Waiving an MSP onboarding fee still means funding the work. Assume the model's 60 hours per new client and its rounded project-engineer cost of about $74 per productive hour: 60 × $74 = about $4,440 of labor. The fee is quoted and then included free for a signed agreement, while the recurring monthly price stays intact.
That is the right instinct. Onboarding is the usual concession, and the MSP model assumes you will make it: the fee is quoted, then included free for a signed agreement. But free to the client is not free to you. It is about 60 hours of your project engineers' time, and it is worth knowing what those hours cost before you hand them over, and what to ask for in return.
What Do 60 Hours of Onboarding Cost?
Onboarding is project work: migrating agents, accounts and workstations. The model puts it on project engineers, not the service desk, and it budgets 60 hours a new client.
Price those hours with the model's project engineer. The salary is $84,000, and $84,000 times the 1.25 burden is $105,000 a year. Burden means the employer's payroll taxes, benefits, and insurance added to salary.
A dedicated project engineer has 1,660 × 85% = 1,411 productive hours a year under the model. The loaded cost is $105,000 / 1,411 = about $74 per productive hour, rounded to whole dollars.
Using that rounded hourly cost, 60 × $74 = $4,440 of labor. Say you close a client at the model's new-client average of $2,200 a month. The waived labor cost is $4,440 / $2,200 = about 2.0 months of that client's fee.
What Does It Cost Across a Year?
One onboarding is small against a year of fees. A year of them adds up.
The model's example MSP wins 8.7 new clients a year. At 60 hours each, that is 523 hours, which is 0.37 of a project engineer working for nothing.
Priced directly at the rounded hourly cost, 523 × $74 = $38,702, or roughly $38,700 of project engineer time a year. That is the cost of the hours themselves.
The model also shows a broader figure. If onboarding sat in the service desk's existing slack instead of on project engineers, the example's EBITDA, earnings before interest, taxes, depreciation, and amortization, would be $43,362 higher, about 1.2 points. That sensitivity is the total effect of where the work sits, which is a different number from the price of the hours alone.
The unpaid hours also explain why the example's project labor runs $10,524 over its budget: the onboarding is sitting inside it.
My view is that this is fine, as long as you know it is there. What is not fine is pricing projects as though your engineers had the hours that onboarding is quietly using.
Why Give Away Onboarding Rather Than the Price?
Because one is spent once and the other is spent every month. A waived onboarding costs you its hours, then it is over. A discount on the seat price comes off every invoice for the life of the client, and it lowers the base that every future increase is built on.
The model's position is plain: never discount monthly recurring revenue to win a client. Concessions go on a bonus item, not on the price, and onboarding is the usual one. That is why the fee should be quoted in full first, so the client can see what they are being given.
What Should You Ask for in Return?
Something that protects the monthly price or cuts the hours. Here is what I'd put on the table, in roughly this order.
- The signature by a date. The waiver is for signing now, and it expires if they don't.
- Your standard stack: the one set of tools you run for every client and train every tech on.
- A yearly price step written into the agreement. The model's step is 5%, told to the client ahead of time.
- A clear scope. Say in plain words what the monthly fee includes, what it does not, and what the excluded work costs.
- The seat count, counted properly. A seat is a user or a device, whichever is larger, and the price per seat stays above your floor of $150.
In my view, each is worth more to you over the life of the agreement than the onboarding fee would have been.
How to Keep the Number Honest
The 60 hours is the model's planning figure, inside a range of 25 to 80 hours. If yours run long, the cost runs with them: at 80 hours a client, the example MSP gives up another $14,454 of EBITDA a year.
- Give onboarding its own project code, and make every hour go to it.
- At the end of each onboarding, write down the hours and the client's seat count.
- After a few, work out your own hours per new client, and price them at your project engineer's real hourly cost.
- Put that figure on the proposal as the onboarding fee, so the client can see what you are waiving.
- Decide in advance what you will ask for in return, before the prospect asks you.
Waive the fee. Just do it on purpose, with a calculation rather than a rule of thumb, and something in return.
mspoutpost.com/articles/msp-onboarding-fee-cost-the-labor-before-you-waive-it
Written by Graham Whitfield
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