 2025, but there are also new things on the horizon.
An effective MSP business model is critical for success now and well into the future. Below, we’ll provide some context for what effective business models look like and why they matter before breaking down how you can craft a successful one.
What is an MSP business model?
An MSP business model is the specific iteration of a firm's service delivery format. MSPs help clients manage information technology (IT) and other digital infrastructure, typically billed monthly as a subscription or retainer agreement.
All told, an MSP business model needs to include:
- The IT services offered by the MSP, a la carte or in packages
- Operational expenses and how they’ll be offset over time
- Strategies generating monthly recurring revenue (MRR)
- Specific markets and/or demographics the MSP will target
- Structures and strategies for pricing (e.g., fixed, dynamic, discounts)
A successful MSP business model accounts for all the managed services that can be provided and in which configurations. It also includes high-level and logistical plans for retaining and growing current accounts and acquiring new clients over time.
Having a sound MSP model is critical to profitability and long-term scalability.
How to build an effective MSP business model
While every small business operates on some strategy, designing and implementing a successful MSP business model takes careful planning. It’s easy to assume that whatever business model has gotten your firm to where it is will continue working into the future, but failing to engage in strategic thinking can be a fast track to disaster.
Even MSPs who make a concerted effort to craft a business model can fall into common pitfalls. Poor financial planning, lacking objectives, and failure to address competitors' or customers' specific needs are insidious challenges for MSPs.
To avoid these mistakes, be sure to follow the following best practices.
Identify your target market
This practice is about understanding your client base. Your identity as an MSP is as much about what you do as it is about who you do it for. Rather than deciding upon a finite set of additional services and seeing the market, you should be open to researching demand and competitive advantages to inform your service offerings.
Specialization is key, and you should start by narrowing your focus to one or a select few service areas. For example, you might focus on cybersecurity services instead of general IT management, cloud, or remote support.
The big takeaway is that you shouldn’t try to be all things for everyone.
Define your value proposition
Closely connected to market segmentation is how your MSP sets itself apart in terms of value creation. What problems do you solve for clients, and how are you unique?
On one level, you’ll want to determine the specific area in which you create value:
- Customer-friendly service-level agreements (SLAs) relative to other MSPs
- Extraordinary thoroughness, availability, or both in customer support
- Unparalleled technological expertise, especially with emerging tech
On another level, you need to be adept at articulating this value proposition clearly to new and existing clients. Show them how much value you create with clear stats and figures accessible from client-facing dashboards, or publicize case studies regularly.
Structure your service offerings
Also related to managed services market segmentation, this practice involves tailoring your services into select packages that provide optimal value to you and your clients.
The most intuitive example is a standard bundle, in which services that are related to each other, synergize efficiently, or are otherwise often purchased together are combined into a single item. For example, a cybersecurity services provider might bundle proactive monitoring with disaster recovery since one service feeds into the other.
Bundles and packages also create opportunities to pair a hotter commodity with a harder-to-sell service. If clients are hesitant to commit to pen testing, sticking with the security example, they might be more inclined to purchase it at a discount alongside something they already require, such as patch management.
Another option is offering customers the flexibility to bundle services that might not be sold together. If an MSP offers remote monitoring and invoicing software under different brands or segments, a well-structured service offering (and agreement) can create extra value for both the vendor and the client.
Create your pricing model
Pricing strategy goes hand-in-hand with structure. How much you charge for a service or suite and how it’s billed can be just as critical as what the services are.
- Per-user: Clients pay for each unique user of your platform services.
- Per-device: Clients pay per computer or other device serviced.
- Flat rate: Clients pay a single rate irrespective of users or devices.
Beyond these, MSPs may also consider tiered packages based on client needs or other externalities, such as honoring loyalty or legacy agreements. Profitability is the north star for all pricing strategies, but flexibility and transparency are crucial for retention. Growing alongside clients requires pricing that works for all parties.
Build your marketing strategy
An MSP business model informs what an MSP offers to current and potential clients and how it communicates outwardly to attract business. A marketing strategy needs to be part of your overall business model.
You need to consider your website, broader digital footprint (e.g., LinkedIn profiles), and any advertising and other direct marketing campaigns you’re conducting.
This means carefully evaluating content and developing a dedicated business strategy, including key performance indicators (KPIs) to help measure success. It also requires an intentional approach to distribution. Select your channels based on where your client base is most likely to be rather than what’s easiest or cheapest.
If you aren’t seeing results, be ready (and quick) to make adjustments based on the data you collect. Flexibility and responsiveness are critical to successful marketing.
Consider client relationship management
Customer or client relationship management (CRM) is essential to any business’s success in retaining clients long-term. This is especially true for MSPs and other service-model firms, where support often differentiates the best vendors.
On one level, effective CRM involves logistics and tracking. You need systems to onboard clients, ideally at the lead stage, and track their progress.
Conversely, CRM is about actively engaging with stakeholders at your client firms. Sales or customer success staff should know the people at your client organizations by first name.
They should reach out regularly to ensure customer satisfaction, collect (and act on) feedback, and identify and resolve issues as swiftly as possible. It’s also the best way to scan for lucrative upsell opportunities.
Identify tools and technology
Last but not least, seek out and leverage the best tools and technology available. MSP-specific tools like remote monitoring and management (RMM) and professional services automation (PSA) will help you and your clients operate more efficiently.
This, in turn, allows you and your clients to grow sustainably.
Building MSP automation into your business model will prepare you to scale both in terms of what you do and how you do it. Providing a wider variety of services at a higher level will allow you to reach more clients. By removing human error and optimizing efficiency, you’ll increase quality alongside quantity.
Trends shaping the future of MSP business models
MSPs need to stay ahead of the curve with emerging trends in technology. Looking at 2025 and beyond, many of the biggest MSP trends revolve around the increased use of AI and machine learning (ML) tech. One way this will manifest is greater demand for data security, cyber defense, and regulatory compliance support.
Another continuation of a years-long development will be the push for cloud-first strategies. Companies in every industry are migrating to the cloud or increasing their use of cloud computing technologies. MSPs are in a strong position to help them make the switch and optimize their businesses during and afterward.
Finally, MSPs should look for more complex uses for automation, such as suites for automated invoicing and automated payments. Helping clients automate their billing and/or invoicing improves accuracy and speed, leading to profitability.
Integrate automation into your MSP business model
Looking ahead to 2025 and beyond, MSPs are in a great position to maximize their value to current and potential clients. But doing so requires creating and implementing an effective MSP business model, which entails strategizing for target markets, value proposition, service structure, pricing, marketing, and more.
WisePay helps MSPs optimize payment and billing operations, increasing profitability for all parties involved. We’ll help you grow sustainably alongside clients.
