Cost Every Person at Burdened Pay Before You Price Anything

Give Finance the Annual Cost First

Burdened pay means salary plus the employment costs included in your burden calculation. The MSP model uses 1.25 times salary for US employees, covering payroll taxes, benefits, and insurance. That is a planning assumption to check against your own costs, not a complete budget for running an employee's workstation.

Have whoever owns payroll confirm the pay and employer costs used for each role. Keep the calculation's scope written beside it. If a bonus is part of your actual compensation plan, give it a place in the cost sheet rather than assuming the model's multiplier has covered it.

The model keeps internal software and equipment outside burden, in general and administrative overhead, or G&A. It does the same for training and recruiting. You need to recover those costs somewhere, but loading them into delivery pay and leaving them in overhead charges for them twice.

Ask the Service Lead for Hours You Can Use

The annual salary buys paid time. Productive capacity is smaller. The model starts with 2,080 paid hours and reduces that to 1,660 available hours after time off and its admin allowance.

It then applies utilization, meaning the share of available time assigned to productive work. Service staff use 70% of available hours. Dedicated project engineers use 85%, with no escalation duty in that project-role assumption.

Those are successive steps, not alternative ways to discount the same hours. Start with availability after leave, then apply utilization to that available time. If your own availability calculation has already deducted an activity, don't deduct that activity again when building the next allowance.

Ask the service lead to reconcile the assumptions with actual time records. Check whether a project engineer also takes escalations before applying the dedicated role's utilization. Calling someone a project engineer doesn't remove their tickets from the board.

Divide Cost by Productive Hours

For a Tier 2 technician working the service role, divide $77,500 by 1,162 productive hours. That gives a burdened labor cost of about $67 per productive hour. The inputs are the model's pay and capacity assumptions, not an invoice rate you can copy onto a quote.

The same method gives about $54 per productive hour for Tier 1 and about $90 for Tier 3 service work. The project engineer's $105,000 is spread over 1,411 hours, giving about $74 per productive hour. Tier 3 and project pay are equal here; their available delivery capacity isn't.

Use the unrounded calculation in your cost sheet. Round the display if it makes the sheet easier to read. A precise-looking hourly figure built on an untested utilization assumption is still an assumption.

Use the Rate Once in Each Margin Calculation

In a project quote, multiply estimated productive labor hours by the appropriate role's cost. Then account for the other costs belonging to that project. The model's blended project selling rate is $185 per hour, and its project gross-margin target is 50%.

Gross margin is revenue less the costs assigned to delivery, divided by revenue. For a labor-only check, a 50% margin requires revenue equal to twice labor cost. Adding 50% to cost is a markup calculation and produces a different result.

Keep free onboarding in the workload. The model assigns it to project engineers and waives the onboarding fee. Those are productive hours that consume capacity without creating their own project invoice, so don't treat every productive project hour as a paid hour sold.

For managed agreements, the model's 50% gross-margin target includes burdened delivery labor and tools. The desk's ticket hours alone don't cover every delivery role. Include the client work assigned elsewhere before comparing the agreement with that target.

Choose a consistent labor allocation method. If you allocate annual delivery payroll through a productive-hour rate, that rate already spreads nonproductive paid time across the productive hours. Adding the same leave or internal-time cost again overstates labor.

The reverse error is to deduct annual delivery payroll, then deduct the hourly allocation of that same payroll as another cost. Use the hourly allocation to distribute the annual cost across work, and reconcile the allocations back to that total. It isn't a second wage bill.

Count the Owner Without Duplicating the Salary

The owner belongs in the cost calculation when they deliver client work. Belief B9 calls for a fair-market owner salary before counting profit and treats time spent as a technician as direct labor. An unpaid escalation is still work your business has to cover.

The example MSP uses a $240,000 owner salary and its separate 1.13 owner burden, giving $271,200. Don't apply the ordinary employee multiplier to that example. If you move part of the owner's pay into delivery to reflect technical work, move the allocation rather than adding it while retaining the entire salary in G&A.

I'd have the owner and service lead agree which duties need replacement when the owner steps away from tickets. Cost those duties explicitly. The aim is a price that pays for the work whoever does it, rather than a price supported by the owner filling every gap.

Put an Owner Beside Each Input

Build one cost sheet and make it the reference for the next pricing decision. Give each input a named owner so a changed salary reaches the quoting calculation. The person maintaining the sheet can be you; the task doesn't require a new job title.

• Payroll or finance confirms annual compensation and which employer costs the burden includes.
• The service lead confirms available hours and the utilization assumption for the actual duties.
• The quote owner uses the role cost and includes any delivery costs outside that hourly calculation.
• Finance reconciles allocated labor to annual payroll and checks that overhead is counted once.
• The MSP owner signs off on the treatment of their own delivery work and updates the sheet when duties or pay change.

Run an existing quote through that sheet before the next one goes out. If its margin changes, identify whether pay or hours caused the difference. Then decide what to change in the price or scope with the service lead, using a cost the board can actually deliver against.