MSP Price Increase: How Much to Raise (Letter Included)

Raise managed services prices once a year, at each agreement’s renewal. Most clients get the cost-of-living piece, which in the plans I see is usually 5% or 6%, and the clients you underpriced get more. When I plan a year with an MSP owner, we model a 10% increase blended across the whole book. Then you tell each client in writing at least 30 days before renewal, with one reason: it costs you more to take care of them than it did last year. Here’s how to set each client’s number, what to say when someone pushes back, and a price increase letter you can copy before your next renewal. It’s one piece of how to grow your MSP.

How much should an MSP raise prices each year?

When I build next year’s plan with an owner, we model a 10% blend across the book because it makes the math easy. It’s a planning number, and almost no single client gets exactly 10%.

You might be going, Kyle, that’s super high. It’s an average. Some clients get a 20% pain-in-the-ass increase. Your favorite client gets a 3% one. Most land in the middle on the cost-of-living piece, typically 5% or 6%. It averages out to some number at the end of the day, and you want that number in the plan before January. Whatever your increases bring in is revenue your sales team doesn’t have to go close.

The cost-of-living piece comes straight off your payroll. Service Leadership’s 2026 compensation report asked IT solution providers what raises they gave each position in 2025. Among managed services staff, the people who deliver your agreements, 32.1% got 0.1% to 3%, 51.8% got 3.1% to 6%, and 14.6% got more than 6% (page 126). Plans for 2026 are lower, but in both 2024 and 2025 more raises came in above 6% than IT solution providers had planned (page 123). Add whatever your vendors raised on the tools you already run, and the agreement costs you more to deliver than it did last year before you’ve touched it.

Why does an MSP have to raise prices every year?

If you took a month off, which client would notice first?

Your biggest client calls with a problem. Whose phone rings?

MeSomeone else has done it without me this quarterNobody, it waitsDoesn't apply

Result on screen. Map by email.

Because your costs go up every year whether you raise prices or not. If your costs go up and the price stays the same, you’ve lowered your margin. That’s the decision you made, even if you made it by doing nothing.

It gets worse from there. Lower margin makes you nervous about giving your people raises. Then you’re hiring bargain-bin employees to deliver the service, because you never made your clients pay for the talent the work needs year over year. Quality drops, and then the client fires you. It’s a vicious little circle, and it starts with a renewal that went through at last year’s price.

Let me ask you this. When your agreements auto-renew, do they go up, or do they renew at the same price? Same price means the rate never moves, so the only growth from those clients comes from seats they add. I wrote on LinkedIn a while back that every time you discount your MSP contracts, you have to have a conversation with someone on your team on why they don’t get their raise this year. A flat renewal is the same conversation. You just never have it out loud.

Here’s what the benchmark data shows. In Service Leadership’s 2026 profitability report, the average managed services contract at the top 25% of MSPs by profitability brought in 5.6% more recurring revenue in 2025 than in 2024. At the median MSP it slipped 0.7%, and at the bottom 25% it fell 15.5% (page 122). Over five years, contracts at the top 25% grew about 80% and the median’s about 21% (page 123). The report’s explanation is that the top group raises prices, sells the full package, and sells to clients near the top of its target size. It does all three more consistently than anyone else.

So why do so many owners skip it? Fear. The voice in your head says, if I increase this agreement, the customer is going to leave me. You’re perfectly normal. We have all been there, and we’re always afraid, me included. Then we send it, only 1 in 20 kicks back, and you go, oh, well, that wasn’t that hard. It gets easier in year two, year four, year 12.

How do you decide each client’s increase?

Sort each client on three things: how old the agreement is, how many years since its last increase, and how far it sits under your minimum margin. Clients under your minimum get the gap added on top of the cost-of-living piece.

Your minimum margin is the floor you never sell under. Say yours is 40%. Was this client 10 points under it last year? 20? 30? The further under, the bigger the increase. If you don’t know each client’s margin, run your noisiest accounts through the MSP pricing calculator with their real help desk hours and find out.

Give some grace when your team caused the problem. If your service team screwed up and that’s why the client went unprofitable, you kind of have to eat that. Fix the service first.

The handshake deals are where owners flinch. Somebody’s buddy got a deal years ago, nobody has touched it since, and it’s been underwater the whole time. Here’s how I think about it: if I can pick the customers that walk away, I want to pick the ones that are super unprofitable and will never be profitable because they got a handshake deal 12 years ago.

The other end of the list needs attention too. At the MSP I ran, we kept a monthly habit called top five, bottom five. Every month we looked at the five most profitable clients and the five least profitable, and asked what we’d do about each group. The bottom five needed to move up in profitability. The top five needed to move down a little, which sounds stupid until you look at who was in it.

Some of them were about 98% profitable and hadn’t heard from us in two months, and they were exactly the clients I couldn’t afford to lose. Even at 80% profitable we’d make a ton of money on them. So we balanced the scales, and sometimes that was just my account manager taking them to lunch so they could see a face.

If you sort your book this way and too many clients land under your minimum, you’ve got a pricing problem that one round of letters won’t fix. Bring the list to a call and we’ll work through it before your next renewals go out.

What’s the difference between a price increase and an upgrade?

A price increase is the same service at your new cost. An upgrade is a different service, so it gets a new agreement. Keep those two apart, and keep a third thing, the true-up, out of both.

A true-up is monthly reconciliation. The client added three users, so the invoice goes up three seats. That happens every month and has nothing to do with your rate. A price increase happens once a year in the renewal cycle, because your costs went up: raises, plus the vendors who raised prices on the tools you already run.

The upgrade is where MSPs get themselves in trouble. You find a better tool, you love it, and you roll it out to every client at the same price. My opinion: unless they’re paying you more money, you don’t do anything different. I know that’s tough to hear in the channel.

Think of your agreement like a phone. Your client has Managed Service Agreement 5. If they want what’s in version 6, they upgrade: new paperwork, new signature, a new onboarding, and the price of the new plan.

And sometimes your costs go up enough that you can’t treat it as an increase at all. That’s the year you build the new plan and move people onto it.

So don’t pin an increase on a new tool, either. If your letter says you added a security tool and that’s why the price is going up, you’ve changed the product and called it an increase. Price increases are there to cover inflation and the cost of living. Your team is going to expect a raise from you, and the increase is how your clients pay for it.

When should you send a price increase notice?

At least 30 days before the renewal date, once a year. You always talk to the client first, so start those conversations a few weeks earlier. For a January 1 renewal, that means conversations in November and any written notices by December 1.

Thirty days is my minimum. Check what your agreement promises, too, because that’s the notice you owe. And if a client is in the middle of a term, if they signed a one-year or three-year agreement at a price, you don’t want to touch that. That’s just gross.

If you want increases during a long term, write them into the next agreement. Some MSPs do this on three-year terms: year one is the base price, year two goes up a set percent, and year three goes up again. It’s a little harder to sell. At 5% or 7%, a lot of people don’t notice it, because for some clients it’s 50 bucks, 100 bucks.

One increase a year is enough. If you try to do two, then you’re that guy.

Then make it a process so it doesn’t depend on you remembering. Put every renewal on a calendar, book the conversations, and let somebody in operations send the notices to the clients who never made time. That rhythm is what saves your margin when your people ask for raises. Your account manager, or you, has the conversations. Keep a list of who got which notice and when their 30 days are up.

How do you tell clients about a price increase?

Start with a conversation, every time. Then put it in writing: the new number, the renewal date and one honest reason. If a client blows off the conversation, the written notice goes out anyway, with the renewal date on it.

The best time to bring it up is before renewal season. If you run quarterly planning meetings, ask about next year’s budget at the last one before renewal. Then you can say it the way I’d say it to a client’s CFO: we’re probably going to increase our prices, but can we at least make an attempt to fit your budget? If you both try and it still doesn’t fit, at least you both tried, and nobody feels gross if they walk.

In that conversation, show them their own numbers: their usage, their tickets, their seats. When you use the client’s own numbers, something happens psychologically and their guard comes down.

What should an MSP price increase letter say?

Five things, in this order: the renewal date and the new rate, one reason, what stays the same, who to call, and a thank-you. Keep it short. Skip the apology, and leave out the paragraph about how much you value the partnership.

Here’s the written notice for a standard cost-of-living increase, for the client who blew off the conversation. Copy it and swap in everything in brackets. If your vendors didn’t raise prices on you this year, cut that sentence. Only put in the letter what’s true.

Subject: Your managed services rate for [year]

Hi [first name],

Your managed services agreement with us renews on [renewal date]. Starting with that invoice, your monthly rate goes from [current rate] to [new rate], an increase of [percent].

Here’s why. It costs us more to take care of you than it did a year ago. Our team got raises, and the vendors behind the tools we run for you raised their prices on us. We raise rates once a year, at renewal, so we can keep paying the people who pick up when you call, and so you never get a surprise in the middle of the year.

Nothing about your service changes. You keep the same team and the same coverage, including [your quarterly planning call or response times].

If you’d like to talk it through, reply to this email or call me at [phone]. Otherwise there’s nothing you need to do, and the new rate starts on [renewal date].

Thanks for the business,

[Your name] [Title], [Company]

For a bigger increase, the letter comes after the call. It confirms what you already said out loud:

Subject: Following up on our call about your agreement

Hi [first name],

Thanks for making time to talk on [day]. As we discussed, your agreement renews on [renewal date], and your new monthly rate will be [new rate].

I want to be straight with you about why this is a bigger step than a normal year. Your rate hasn’t changed since [year], and as we went through on the call, your [usage, tickets and seats] have grown past what the agreement was priced for. I’d rather fix the price than start cutting corners on your service.

Nothing about your service changes. The same people will keep picking up when you call.

If anything in this doesn’t match what we discussed, call me at [phone] before [renewal date].

[Your name] [Title], [Company]

Send both from a person the client knows, from an inbox a human reads. A rate change from a no-reply billing address tells the client nobody wants to talk about it.

What do you do when a client pushes back?

Take the call and hold the number. Very few clients will push back.

Restate the reason, and don’t discount to keep them. A discount is the raise someone on your team doesn’t get this year. If you want to give something, get something for it. For a client on month-to-month, one trade I’ve put in a letter: sign an agreement for another year and you can keep your current pricing. You give up a year of the increase, and you get a year of commitment. For more on holding the line when a client leans on you, read holding your managed services price.

Some will walk. If you sorted your book right, the ones who walk are the handshake deals and the clients who were eating more than they paid for. That’s churn, and it’s churn you picked.

Common MSP price increase mistakes

• Auto-renewing at last year’s price. Your costs went up and your revenue didn’t, so you made less on that client this year.
• Pinning the increase on a new tool. That’s an upgrade. It gets its own agreement and its own price.
• Handing old clients your new stack for free. When you switch to a better, pricier tool, old clients upgrade to the new plan to get it.
• Mailing a 25% increase cold. The big ones hear it from you first.

The one thing to do this week

Your costs went up this year whether you send the letter or not. So send it.

Pull every agreement and sort the list by renewal date. Next to each one, write the date of its last increase and its margin over the last year, then run it through the table above. Book a conversation with every client a few weeks ahead of each renewal, and send the written notice to anyone who blows you off so it lands at least 30 days before the renewal date. For a January 1 renewal, that means conversations in November and notices by December 1. Then count how many clients actually push back. For every 20, my bet is one.

If you want help building next year’s plan around that number, here’s how I work with MSP owners.