Key Points
- Managed backup is one of the most profitable recurring services in an MSP’s catalog, with 37% of MSP revenue coming from it.
- Accurate backup service pricing protects margins by taking into account all cost drivers (like storage, licensing, and technician labor) that influence the actual cost of service delivery.
- MSPs commonly use four backup pricing models: per-device, per-user, storage-based, and tiered service pricing. They often combine one or two models to balance invoice predictability with data growth.
- Key factors that affect managed backup pricing include data volume, backup frequency, recovery point objectives (RPOs), advanced security features, and ongoing support labor.
- Structuring backup services into tiers makes them easier to sell and creates a natural upgrade path for clients as their operations grow.
- Common backup mistakes like underpricing to win clients, ignoring operational expenses, and offering unlimited storage erode margins quickly.
Managed backup services are one of the most valuable revenue opportunities for MSPs. Recent surveys show that 37% of MSP revenue comes from monthly recurring services, with backup and disaster recovery sitting at the top of the list.
But pricing managed backup services can be challenging. Providers either underprice to close deals or overcharge without clearly communicating the value they can offer, neither of which is sustainable.
For a new service offering to be profitable, you need a clear picture of how much it actually costs to deliver.
Why pricing matters for backup services
Backup services are one of the most reliable recurring revenue streams in an MSP service catalog. Businesses rarely cancel backup services because the risk of a major data loss event is simply too high, and that consistent demand makes accurate pricing especially important.
Get it right, and you’ve got yourself a high-margin, low-churn service that anchors your monthly recurring revenue (MRR). Get it wrong, and you could end up turning a mission-critical offering into a margin-killer.
With the right pricing structure, managed backup can help you:
- Protect your margins: The cost of storage, licensing, and labor all add up quicker than you think. So if your pricing doesn’t take these factors into account, it’ll erode the profitability of your new service, the bigger your client base gets.
- Showcase the true value of your service: Pricing reflects the value that a service offers. Undercharging sends the wrong signals to your clients and makes rate increases harder to justify later on.
- Prevent scope creep: Without an actual pricing model in place, every restore request or storage overage will become an unbillable cost.
- Set the foundation for long-term growth: MSPs that price their backup services strategically are better positioned to add higher-value offerings, such as disaster recovery as a service (DRaaS) and business continuity planning, into their service catalog.
Backup services are tied to business continuity, so you want your pricing to reflect that right from the get-go.
Four pricing models MSPs commonly use for backup services
There are four pricing models that MSPs typically use for their service catalogs
Per-device pricing
In this model, providers charge a monthly fee for each device they will monitor and support. It’s a simple and predictable pricing structure that scales with the device count.
Per-user pricing
MSPs with per-user pricing charge their clients for each user in their organization, regardless of how many devices the user has. It’s a relatively popular structure among MSPs since it simplifies the billing process and is easier for businesses to understand.
Storage-based pricing
This structure ties pricing directly to the volume of data backed up. Clients are billed per gigabyte, making it one of the fairest costing models from an expense alignment standpoint.
It’s flexible enough to cater to clients with different data foot volume, but invoices in this setup fluctuate, which some businesses may find too unpredictable for their liking.
Tiered service pricing
Tiered pricing packages your backup services into different service levels, each with a set of included features, storage limits, and support options. Most MSPs that follow this model divide their tiers or service plans into three categories: Basic, Standard, and Advanced.
Basic plans might have standard retention, while higher plans may have added server backup, extended retention, and faster recovery time objectives (RTO).
It’s very common for MSPs to use a combination of these pricing models for their backup services. For instance, some providers charge businesses per device, with additional per-GB fees applied once a client’s storage consumption exceeds the standard limit.
Implementing this approach gives you the predictability of a fixed monthly fee while still accounting for actual data growth.
What affects backup pricing
Now, if you think that pricing managed backup services is as easy as picking a costing model and adding a markup, you’re wrong. There are several other factors you need to account for to price your services accurately, such as:
Data volume
The amount of data a client wants backed up is one of the major cost drivers of any backup service. More data means more storage consumption, higher storage fees, and longer backup periods.
What catches a lot of MSPs off guard is how quickly data grows, especially for clients in industries like healthcare, legal, or finance.
Backup frequency
How often backups run has a direct impact on the bandwidth your network will use. Clients running continuous or near-continuous backups will generate more data churn than those that run nightly jobs.
Recovery point objectives (RPOs) are the primary drivers of backup frequency, so you want to understand your client’s RPO requirements upfront for a more accurate pricing.
Security features
Not all backup services are equal. Some have encryption at rest and in transit, while others have immutable backups that even ransomware can’t alter. All these features come with additional cost, especially since you’ll need specific tools and expertise in implementing and managing them correctly.
That said, you should never shy away from adding these capabilities to your managed backups. They offer real value to clients that need to comply with industry standards, such as HIPAA, PCI DSS, and SOC 2.
Support and management
When MSPs start to build out their pricing for their backup services, they tend to underestimate the ongoing operational expenses it takes to keep everything running smoothly.
Backup isn’t a “set it and forget it” service. It requires ongoing support and management, which brings in real, recurring labor costs. Your pricing model should account for the actual time your team spends doing tasks like:
- Monitoring backup jobs for failures
- Validating successful completions
- Performing test restores
- Managing alerts and responding to recovery requests
These expenses compound as your client base grows, so you want to ensure that your prices reflect the actual technician time. The more grounded your pricing is in the day-to-day reality, the less likely you are to bleed margin behind the scenes.
How to package managed backup as a service
If you want to make your backup services easier to sell and scale, packaging them into clearly defined service tiers is the way to go. This approach gives prospective clients a simple menu they can choose from, and gives you a natural opening to move them to higher tiers as their needs evolve:
Here’s how most successful MSPs package managed backup as a service:
Basic tier
Basic tier serves as a client’s entry point to managed backup. It delivers essential data protection, including:
- Endpoint backup for workstations and laptops
- Standard retention of around 30 days
- Basic job failure alerts
This category is ideal for smaller teams with simple infrastructure that need reliable backup without all the bells and whistles. It introduces your clients to your recurring revenue model and sets the stage for when they need to upgrade their tier.
Standard tier
Standard tier builds on the basics by adding deeper coverage and visibility:
- Server backups
- Detailed monitoring and reporting
- Longer retention windows ranging from 60 to 90 days
- Defined recovery time objectives (RTOs)
The standard tier is where MSPs close most of their deals. Clients at this level understand the risk of operating without a proper backup strategy, and they’re more than willing to invest in better insight into their data and clearer recovery expectations.
Advanced tier
This serves as your highest-margin offering. In addition to everything that the standard package offers, the advanced tier introduces more advanced security and compliance features, such as:
- Immutable backups
- Encryption at rest and in transit
- Offsite or air-gapped replication
- Compliance-aligned retention policies
- Faster RTOs and stronger SLA commitments
Advanced tiers are designed for companies within regulated industries like healthcare, legal, and finance, where compliance with industry standards is a must.
Providers that offer a clean, well-priced tiered structure are in a better position to bring in new business and retain existing clients. By guiding your customers into higher tiers as their operations grow, you can steadily grow your revenue and deliver increasing value over time.
Ensuring profitability
Once you’ve defined what your service tiers will be, the next step is to figure out how to price them in a manner that makes it worth delivering. A lot of MSPs have the tendency to use their competitors’ rates as a foundation for their pricing.
They would look at what they’re charging and work their way backward, instead of looking at what the actual cost of what you’re offering and building up from there.
To ensure that your tiered model is profitable, you need to consider the following:
- Storage and infrastructure costs: Every gigabyte your client wants to back up will cost something, whether it’s cloud storage fees, on-premise hardware, or a combination of both. These expenses grow as your client’s data grows. Your pricing should factor in what storage costs would likely be six to twelve months from now.
- The time your technician puts in: Monitoring backup jobs, validating completions, performing test restores, and responding to recovery requests consumes real technician time. Each tier should have a clear labor cost attached to it, and just an estimate of tools and storage costs.
- What clients expect when things go wrong: Recovery time expectations vary between tiers, and so does the cost of meeting them. Faster RTOs require more robust infrastructure, more proactive monitoring, and more technicians, all of which can inflate your tier’s pricing.
- The risk reduction your service provides: Managed backup protects the business from the financial fallout of a major data loss event. Research shows that downtime costs businesses an average of $9,000 per minute, meaning a single successful recovery can deliver more value than months of service fees. You want your pricing to reflect the level of risk reduction your service can deliver.
Common backup pricing mistakes you should avoid
Even experienced MSPs make pricing mistakes when they launch a new service, and some of those slip-ups don’t show up until months later when they start to lose margin.
Underpricing to win clients
It’s tempting to lower your pricing when you’re trying to win new clients, especially in competitive markets, but underpricing backup services leads to problems that are difficult to solve without endangering client relationships.
Once a client has anchored to a low price, you’ll need to justify raising it to a sustainable rate later on.
Ignoring operational costs
Too many MSPs make the mistake of pricing their backup services based on what the software and storage costs them, completely forgetting about the labor that it requires to maintain and manage it.
If you fail to take into account technician time, you’re essentially subsidizing your backup service out of your own margins.
Offering unlimited storage to clients
Unlimited storage may sound like a great selling point, but it’s one of the fastest ways to turn a profitable service into a margin-killer. Data volume tends to grow faster than clients expect, and if your pricing doesn’t scale alongside that growth, your storage costs will eventually eat up your revenue.
Overcomplicating pricing structures
There’s a thin line between detailed pricing that protects your margin and complex pricing that slows down your sales cycle. If a prospect needs a spreadsheet to understand what you’re billing them for, then you most likely have already lost them.
You want your tier model to have clear, simple pricing that makes it easier for clients to say yes, but flexible enough to accommodate real-world variability that often comes with managed backups.
This means outlining what’s included in each tier upfront, like their storage limits, device counts, and retention periods.
Create a managed backup services pricing that works as hard as your team
Pricing a crucial service such as managed backup requires balancing cost, value, and scalability.
If you want your newest offering to be profitable, you need to take the time to understand the true cost of delivering that service. This is the only way you can price it in a manner that reflects the value that it offers to your clients.
Most importantly, you need to structure your backup services into clear, defined tiers so that they’re easy to sell to new clients and scale for your existing ones.
A well-priced backup service provides your clients with robust data protection and enables your business to grow without sacrificing the margins that make growth sustainable.
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