Author: The Chief Alchemist

MSP Valuation: How UK MSPs Are Valued and What Yours Could Be Worth

Many MSP owners carry a rough figure for what their business is worth. It usually comes from a multiple someone mentioned at a channel event, or from what a peer sold for. That figure can be a long way from what a buyer would pay, and the gap is often large enough to change an owner’s plans.

This guide explains how UK MSPs are valued, what multiples they typically sell for, which factors move the multiple up or down, and how much difference pricing and profitability make. It is useful whether you plan to sell in two years, in ten, or never.

If you want a figure for your own business first, the MSP valuation calculator takes about two minutes and needs only your revenue, EBITDA and recurring revenue mix.

How MSPs are valued

UK MSP acquisitions are usually priced as a multiple of adjusted EBITDA (earnings before interest, tax, depreciation and amortisation).

Valuation = adjusted EBITDA × multiple

Adjusted EBITDA is your profit after a buyer has made some corrections. The most common is replacing whatever the owner pays themselves with a market-rate salary for the role they perform. Buyers also remove one-off costs or income, and personal expenses run through the business. If you pay yourself a small salary and take the rest as dividends, your adjusted EBITDA will be lower than your accounts suggest.

The multiple reflects how confident the buyer is that those earnings will continue and grow. Two MSPs with the same EBITDA can receive very different offers, because one has predictable, contracted revenue and the other depends on a few clients and its owner.

Revenue multiples appear in some smaller deals, usually where the buyer is mainly acquiring a contract base. They tend to produce a lower figure than a well-run MSP would achieve on an EBITDA basis.

What multiples UK MSPs sell for

Published M&A market data, including Aventis Advisors’ analysis of MSP transactions, suggests that UK MSP transactions have generally landed between 3.5x and 7x adjusted EBITDA in recent years. Where a business sits in that range depends mainly on its size and the quality of its earnings.

Size has a clear effect. Aventis Advisors’ analysis of MSP transactions, which covers international deals and was updated in 2026, puts the smallest businesses, with revenue under $1–2 million, at around 3–4x EBITDA, and smaller companies generally at 5–8x. The median across the 120 transactions it analysed was around 8.9x, but the median deal in that sample was worth $38.5 million, far larger than a typical owner-led UK MSP. Larger MSPs attract more buyers, including private equity, and are seen as lower risk.

For a typical owner-led UK MSP with £1–5 million of revenue, a realistic starting range is around 3.5x to 6x. Quality factors can move a business by up to about 1.5x in either direction within that range.

What moves your multiple up or down

Buyers look for evidence that revenue will continue after the sale and that the business can run without its founder. These are the factors they examine most closely.

Factor	Raises the multiple	Lowers the multiple
Recurring revenue	A high share of revenue from contracted monthly services	Recurring revenue below around 60%, with a large share from projects and hardware
Contracts	Multi-year agreements with auto-renewal and 90-day or longer notice periods	Month-to-month terms, or services delivered without signed contracts
Client concentration	Revenue spread across many clients	One client providing more than around 20% of revenue
Retention	Low churn, with clients who have stayed for years	Regular client losses that have to be replaced to stand still
Growth	Steady year-on-year growth	Flat or falling revenue
Owner dependence	A management team that runs sales, service and key relationships	An owner who is involved in every sale and every major client
Security capability	A defined cybersecurity practice with recurring security services	Security handled ad hoc, or not offered
Specialisation	Recognised depth in one or two sectors	A generalist offer competing mainly on price

Many of these factors come back to how well the business serves its clients. Clients who get clear results stay longer, sign longer contracts and accept price increases, which is exactly what a buyer is paying for.

Worked example: the effect of margin and multiple

Take an MSP with £4 million of revenue, of which £3 million is managed services. After adjustments, its EBITDA margin is 12%, so adjusted EBITDA is £480,000. With patchy contracts and one large client, a buyer might offer 4x, valuing the business at around £1.9 million.

Lever 1: pricing. An 8% increase on the £3 million of managed services adds £240,000 of revenue. The cost of delivering those services does not change, so adjusted EBITDA rises to £720,000. At the same 4x multiple, the business is now worth around £2.9 million, an increase of about £960,000 from the price change alone.

Lever 2: quality. If the owner also moves clients onto longer contracts, reduces dependence on the largest client and hands day-to-day management to a team, the multiple could move towards 5x or more. Every half-point of multiple on £720,000 of EBITDA is worth £360,000.

These figures are illustrative, and the right numbers depend on your business. The principle holds for many MSPs: pricing is usually the fastest way to raise EBITDA, and the quality factors decide how much each pound of EBITDA is worth. The MSP price increase case study shows an 8% increase in practice: the client kept every customer and grew profit by 43%.

Why your MSP may be worth less than you think

Your EBITDA gets adjusted down. Paying yourself below market rate flatters your profit. A buyer will correct it.
Revenue you count as recurring is not contracted. Buyers discount services delivered without signed, current agreements.
The business depends on you. If clients call you directly and sales run through you, the buyer is taking a risk that you will not be there, and prices that in, often through an earn-out.
Prices have not moved in years. Low prices hold down margins, and buyers can see the gap between your pricing and the market’s.

All of these can be fixed, but they take time. Tightening contracts and client concentration can show results within a year. Building a security practice or changing your revenue mix usually takes longer. Planning 12 to 24 months ahead gives you more options.

How to increase what your MSP is worth

Work out your adjusted EBITDA with a market-rate salary for yourself, so you start from the figure a buyer would use.
Review your pricing. If you have not raised prices in two years or more, start here. The guide to communicating a price increase includes letter templates.
Put every client on a current contract with a sensible term and notice period.
Reduce concentration by growing other accounts, and review which clients are worth keeping. A client scorecard helps.
Step back from day-to-day delivery so the business runs without you.

The six fixes that improve MSP profitability and valuation cover these areas in more detail.

Next step

Use the MSP valuation calculator to get an indicative figure for your business and see which factors are holding the multiple down.

If you want to see where your pricing stands, the MSP Pricing Scorecard takes three minutes and gives you a score and a full report by email.

Valuation multiples in this article are indicative, based on published M&A market data, and are not financial advice. Individual valuations depend on the specific circumstances of each business.

28 September, 2026

Should You Fire a Client? How to Decide Using a Client Scorecard

A business owner once told me, with some pride, that they had never lost a customer. I asked whether they enjoyed working with all of them. They admitted a few were difficult: always asking for free work or discounts, disliked by the team, and never given a price increase because the owner could not face the argument.

Those clients were taking a large share of the team’s time, holding down margins and making the work less enjoyable. A retention rate of 100% was hiding the problem.

This guide explains how to decide whether a client is worth keeping, using two simple scorecards: one before a client signs and one while you work with them. It includes example scorecards you can adapt and the options you have when a client scores badly.

Why keeping every client can hurt your business

Many owners treat retention as a score where higher is always better. The costs of a poor-fit client rarely show up clearly in the accounts. They show up in time spent on rework, scope arguments, late payments and a tired team.

A marketing consultant I worked with had a client paying £1,800 a month. On paper it looked like a good account. When we added up the hours the team spent on it and the effect it had on morale, the client was costing the business money.

Owners usually keep clients like this for three reasons: worry about replacing the revenue, reluctance to have a difficult conversation, and concern about what the client might say to others. Meanwhile the time those clients take up is time the business cannot give to clients who value the work and pay properly for it.

Some client turnover is healthy. Needs change, key contacts move on and your business moves in a different direction. The aim is to decide deliberately which clients to keep, using criteria you have set in advance, so the decision rests on evidence you can point to.

Case study: how scoring cut churn at a logistics company

A global logistics company came to me losing 35% of its clients every year. The leadership team believed the problem was in customer service. When we looked at the whole client lifecycle, the cause turned out to be earlier.

The company mainly served American businesses expanding into Europe. The offer was attractive and plenty of companies signed up, but many left after about six months. They liked the idea of expanding into Europe but were not ready to do it.

We built a scoring system that rated prospects on five factors:

Product fit for European markets
Previous experience with third-party logistics
Language capabilities
Understanding of UK and EU regulations
Marketing plans for European customers

The scores predicted which clients were likely to leave within six months. Early terminations fell by 55%. Over the following three years revenue grew by 140% while the team’s workload fell by 20%.

The company did not simply turn low-scoring prospects away. The scores showed a gap in the market, and the company built a new service line that helps businesses prepare for European expansion. Prospects who were not ready became clients of that service first.

Scorecard 1: before a client signs

A pre-engagement scorecard helps you spot poor-fit clients before you commit. Choose five to eight factors that predict a successful engagement in your business, and score each from 1 to 5. The example below suits many service businesses; replace any factor that does not apply to yours.

Factor	Scores 1 if…	Scores 5 if…
Budget fit	They want your full service at well below your price	Your price is within their budget without negotiation
Readiness	They like the idea but cannot act on it yet	They have the people, time and data to start now
Decision-making	Several people must approve, and you have not met them	You are speaking to the person who decides
Provider history	They have been through several providers recently	They have long relationships with their suppliers
Openness to advice	They want you to do exactly what they say	They ask for your view and act on it
Fit with what you do best	The work sits at the edge of your services	The work is what you do best

Set a threshold before you start using it. With six factors, a total below 18 out of 30 might mean you walk away, or that you address the weak areas before signing (for example, a paid discovery phase for a client who is not yet ready).

Being clear about what a good client looks like also improves your marketing and sales conversations, because you know which prospects to spend time on.

Scorecard 2: while you work with a client

Client relationships change. A new finance director may care only about cost, or a client who used to accept your advice may start questioning every recommendation. Score every client each quarter against factors like these.

Factor	Scores 1 if…	Scores 5 if…
Profitability	The time spent is out of proportion to the fee	Margin on the account is at or above your target
Scope discipline	Regular requests for work outside the agreement	Changes are raised and paid for properly
Payment	Invoices are regularly late	Invoices are paid on time
Results	They are not getting value from the work	They can point to results from your work
Ease of working together	The team dreads their calls	The team enjoys the work
Growth potential	No prospect of the account growing	Clear scope to do more for them

Agree in advance what happens when a client falls below your threshold, for example two quarters in a row. Scoring is most useful as an early warning, because it lets you raise problems while the relationship can still be fixed. Clients who value the work usually respond well to an open conversation about the scores. A client who will not engage with the facts has given you useful information too.

What to do with a low-scoring client

Ending the relationship is one option of several.

Reset expectations. A frank conversation about scope, communication or payment can change the relationship.
Adjust the price. If the account takes more time than it pays for, raise the price to reflect the work. The client will either pay a fair rate or leave, and both outcomes improve your position.
Offer a different service model. A simpler, lower-touch package may suit them better and take less of your time.
Help them move on. Introduce them to a provider that suits them better, and hand over properly so the relationship ends well.

A client who is wrong for you is often not getting your best work either. Helping them find a better fit is usually good for both sides.

Next step

Score your current clients against the second scorecard this month. Many owners find a few accounts that take far more time than they pay for. Decide which of the four options above fits each one.

If you would like help building scorecards around your own client journey, customer journey mapping is where that work starts. For a wider view of your pricing, profitability and client base, the Value Transformation Assessment gives you a picture in around five minutes.

If you run an MSP, the MSP case study shows how one IT company improved profit without taking on new clients.

4 September, 2026

How to Position Your Services as an Investment

A consultant I know lost a £50,000 project because the client said the price was too high. A month later, the same client hired someone else for £65,000.

The first proposal listed what the consultant would do: monthly reports, weekly check-ins, analysis and recommendations. The second never listed activities. It described a £2 million revenue opportunity the client was missing and how the work would capture part of it within 18 months. The client paid more because the second proposal was about the result the client wanted.

This guide explains why clients come to see a service as a cost, and gives a four-step model for positioning your services as an investment, with worked examples and a table for rewriting your own service descriptions.

Why clients see your service as a cost

Businesses split their spending into two groups: costs they want to reduce and investments they expect a return from. When a proposal describes hours, reports and meetings, the client files it under costs. Costs get compared line by line with cheaper suppliers, and they are the first thing cut when budgets tighten.

This happens in many service businesses. An IT provider describes 24/7 monitoring and quarterly reviews. A marketing agency describes social media management and content. An accountant describes monthly bookkeeping. Each is accurate, and each invites the client to find the same list somewhere cheaper.

An IT services company I worked with was bidding against an MSP that charged less for what looked, to the client, like the same service. The same client was hiring, expanding and investing in growth, so budget was not the issue. The IT company rewrote its proposal around the client’s growth plans and showed how its support would make them happen. It kept its price and won the contract.

A management consultant I worked with had long-standing clients who kept asking for discounts, even though his results were good. His proposals read as a list of activities: planning sessions, stakeholder interviews, process mapping. When we rewrote them around the efficiency gains and annual savings his work produced, the discount requests stopped.

What clients are buying

Clients pay for the change your work makes to their business. The table shows how the same services read when they are described by their outcome.

Described as a deliverable	Described as an outcome
24/7 monitoring and quarterly reviews	Staff who can work without IT interruptions, and a board that knows the business is protected
Social media management, SEO and content	A steady flow of qualified enquiries and a lower cost per new customer
Monthly bookkeeping and quarterly reports	Accurate figures to make decisions on, and no surprises at year end
Strategy workshops and process mapping	A plan the team can follow, and measurable time saved on core processes

Outcome descriptions only work when they are specific to the client. The next step is to put numbers on them. This is also the basis of value-based pricing, where the price is set from the value of the outcome.

The four-step Investment Positioning Model

The examples below use an IT support contract for a 60-person business at £5,000 a month. The figures are illustrative; in a real proposal, use the client’s own numbers.

Step 1: Put a number on the problem

Start with what the problem costs the client today. If outages stop 60 people working and an hour of lost work costs the business around £40 per person, each hour of downtime costs about £2,400. At six hours a month, that is roughly £14,400 a month.

Include the risks the client is exposed to. The cost of a data breach, for example, can run to tens of thousands of pounds for a smaller business and to hundreds of thousands or more for a larger one. Use the client’s own history where you can, and name your source when you quote an outside figure.

Step 2: Specify the outcome

Say what will change, in terms the client can measure. “We will optimise your systems” gives them nothing to hold you to. “We will reduce unplanned downtime from around six hours a month to under one” does.

Step 3: Show the return

Set the fee against the outcome. Five fewer hours of downtime a month saves about £12,000. Against a fee of £5,000, the client is around £7,000 a month better off. Presented this way, the client is weighing a return against an outlay.

Step 4: Show the risk you remove

Explain what happens without the service. Unmaintained equipment may need replacing early, and an unpatched system is more exposed to attack. Put a figure on the likely cost where you can. The service then protects the client’s existing investment as well as adding to it.

Example: a digital marketing agency

A digital marketing agency I worked with charged £2,500 a month for what it called comprehensive digital marketing services. Existing clients regularly asked for discounts when budgets tightened.

For the next new client, we described the service by its results: the cost of acquiring a customer, revenue attributed to the campaigns, and customer lifetime value. Over the engagement, the client’s acquisition cost fell from £350 to £80 per customer, and the campaigns were bringing in £25,000 or more a month in additional revenue. At that point the £2,500 fee was a small share of what the client gained, and price stopped coming up in renewal conversations.

What to do this week

List your three main services. For each, write down the problem it solves and estimate what that problem costs a typical client.
Rewrite each service description to lead with the outcome, using the table above as a guide.
In your next proposal, set your fee against the client’s likely return, using the four steps.
Compare your price with the value of the outcome. If the gap is large, read why many service businesses undercharge and how to raise prices without losing clients.

When a client asks why your service costs what it does, this guide to explaining value-based pricing gives you a structure and scripts for the conversation.

Next step

If you want to know how your positioning and pricing compare with the value you deliver, the Value Transformation Assessment gives you a picture in around five minutes.

If you run an MSP, the MSP Pricing Scorecard takes three minutes and gives you a score and a full report by email.

31 July, 2026

What Happens When You Raise Your Prices
Owners who are thinking about raising their prices usually picture the same thing: clients reading the notice, deciding it is too expensive, and leaving for someone cheaper. That expectation keeps many service businesses on the same prices for years.
In the price increases I have worked on, the outcome is usually different. This article describes what tends to happen to your client base, to the way clients behave, and to your profit, and how to test a new price before you apply it across the business.

Fewer clients leave than you expect
When an increase is reasonable, explained well and linked to what the client receives, clients usually stay. Many of them have been expecting it, particularly if prices have not moved for a few years and their other suppliers have already put theirs up.
An IT service provider I worked with had not changed its prices in four years. It put through an 8% increase and kept every client. Combined with some cost savings, profit rose by 43%. The full MSP case study shows how it was done.
How you announce the change has a large effect on who stays. The process, with letter templates, is in how to communicate a price increase to clients.
The clients who leave are usually the least profitable
The clients most likely to leave are the ones who chose you because you were cheapest. They are often the same clients who negotiate every piece of scope, ask for work outside the agreement and pay late. When they go, the revenue you lose is usually smaller than it looks, because the time they took up is freed for better-paying work.
If you want to see in advance which clients are at risk, score them. This client scorecard shows how, and what to do with the accounts that score badly.
Clients often treat you differently
Price is one of the signals buyers use to judge quality, especially for services they cannot easily assess before they buy. A consultant at £8,000 is assumed to have more experience than one at £2,000 for similar work, whether or not that is true.
In practice, businesses that move their prices up, and describe their work in terms of the client’s results, often find clients question their recommendations less, ask for fewer time reports and act on advice more quickly. The clients have made a bigger commitment, so they want the work to succeed.
This only holds when the price is backed by the service. A higher price with the same vague proposal and the same delivery invites closer scrutiny. The article on positioning your services as an investment covers how to describe your work so the price makes sense to the client.
Example: an SEO agency that moved from £2,000 to £10,000 a month
An SEO agency I worked with recently charged its clients an average of around £2,000 a month. The work was good, but the agency never connected it to what each client gained, so clients judged it on the monthly fee.
We changed how the agency described its value. Its proposals now set out the outcomes for the client and what those outcomes are worth in pounds, so the client can see the return before they sign. The agency also moved to a revenue share model, where part of its fee is linked to the revenue its work generates for the client.
Shortly afterwards, the agency signed its first client paying more than £10,000 a month. The SEO work itself was much the same. The difference was that the client could see what it was worth.
Profit rises faster than the price
In a service business the main costs are people and overheads, and they do not change when you raise prices, so nearly all of the increase goes to profit. For a business with a 15% margin, a 10% price increase with no client losses raises profit by around two thirds. The business could also lose around 9% of its revenue from departing clients and still take in the same revenue as before, from fewer clients. The worked example is in how to raise prices without losing clients.
How to test a new price before you commit
1. List the results you delivered last year. For each client, note what changed for them: revenue gained, costs cut, time saved or risks avoided. Use numbers where you have them.
2. Describe the outcome you deliver. “Better marketing” is vague. “Forty qualified enquiries a month” is specific enough for a client to value.
3. Put a value on the outcome. Estimate what the client’s problem costs them today and what solving it is worth. This gives you a reference point for the price. The guide to value-based pricing explains the method.
4. Try the new price on new prospects first. Quote it in your next few proposals and watch how prospects respond. Adjust the price or the way you describe the work before you change anything for existing clients.
5. Move existing clients across. Give notice in two stages and connect the change to the results you have delivered together and what comes next.
Next step
Choose one service and write down the outcome it delivers and what that outcome is worth to a typical client. Compare that figure with what you charge. If you want to see how far your pricing sits from where it should be, the Pricing Health Check gives you a picture in a few minutes.
If you run an MSP, the MSP Pricing Scorecard takes three minutes and gives you a score and a full report by email.
24 July, 2026
How to Explain Your Value-Based Pricing to Clients (Without Losing the Room)
Many service business owners understand the theory of value-based pricing. The harder part is explaining their pricing to clients.
It’s easier to just fall back on hours, day rates and a list of deliverables, because those feel defensible. And the moment you defend a price based on these inputs, you have invited the client to compare those inputs with someone else’s cheaper ones.
Knowing how to explain value-based pricing to clients is a skill, and like many skills it comes down to a repeatable structure. Here is the one I use with my own clients, along with what to say when you get pushback.
Why These Conversations Go Wrong
The problem is usually the order in which things get discussed.
In a typical proposal conversation, the provider explains what they will do, lists the deliverables, and then reveals the price. The client has been given no frame for that number except the deliverables, so they do the only rational thing available to them: they compare the number against other quotes for similar-looking deliverables. At that point your service has become a commodity.
This is a problem with how the conversation is set up. Clients compare on price when price is the only comparable thing they have been given. If you want the full grounding on why this happens and how value-based pricing fixes it, our complete guide covers the model in depth. This article is about the conversation itself.
The Three-Part Structure: Outcome, Approach, Price
The fix is sequencing. Talk about the client’s outcome first, your approach second, and the investment (price) last. The price should come at the end, as the logical conclusion of the conversation.
Step 1: Anchor in their outcome, in their numbers
Start with the result the client is buying, expressed in figures they gave you. “You told me a day of downtime costs you around £8,000, and you had four last year.” Now you are talking about removing a £32,000 problem.
This only works if you did the discovery properly. If you do not know what the problem costs the client, you cannot anchor to it, which is why the discovery work before the proposal matters so much. Ask about the cost of the problem, the cost of it continuing, and what solving it would let them do next.
Step 2: Connect your work to that outcome, briefly
Explain how what you do produces the result, in one or two sentences. Avoid itemising. Clients pay for the finished meal, and a list of ingredients is easy to compare on price. The more you list, the more you invite line-by-line comparison with a cheaper list.
Step 3: Present the price as a share of the value
“The programme is £12,000. Set against the £32,000 this has been costing you each year, it pays for itself in the first five months.” Framed this way, the client compares your fee to their gain. That is the purpose of the structure: it changes what the number is measured against.
What to Say When a Client Pushes Back
A common objection is some version of “another provider quoted less for the same thing.” When you pitch a value-based approach, it usually is not the same thing. The way to say so without sounding defensive is to return to the outcome.
“If the cheaper option gets you the same result, you should take it. What we are pricing is the outcome we have agreed and the accountability for delivering it.” Said calmly, this comes across as confidence in the results you will deliver. A prospect who only wants the cheapest inputs is telling you something useful about fit before you have signed anything: they are unlikely to be a good client.
For existing clients who you are looking to move onto a value-based model, the usual objection is something like “Why has the price changed?” That is a different conversation, because there is a relationship and a pricing history involved, and you need to frame it properly. We have covered it step by step in how to communicate a price increase to clients. The short version: two-stage notice, lead with the value they will receive, and don’t apologise for pricing your work properly.
The Language Mistakes That Invite a Price Comparison
A few phrases can undermine a value conversation, however well structured it is.
Justifying the price with your costs. “Our overheads have gone up” and “that is the market rate” mean nothing to the client. They shift the conversation to your economics, which the client has no reason to care about. Every sentence in a pricing conversation should be about what changes for them.
Apologising for the number. “I know it is a lot, but…” tells the client you do not believe the price yourself. If you do not believe it, the client will not either.
Offering a discount before being asked. Pre-emptive discounting signals that the original price was padding. It trains clients to wait, because they learn the real price usually turns out to be lower.
Quoting a range. “Somewhere between £8,000 and £12,000” means the client usually hears £8,000. Anchor to a single figure tied to a defined outcome. If you offer options, structure each one around a different outcome.
Where to Start This Week
Pick your next proposal conversation and prepare the three parts in advance. Write down the client’s outcome in their numbers, the one or two sentences that connect your work to it, and the price framed as a share of the value. Then have the conversation in that order and see how the client responds to the price.
If you are not confident your current prices reflect the value you deliver, that is the thing to fix first. A Pricing Health Check will show you where you stand and where the quickest gains are.
If you run an MSP, the MSP Pricing Scorecard takes three minutes and gives you a score and a full report by email.
11 July, 2026
How to Communicate a Price Increase to Clients (With Letter Templates)
Many service businesses announce a price increase with a single email sent 30 days before the change, opening with rising costs. Clients read it as a problem being passed on to them, and the conversation starts on the defensive even when the increase is reasonable.
This guide covers the process I use with clients: two messages instead of one, each tied to what the client gets. It includes three letter templates you can adapt, a real example of a price change handled well and one handled badly, and a checklist to run before you send anything.

The two-step process: 60 days, then 30 days
Send two messages. The first goes out around 60 days before the change and tells the client a review is under way and pricing for the coming year will follow. It contains no numbers. Its job is to let the client expect a change before they see one.
The second goes out around 30 days before the change. It gives the new price, the date it applies from, and the specific improvements the client will see. By the time the figure arrives, the client has had a month to get used to the idea, and the number comes with reasons attached.
A web design agency I worked with used this approach after hiring two new team members. Their 30-day notice explained that the additions would shorten project delivery times while keeping the same quality checks. Clients could see what the increase paid for, and renewals held up after the change.
If you are still deciding how much to raise prices by, start with how to raise prices without losing clients, then come back here to write the messages.
Price increase letter templates
Copy these and replace everything in square brackets. The more specific the details you put in, the better they work. A client will respond to “we resolved 212 of your support tickets this year” far more readily than to “we continue to invest in quality”.
Template 1: the 60-day heads-up email
Subject: Our plans for [year] and a note on pricing
Hi [first name],
Each year we review how we work with clients and where we will invest next. We are doing that now, and I wanted to give you early notice.
Over the past year we have [one or two specific things you delivered for this client]. Next year we are planning to [the main improvement you are making].
I will write again on [date] with the full details, including our pricing for [year], which will apply from [effective date]. If you would like to talk it through before then, reply to this email and we will find a time.
Thanks for working with us,
[Your name]
Template 2: the 30-day price increase notice
Subject: Your [service] from [effective date]: what is changing
Hi [first name],
As mentioned in my note on [date of first email], here are the details of what changes from [effective date].
What we are adding:
[Improvement 1, and what it means for the client day to day]
[Improvement 2, and what it means for the client day to day]
Your new fee: from [effective date], your [monthly / annual / project] fee will be £[new amount]. It is currently £[current amount].
What you need to do: nothing. Your [invoice / direct debit] will update automatically from [effective date].
If you have any questions, reply here or call me on [number]. I am happy to go through it with you.
[Your name]
Template 3: a short notice for small or routine increases
For a small annual adjustment, or clients on a low-touch service, one shorter message can be enough. Give at least 30 days’ notice.
Subject: Your [service] fee from [effective date]
Hi [first name],
A quick note that our [service] fee will change from £[current amount] to £[new amount] per [month / year] from [effective date]. This covers [the specific improvement, or the level of service you are maintaining, for example same-day response times].
You do not need to do anything. If you would like to talk it through, just reply.
[Your name]
How to word a price increase
Lead with what the client gets. “Due to rising costs” tells the client you are under pressure and asks them to absorb it. Opening with the improvements, and then stating the price, gives them a reason to accept the change. It is the same skill as explaining value-based pricing to clients: describe the outcome first and the number second.
Replace general reasons with specific ones. “Market conditions” and “inflation” say nothing about the client’s service. “This funds a second engineer on your account, so urgent issues are picked up within the hour” does.
Make existing value visible. You do not have to add something new to justify an increase. Many clients do not know everything you already do for them. A short summary of the year (projects delivered, issues resolved, time saved) is often enough.
Write with confidence. Use active phrasing such as “we are adding” and “from 1 April your fee will be”. Avoid apologies and passive phrases like “prices are being adjusted”, which suggest you are unsure about the decision.
Give an exact date. “From 1 April” removes the need for follow-up questions. “In the coming months” creates them.
A business coach I worked with had drafted: “Due to rising costs, our prices will increase next month.” We rewrote it to: “From 1 June we are adding weekly Q&A sessions and a custom assessment tool for every client.” The price went up by the same amount in both versions. The second version tells the client what they get for it.
A price change handled well: Amazon Prime Video
In early 2024 Amazon introduced adverts to Prime Video in the UK, with an extra £2.99 a month to remove them. For customers who wanted to keep the service they had, this was a price rise. This is the email Amazon sent.
The opening states the change and the reason for it, which is continued investment in content. It then compares the number of adverts favourably with other streaming services and offers the ad-free option straight away.
The middle section reminds the customer of everything included in Prime. This is the “make existing value visible” principle in practice.
The close confirms that no action is needed and repeats the ad-free option. The customer knows what is changing, when, what they still get, and what they can do about it.
A price increase handled badly: a web hosting provider
This email came from a hosting provider I used to work with.
The tone is apologetic, and the only reference to value is a general mention of improving infrastructure. The email could have summarised the services I was using, set out their plans for the year, or introduced products I might want. It did none of those things.
I moved to another provider soon after. I now pay more, for a service where I can see what I am getting.
Checklist before you send a price increase notice
- You have given at least 30 days’ notice, and ideally a 60-day heads-up as well.
- The message states the new price, the current price and the exact date the change applies.
- The reason is specific to the client’s service, with no references to general inflation or market conditions.
- It reminds the client of what they already receive.
- The language is plain and confident, with no apologies or jargon.
- Your largest or most sensitive clients get a personal version, or a call before the email.
- Anyone who speaks to clients knows about the change and how to answer questions about it.
- It tells the client what, if anything, they need to do.
What to say if a client pushes back
“Can we stay on the old price?” Thank them for asking, and restate what the new fee covers. If you want to offer something, offer time (for example, applying the new rate at their next renewal) and keep the price the same. A discount at this stage teaches clients that the price is negotiable.
“We are going to look at other providers.” Ask what they would want from an alternative. The answer tells you whether the concern is the price or something about the service, and gives you a chance to address it.
A client leaves. Some will. A client who leaves over a fair, well-explained increase was often a poor fit for the price your service needs to carry. The MSP case study shows what happened to one IT company’s client base and profit after an increase handled this way.
Next step
Draft your 60-day heads-up this week using Template 1. Before you settle on the new figure, it helps to know how far your current prices sit from the value you deliver. The Pricing Health Check shows you in a few minutes, and the guide to value-based pricing explains how to set a price from the client’s outcome.
If you run an MSP, the MSP Pricing Scorecard takes three minutes and gives you a score and a full report by email.
9 July, 2026
How to Raise Prices Without Losing Clients
Many service business owners know their prices are too low and still put off raising them, because they expect clients to leave. In my experience working with service businesses, a well-planned and well-communicated increase usually loses far fewer clients than the owner feared, and the ones who do leave are often the least profitable.
This guide covers what holding prices still costs you, how to decide how much to raise them by, which clients are likely to leave, and how to plan the increase so your best clients stay.

What holding your prices costs you
If your prices stay the same while your costs rise, the difference comes out of your profit. Take a business with annual costs of £100,000 and inflation of 3% a year. In year one, costs rise by £3,000. By year five, annual costs are about £15,900 higher than when you started. Over the five years combined, the extra costs add up to around £46,800, all absorbed by the business if prices never moved.
Salaries, software, insurance and National Insurance contributions have all risen for UK service businesses in recent years. If you have not reviewed your prices for two or three years, use the calculator below to see where they would be if you had kept pace with UK inflation alone.
Price Inflation Calculator
Why a small price increase has a large effect on profit
In a service business, most costs are people and overheads, and they stay the same whether you charge more or not. That means nearly all of a price increase goes straight to profit.
A worked example: a business turns over £800,000 with costs of £680,000, so profit is £120,000 (a 15% margin). A 10% price increase with no client losses takes revenue to £880,000. Costs are unchanged, so profit rises to £200,000, an increase of two thirds. The effect is larger the thinner your current margin.
It also works the other way. After a 10% increase, you could lose around 9% of your clients by revenue and still take in the same revenue as before, while serving fewer clients. Very few well-handled increases lose anything like that proportion.
The MSP case study shows the same arithmetic in a real business: an IT company that combined a modest price increase with small cost savings and kept its clients.
How much to raise your prices by
There is no single right figure, but a few questions will narrow it down.
- How long since your last increase? The calculator above gives you the minimum needed to stand still.
- How do you compare with the value you deliver? Prices set by looking at competitors often sit well below what clients would pay for the outcome. The guide to pricing on value rather than cost explains how to work this out.
- How often do prospects accept your quotes? If nearly every proposal is accepted without discussion, your prices are probably too low.
- Is the gap large? If you are a long way behind, you can move new clients to the new rate straight away and bring existing clients up in two stages over 12 to 18 months.
After this first increase, review prices every year. Small, regular increases are easier for clients to accept than a large one after years without change.
Which clients are likely to leave
The clients who object most to a reasonable increase are usually the ones who already ask for discounts, pay late and take up the most time. They tend to see your service as a commodity, and they are often your least profitable accounts.
Michael, a marketing consultant, spent weeks worrying about a 10% increase and expected to lose a large share of his clients. One client left and one asked to discuss it. They were the same two clients who regularly asked for discounts and made last-minute changes.
A recruiter I worked with had one client who took twice the time of any other and pushed back on every invoice. When she raised her prices, he left. The hours she got back let her take on two new clients at the new rate, which increased both her revenue and her profit.
Before you raise prices, list your clients and note which ones take a large share of your time compared with the profit they generate. If some of them left, consider what you could do with that capacity. A client scoring system makes this assessment more objective.
How to communicate the increase
How you announce the increase affects client retention as much as the size of the increase. The approach that works best has three parts:
1. Two messages. A heads-up around 60 days before the change, with no numbers, then a detailed notice around 30 days before.
2. Specific reasons. Tie the increase to what the client gets, such as faster response times, a new service, or a summary of what you delivered this year. Avoid general references to rising costs or inflation.
3. An exact date and a clear next step. State when the new price applies and whether the client needs to do anything.
The full process, with three letter templates you can adapt, is in how to communicate a price increase to clients.
Next step
Choose one service you know you have been undercharging for, set the new price, and draft the 60-day heads-up. If you want to know how far your pricing sits from where it should be before you decide, the Pricing Health Check gives you a picture in a few minutes.
If you run an MSP, the MSP Pricing Scorecard takes three minutes and gives you a score and a full report by email.
2 July, 2026
How One IT Company Boosted Profits by 43% Without a Single New Client
An IT service provider I worked with increased profit by 43% without bringing in a single new client.
They had not touched their prices in four years. Like a lot of businesses, they were afraid to charge more and under constant pressure to compete on price. Their revenue had flatlined while costs kept rising. The owner told me in our first meeting: “We feel stuck. Every year we are working harder, but it never seems to get any easier.”
In eight weeks, we raised their prices by 8%, cut their costs by 3%, and not one customer left. Here is exactly how we did it.

The Cost of Keeping Prices Flat
For four years, this IT company left their rates untouched while their costs kept rising. Over that time they gave away nearly half their potential profit without realising it.
This is not unusual. Many service businesses compete on price instead of pricing based on value. You keep prices the same hoping to keep clients happy. A competitor appears offering the same thing for less. You discount to win new business and avoid increasing prices for existing customers. Before long there is almost nothing left in your margins.
The owner was cutting staff just to keep the business profitable. They were working longer hours for the same return. And the losses were invisible. Few clients ever questioned invoices or asked for discounts. The problem was the pricing.
Why Clients Stay for the Value of the Service
When we looked closely at the client base, something became clear. Customers were staying because the service was good.
Clients valued reliable systems, fast resolutions, and the peace of mind the company provided. Many had been with the business for years. Their service was tailored to each client’s industry and solved real problems. The value they received far outweighed the cost.
By not adjusting prices to reflect that value, the company was missing the chance to reinvest in staff, better tools, training, and service improvements. Standing still cost them profit, and it also cost them the chance to build a stronger business for the team and for the clients.
When clients see you as a solution to their problems, conversations move from price to outcomes. That change in thinking made everything else possible.
The Psychology of Raising Prices
Any price increase involves work on the numbers, but the harder part is psychology. How you talk about the change shapes how your clients see it.
Simply announcing that prices are going up makes the change about your costs, and clients tend to resist it.
A better approach is to make it a conversation about value. We explained to clients: “To keep delivering these results and to add the new security features your business needs, we are making a small adjustment to your rate.” The conversation stayed focused on what each client would gain.
Think of it like upgrading to premium economy. You pay more because you can see the value in extra leg room and better service. How an increase is framed has a big effect on how clients respond to it.
How We Approached Each Client
We reviewed each client individually: how long they had been with the company, how engaged they were, and how sensitive they might be to change.
For each long-term client, we focused on what mattered to that client. The hours saved every month. The downtime they had avoided. The peace of mind from not worrying about system failures. We pulled out real numbers showing how those outcomes translated into lower risk and higher productivity for their business.
That gave the owner and their team confidence. They could see exactly how much value they were delivering compared to what clients were paying.
We kept the adjustment in the high single digits and made sure every client understood exactly what they would gain. For some it was access to new technology. For others it meant stronger security or more responsive support.
The response was positive. One client said: “I appreciate you improving your service every year and being upfront about what we are getting for the change. That is rare.”
Handling a price change as a conversation about value keeps trust intact. Clients focus on what they will get next.
Where We Found Cost Savings
Costs are the second area that affects profit, and they are often overlooked. They played a big part in reaching the 43% profit increase.
When people think about improving profit, they often focus on revenue. Some of the simplest wins are in everyday expenses.
With this IT company, we started by digging into operational costs. The first thing we noticed was a pile-up of overlapping software subscriptions. They were paying for nearly 20 different tools: multiple project management platforms, several cloud storage providers, and a handful of security apps that all did more or less the same thing. By consolidating those subscriptions, we cut thousands of pounds each month from their outgoings without losing a single critical feature. The team had never realised how many of those small recurring costs had built up over time.
Vendor contracts were another source of savings. Some agreements had not been reviewed in years and usage had changed significantly since they were first signed. A quick round of renegotiations, in some cases just picking up the phone to ask for a pricing review, led to immediate savings. In a few cases, switching to a new supplier brought better service at a lower price.
Staying with the same supplier for years without a review can mean you are overpaying.
One of the most effective operational changes was moving to automated invoicing. The team had been spending hours each week manually sending invoices and chasing payments. By switching to an automated system, they cut billing time by 80% and saw clients pay faster, which improved their cash flow.
None of these changes reduced the quality of service. If anything, they created more space for the team to focus on strategic work and better client support.
Why Pricing and Cost Savings Multiply Each Other
Lower costs and simpler operations meant every pound saved went straight to profit. The two changes also multiply each other’s effect.
Once you have cleaned up costs, raising prices becomes easier and more impactful. You have more confidence in your margins. You can point to genuine investment in service quality. You can have the value conversation from a stronger position.
The biggest jump in profit often comes from looking at what you already have, reviewing your prices, and trimming unnecessary costs. Many businesses overlook these basics, and they are often where the easiest profit gains are.
Three Lessons from This Case Study
First, clients will accept reasonable price increases when you tie them directly to value and they can see what they are getting.
Second, many businesses can find cost savings in the expenses they already have. Overlapping subscriptions, unreviewed vendor contracts, and manual processes that could be automated all reduce your margin.
Third, when you combine smart pricing with operational efficiency, the results multiply. An 8% price increase and a 3% cost reduction delivered 43% more profit. Neither would have got there alone.
If your prices have not changed in a while, or you are not regularly reviewing your expenses, it is worth checking how much profit you are missing.
The MSP Pricing Scorecard shows where your MSP’s pricing needs work. It takes three minutes: 14 questions, with your score on screen straight away and a full report by email.
To get an indicative figure for what your MSP is worth, use the free MSP Valuation Calculator.
25 June, 2026
Why Many Service Businesses Undercharge Without Realising It
Many service businesses set their prices the same way. They look at what competitors charge and pitch a little below it to look competitive. It feels safe, and it wins work. Over time it also leaves the business charging less than its work is worth, often without the owner noticing.
This article explains why pricing from competitors pulls prices down, the signs that you are undercharging, and how to set prices from the value you deliver.

Why pricing from competitors pulls prices down
When one provider prices slightly below the others to win work, the others often respond by matching or undercutting. Each round moves the reference point lower, and over a few years prices across the sector drift down while costs keep rising.
Competitor pricing also tells you very little. You do not know a competitor’s costs, whether they are profitable, or whether they are buying market share at a loss. Setting your price from theirs means relying on decisions you cannot see.
Your price also tells prospects something about you. A price well below the market can suggest a business that is less experienced, or under pressure, even when the work is excellent.
Signs you are undercharging
If several of these apply to your business, your prices are probably too low.
- You win nearly every proposal, and prospects rarely question the price.
- You have not put through a meaningful price increase in two years or more.
- Your prices were set by looking at what competitors charge.
- The team is busy, but profit has stayed flat or fallen.
- You regularly discount to close a deal.
- Clients say things like “you’re very reasonable”.
- You would struggle to pay yourself properly if you stopped doing client work.
How low prices shape your client base
Clients who choose you because you are cheapest are likely to leave when someone cheaper appears. They also tend to be the most demanding: they negotiate on every deliverable, ask for work outside the agreed scope and see your expertise as a commodity. Your team spends more time managing them and less time on the work.
Meanwhile, clients who would value the work and pay properly for it may rule you out because your price suggests a different kind of provider. Over several years, low prices produce a client base that makes the business harder to run. A client scorecard helps you see which accounts are affected.
Pricing from the value you deliver
Clients pay for the result of your work. An IT support company provides business continuity. A marketing agency provides new customers. An engineering consultancy provides a project approved on time and within budget. When you price the hours or the deliverables, clients can only compare you on price. When you price the outcome, the conversation moves to what the result is worth to them.
Value-based pricing starts with that question. The practical steps are:
1. Find out the client’s real problem, which is often different from the first thing they ask for.
2. Map your service to the outcome it produces for them.
3. Put a number on that outcome, using the client’s own figures where you can.
4. Set your price as a fair share of that value, and explain it in those terms. This guide covers what to say.
What changes when prices reflect value
Profit improves because the extra revenue comes from work you are already doing. The MSP case study shows an IT provider that raised prices by 8%, kept every client and grew profit by 43%.
The client base usually improves as well. Clients who buy on results tend to be more collaborative and stay longer. Higher margins pay for better people and tools, which improves delivery and supports the price. That makes the business easier to run and, if you ever sell it, more valuable.
One thing to do this week
Pick one piece of work you are delivering now. Write down what the outcome is worth to the client, then compare it with your invoice. If the gap is large, read how to raise prices without losing clients next.
If you want to see how far your prices sit from where they should be, the Pricing Health Check gives you a picture in a few minutes.
If you run an MSP, the MSP Pricing Scorecard takes three minutes and gives you a score and a full report by email.
18 June, 2026
This Is the Cheapest Year of AI You Will Ever See
Figures in this article reflect AI pricing as of May 2026.
I gave a talk recently at South Coast Technology Leaders called “Stop Chasing AI: Start Solving Problems.” One slide got more reaction than the rest combined. It made a simple point: the AI subscriptions you’re paying for right now are heavily subsidised, and that won’t last.
If you’re experimenting with AI in your business, this matters. You should keep experimenting, but the assumptions you make today about cost are probably wrong.
What AI tools really cost to run
OpenAI is spending far more than it earns. The Wall Street Journal reported that internal OpenAI documents show the company expects operating losses of roughly $74 billion in 2028 alone, before turning profitable somewhere around 2030.
Anthropic, which makes Claude, spends the large majority of its budget on the computing power needed to train and run its models. The company is still running at a loss.
These are the two biggest names in AI, and they’re both spending far more than they earn. The gap is being funded by investors who expect today’s scale to turn into market dominance later.
What that means for your monthly subscription
Your £20 ChatGPT Plus, your £20 Claude Pro, your Copilot, your Cursor account. None of them reflect the real cost of running the models behind them.
Take Claude Code, which a lot of developers use for writing software. A heavy user can run up compute costs many times higher than the price of their subscription. The provider absorbs that gap because they want you to build your work around their tool. Once your workflows depend on it, switching becomes difficult, and that is what the providers are counting on.
Uber used the same approach with cheap rides, WeWork with cheap office space, and Amazon Prime with free shipping: subsidise growth, build dependency, raise prices later.
Signs that AI prices are already rising
Anthropic has changed how it bills business customers, moving towards charging based on actual usage in place of flat fees. Rate limits have tightened across the major providers in 2026. Claude Code users have publicly complained about quotas running out faster than expected, and Anthropic’s own CEO has said the company is compute-constrained.
OpenAI has also raised prices on its newer models this year. None of this is a crisis. Taken together, these changes point to a gradual move towards pricing that reflects the real cost.
Over the next year or two, I expect three things: free tiers will tighten, paid tiers will get more expensive, and pricing models will shift from flat subscriptions towards metered usage. The era of cheap, unlimited use is ending.
What this means if you’re using AI in your business
Two things matter.
First, experiment now. This is the cheapest these tools are likely to be, and the gap between what you pay and what you get is very large right now. If you’ve been hesitating about trying AI in your business, hesitate less. You’re unlikely to get more capability per pound than you do today.
Second, design with cost in mind. The application of AI you build today might work commercially only because the cost is artificially low. Ask yourself whether it would still work if your AI bills doubled, trebled or went up tenfold. Prices are heading upwards, so this is a realistic test.
This is where many businesses go wrong. They’re adding AI to everything, often where it isn’t the right tool.
When RPA is a better fit than AI
RPA stands for Robotic Process Automation. It’s been around for years. It’s the sort of automation that handles structured, repetitive tasks: copying data between systems, processing invoices, moving information through known workflows. It’s deterministic, which means it does the same thing every time. It’s auditable. It’s cheap to run.
A lot of business activity is better handled by RPA, a script or a rules engine. These are tasks where the logic is stable and the inputs are predictable. AI is the wrong tool for those jobs. It’s slower, more expensive, and less reliable. You don’t need a language model to move a number from column A to column B.
AI is most useful for messy work. Reading unstructured information at scale, like contracts or support tickets. Letting non-technical staff query data in plain English. Spotting patterns in chaotic inputs. Summarising long documents. Drafting content that a human will review.
The sensible approach is to use AI to build your automations. Get Claude or ChatGPT to help you write the script, design the RPA workflow, or build the rules engine. Then let cheap, deterministic infrastructure run it day to day.
McDonald’s is a good example. They ran a three-year partnership with IBM to put AI in the drive-thru, taking voice orders. It was a mess. Videos shared online showed orders filling up with hundreds of chicken nuggets nobody asked for, and bacon ending up on ice cream. They quietly shut the whole thing down in July 2024. That problem didn’t need AI. In my view, better menu design and standard speech recognition would have done most of the job at a fraction of the cost.
What cheap AI makes possible to build now
Because AI tooling is cheap right now, the economics of building your own software have changed.
Three of my own clients are currently building things that wouldn’t have been viable two years ago. One is replacing a CRM that never quite fit the business. Another is cutting expensive licensing costs by building a custom platform from existing intellectual property. A third is building a multi-tenant system to sell their own approach to other businesses.
None of these projects would have made commercial sense before. They’d have needed a £200,000 consultancy engagement and a year of build time. Now they’re being done by small in-house teams with help from Claude Code, Cursor, and GitHub Copilot, in weeks rather than months, at a fraction of the historic cost.
This is the most interesting consequence of cheap AI: things you previously couldn’t afford to build are now within reach.
If you run a service business, the bigger risk is having an offer AI can easily copy. I covered that in my article on how AI is exposing weak web design agency offers.
If you’ve been quietly fed up with software that doesn’t fit how your business actually works, now is a good time to build something that does. Just design it knowing that the underlying AI costs are likely to rise.
Three things to do this week
Here are three practical actions.
One: look at where you’re using AI today and ask whether it would still be viable if your AI costs went up significantly. If the answer is no, you’ll have a cost problem to solve.
Two: look at where you’re using AI for things that RPA, scripts, or rules engines could handle better and cheaper. Move those off AI now.
Three: look at the things you’ve wanted to build for years but couldn’t afford to. The maths might have changed.
If you want to find out where your business sits on the spectrum from AI-vulnerable to AI-resilient, the assessment below takes about two minutes and gives you a personalised report.
Could AI Replace Your Service Business?
5 May, 2026