Estimating The Value Of An MSP Lead

person estimating cost of an msp lead
Home » Blog » Estimating The Value Of An MSP Lead
Free Web Marketing Consultations

Helping B2B Technology Companies Increase Their Lead Volume.
Serving: IT, MSP, Cybersecurity, Software Dev, SaaS, ISV, VARs & More.

Table of Contents
    Add a header to begin generating the table of contents

    In today’s post, we’ll be talking about a muddy subject.. How to estimate the value of an MSP lead and how you can translate that into what you can spend to acquire a customer with your sales and marketing spend. Many MSP owners are overly cautious with their sales and marketing spend and try to rely soley on referrals to grow. With an industry wide 12.5% compound annual growth rate over the past decade, it’s a luxury many can afford to do, but having no sales or marketing program also presents signficant risks for an MSP business. It also leads to underperformance as a recent industry report revealed that 75% of MSPs grow at less than 15% per year, meaning most are growing at industry growth rate or below.

    One of the root causes of this caution is that many MSP owners don’t have a clear picture of what investments in new customer acquisition look like, or really what the long term value of an MSP customer is. In this post we’ll break down more of the math behind estimating MSP customer values and turning that into a customer acquisition cost that you can be confident in making.

    YouTube video

    How Much Is An MSP Customer Worth?

    Estimating a 50 seat MSP customer might look something like this:

    • Managed Services Monthly Fee: $150/month
    • Potential Seats: 50
    • Monthly Revenue: $7,500
    • Estimated Number Of Months Retained: 36
    • Total MSP Revenue: $270,000
    • Projects & Hardware Modifier: 25%
    • Projects & Hardware Revenue: $67,500
    • Estimated Total Revenue: $337,500

    Based off conversations with MSPs, polling on Reddit, and reviewing industry reports, these are all realistic numbers and revenue estimates for a 50 person company wanting to go managed. This revenue is earned over a 3 year period, which again, after polling MSPs is a realistic estimate of customer lifetime (and many stay much longer). It’s also a standard contract length for many vendors providing software to MSPs which makes basing revenue estimates off this timeline a sensible choice.

    How Much Can You Pay For A 50 Seat Deal?

    MSPs generally spend between 0 and 15% of their revenues on sales and marketing. A good benchmark figure is 7.5%. Working backwards, we estimate that a 50 seat deal generates around $337,500 and if we wanted to acquire that revenue over a 3 year period and make sure that our sales and marketing budget is doing it’s job, that means we could spend up to around 7.5% of that revenue or around $25,000 to acquire that sort of customer.

    You may not like those sorts of numbers and they don’t make sense for smaller deal sizes, but larger well managed MSPs who you’ll inevitably be competiting against are acutely aware of the value of a potential customer and the target acqusition costs to obtain them. When thinking about what scaling your MSP and creating enough value in it to sell one day, you’ll need to know these numbers too and be able to establish sales and marketing departments capable of bringing in new business at a reasonable price.

    You may be more efficient than this right now, but as you scale, market pressures and lack of owner and partner involvement will force your company’s customer acqusition costs to regress towards the mean.

    How Much Can I Afford To Pay To Acquire An MSP Customer?

    Based off some of the math above, below are some target cost figures various seat counts for common customer sizes:

    Target Max Customer Acquisition Cost

    • 10 Seat Deal: $5,062
    • 25 Seat Deal: $12,656
    • 50 Seat Deal: $25,312
    • 75 Seat Deal: $37,968
    • 100 Seat Deal: $50,625

    Not every customer is going to be a 50 seat deal, your customer base is likely a mix of sizes and will continue to be blended in the future. It’s important to measure your customer acquisition costs over time, relative to the quality of customers your bringing on board. When you develop this level of financial understanding it will make you far more confident in making marketing investment decisions and knowing when you can be more agressive, or when it’s time to pull back.

    How Much Can I Afford To Pay To Acquire An MSP Lead?

    MSPs who are conditioned to being handed scorching hot leads via referrals are used to a near 100% close rate. That’s not realistic with marketing and prospecting sourced leads. A good target close rate is around 20%. When thinking about how much you can afford to pay for an MSP lead, you can multiply your target acquisiution cost by your estimated close rate.

    Target Max Cost Per Qualified Lead

    • 10 Seat Deal: $5,062 * 20% = $1,012
    • 25 Seat Deal: $12,656 * 20% = $2,531
    • 50 Seat Deal: $25,312 * 20% = $5,062
    • 75 Seat Deal: $37,968 * 20% = $7,593
    • 100 Seat Deal: $50,625 * 20% = $10,125

    Wrapping Up

    In this post we talked a little bit about some of the numbers you can use to understand the value of an MSP lead. We discussed what an MSP customer is typically worth, and some of the assumptions we use to estimate that customer value. We talked about target customer acquisition costs at various price points, and how that translates into a target cost per qualified lead. Getting an understanding of these figures and modeling the numbers for your own MSP is a worthwhile excercise that can help you budget for, and be more confident in a plan for growth.

    Share This Article
    Posted in:
    Tagged:

    Hunter Nelson

    Hunter is the founder and president of Tortoise and Hare Software, a digital marketing agency for the technology sector and other lead generation oriented businesses. Hunter has more than 10 years’ experience building web applications and crafting digital strategies for companies ranging from scrappy startups to Fortune 50 household names. When not on the clock, you'll find him spending time with his family and pups, relaxing on the beach, or playing competitive online video games. See for more.

    Leave a Comment





    Recent Blog Posts

    Aesopians E5: From Tech To Rep: Year 1 In MSP Sales Ft. Ashton Fortuna

    Most MSPs hesitate to move technicians into sales—worried they’ll lack the polish, confidence, or killer instinct to close deals. Sales is a different game. Techs solve problems with systems; sales…

    SEO Not Working: Here’s Why

    Lately I’ve been getting on more and more calls lately with people saying something along the lines of “we’ve been doing SEO or inbound for 6 months, 12 months, or…

    Why SEO Investments Help Your MSP Weather a Recession and Keep the Door Open for New Opportunities

    What happens to your pipeline when the phones go quiet, inboxes stay cold, and paid ads stop converting? That’s not a hypothetical. It’s what happens in a recession. Budgets freeze.…

    MSP Marketing – How to Build a Strategy That Works

    Let’s be honest—most MSP marketing doesn’t work.Not because the tactics are bad, but because they’re unaligned. What looks like a marketing problem is often a strategy problem in disguise. Most…

    The 10 Best MSP SEO Agencies To Help You Grow Organic Traffic

    If you’re searching for SEO agencies for MSPs, the list of generalists can feel endless—and underwhelming. Most SEO providers don’t understand the managed services space, much less the buyer behavior,…

    Why Your MSP’s Online Marketing Efforts Are Failing

    If you’re leading an MSP and investing in online marketing, you’re probably feeling a growing sense of frustration. You’ve put money into websites, content, ads—even hired an agency or two…

    Related Blog Posts

    Why SEO Investments Help Your MSP Weather a Recession and Keep the Door Open for New Opportunities

    What happens to your pipeline when the phones go quiet, inboxes stay cold, and paid ads stop converting? That’s not a hypothetical. It’s what happens in a recession. Budgets freeze.…

    MSP Marketing – How to Build a Strategy That Works

    Let’s be honest—most MSP marketing doesn’t work.Not because the tactics are bad, but because they’re unaligned. What looks like a marketing problem is often a strategy problem in disguise. Most…

    Why Your MSP’s Online Marketing Efforts Are Failing

    If you’re leading an MSP and investing in online marketing, you’re probably feeling a growing sense of frustration. You’ve put money into websites, content, ads—even hired an agency or two…

    Microsoft Loop Presents Marketing Opportunity For MSPs

    Introduction Microsoft Loop, a recent addition to the Microsoft 365 suite, is already creating buzz in the tech community, and for a good reason. With its native integration into widely…

    Microsoft CoPilot Available For Resale Via MSP Partners

    On January 15th Microsoft announced Copilots availability to the broader business landscape. It released initially for enterprise customers back in November, but is now available via Microsoft 365 subscriptions to…

    MSP Sales Tips To Close More Deals

    I’ve been doing MSP marketing for close to 5 years now and have worked with a about a dozen technology businesses in some capacity and have had conversations with dozens…

    Top Blog Content

    The Ultimate Guide To MSP SEO

    Search Engine Optimization (SEO) is one of the most important ways to attract new business for mid-market managed service providers (MSP). If you look at MSPs that have achieved any…

    The Ultimate Guide To Paid Search On Google Ads For Managed Service Providers

    Generating leads for your MSP can be a challenge. You spend so much time managing employees, making sure customer support tickets are answered, procuring hardware, and defending against cyber threats,…

    The Ultimate Guide To MSP Website Optimization

    A well-optimized website is essential for Managed Service Providers (MSPs) looking to scale their business, attract more leads, and achieve a lucrative exit. A lot of MSPs check a few…

    The Ultimate Guide to Hiring an MSP Marketing Agency

    Are you one of the many MSPs struggling to attract new clients consistently? According to research conducted by MSP Dojo, a leading MSP sales consulting firm, approximately 85% of MSPs…

    The Ultimate Guide To Setting A Marketing Budget For IT Companies

    Many IT companies get their start as a one-man operation and rely almost exclusively on word of mouth, referrals, and other organic offline means to get past their initial growth…

    Featured Review of Tortoise and Hare

    ryan drake president nettech consultants
    R.D.
    President Florida Based MSP

    Tortoise and Hare has been a key partner in our MSP's growth. Over the year's we've worked together they've helped our MSP dramatically increase our website traffic, and build a steady stream of leads sourced from our website and advertising efforts. Over that time, we've been able to raise our base customer size, build economies of scale to more efficiently service customers, and expand into new markets.