Audit grandfathered pricing by separating missed price changes from changes in scope, seat count, and delivery cost. Calculate the difference against the model's 5% annual step, then check the agreement and actual margin before deciding what to propose. A missed model increase isn't automatically an amount the client owes you.
I'd build the list before drafting any increase letter. The oldest price isn't necessarily the weakest account. You need the current fee, what it buys, what it costs, and the terms governing a change.
Build a Price History You Can Reconcile
Grandfathered pricing means an existing client retains an earlier pricing arrangement while your current offer uses a different one. Establish what was actually agreed. A historical discount, an unchanged unit rate, and extra work added without a fee are different problems.
Use the signed agreement, approved changes, notices, and invoices to build the history. Record the last confirmed rate change and the date it took effect. If the records disagree, assign the difference for investigation rather than guessing the date from the client's tenure.
| Record | What to Establish | Why It Matters |
|---|---|---|
| Current Fee and Quantity | Recurring lines, unit prices, billable quantities, and effective dates | Separates price changes from seat growth |
| Scope History | Included work and approved additions or exclusions | Shows whether the service changed while the fee stayed still |
| Price-Change Terms | Agreed step, timing, notice, and any recorded exception | Distinguishes the commercial comparison from an authorized change |
| Delivery Cost | Current burdened labor, tools, and relevant product costs | Shows the margin the account actually produces |
| Next Decision | Responsible person, intended proposal, and permitted timing to confirm | Turns the audit into assigned work |
Keep resold products identifiable within the recurring bill. A larger license total can make the invoice rise while the managed-service unit rate stays unchanged. Read each revenue line with its cost before calling that a price improvement.
Calculate the Missed Step on a Fixed Basis
For a hypothetical comparison, use the model's 20-seat client at $225 per seat a month. Assume seats and scope stay unchanged, and compare that fee with a single 5% annual step. The original full-month fee is 20 multiplied by $225, or $4,500.
Apply the step to the unit price: $225 multiplied by 1.05 equals $236.25. At the same 20 seats, the monthly fee becomes $4,725. The difference is $225 a month, or $2,700 across a full year with the same count and scope.
That is a price comparison under stated assumptions. It isn't a retroactive invoice, a guaranteed margin gain, or a prediction that the client will accept the proposed fee. Check the actual change terms and delivery plan before acting on it.
For a longer gap, use the confirmed number of applicable annual steps from the records. The model comparison is the original rate multiplied by 1.05 raised to that number of steps. Apply each relevant rate to a consistent quantity and scope when comparing periods.
Don't simply multiply 5% by the years and call that the compounded result. Don't apply a missed step to work or quantities that weren't part of the original basis. Keep the assumptions beside the calculation so finance can reproduce it.
Check Margin Before Choosing the Order
Gross margin is revenue left after the direct cost of delivering the work. For managed services, the model uses burdened delivery labor plus tools. Include the owner's technical work where it belongs rather than treating it as free.
The model's US seat-price floor is $150, and the goal is $225. The floor is a danger line, not a target or a guarantee of profit. Keep the account's actual cost beside its price; a fee above the floor can still produce weak economics.
The model calls for repricing the weakest clients first and replacing weak revenue with better revenue so the total doesn't shrink. Use measured margin and fit to choose the order. A long unchanged rate belongs on the review list, but age alone doesn't establish which account should move first.
Where an environment drives excessive support work, scope the corrective project before repricing. The model's position is to fix the low-margin client first. Recalculate the delivery cost after the agreed improvement rather than assuming a higher fee solves every operating problem.
Separate the Audit From the Client Conversation
Give finance responsibility for the rate and cost record. Give the account lead responsibility for the proposal and client conversation. Have the owner decide the exceptions that need commercial authority. The audit should produce a supported decision, not a silent invoice edit.
On a podcast, Foojee's Lucas Acosta describes assigning an audit of inconsistent PSA contract discounts to finance leadership and the client communication to collaborating leaders. He explicitly says prices wouldn't simply be changed without talking to clients. That's his leadership-work example, not a universal implementation timetable.
Use the same separation here. State the proposed fee, the service scope, the reason for the change, and the effective date you are authorized to offer. Confirm the required notice and process from the agreement, with appropriate review where the terms are unclear.
Don't present a model-based catch-up calculation as proof the client broke an agreement. Your business may have chosen an exception, failed to apply a permitted step, or never agreed the step at all. Establish which case applies before choosing the wording.
Keep the Monthly Price From Drifting Again
The model calls for a fixed annual step written into the contract, with advance notice. Its step is 5%. It doesn't index that escalator to CPI or pass supplier increases through at cost. Keep the annual rate decision separate from quantity changes and separately scoped work.
Record the next review and applicable rate-change date with an owner. Have billing confirm the correct rate reached the first affected invoice. An approved notice and an unchanged billing line would leave the original problem in place.
If a client needs an unusual commercial arrangement, write down who approved it and when it must be revisited. Keep the cost of that decision visible. Don't let an exception become the undocumented price for the next renewal.
Turn the List Into a Funded Sequence
- Finance reconciles the current rates, price history, and comparison calculation.
- The service lead confirms scope and current delivery cost, including work missing from the account record.
- The account lead proposes the improvement or pricing conversation in the order agreed from margin and fit.
- The owner checks revenue dependence and the replacement plan before accepting a departure risk.
- Billing applies the authorized change and verifies the resulting invoice against the approved rate and quantity.
Start with the weakest supported margin result on the list. Resolve its operating and contractual questions, then assign the next decision. The calculation tells you how far the old price has drifted; the cost and agreement tell you what you can responsibly do about it.
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Written by Graham Whitfield
MSP Outpost publishes information, not legal, financial, insurance, tax or compliance advice, and reading it creates no professional relationship. For decisions about your business, talk to a qualified professional.