Josh Peterson can walk into a room of fifty managed service providers, ask each one for last quarter's agreement gross profit report, and reasonably expect two of them to produce it and speak intelligently about what it says. The rest will ask him to remind them what that report is. Those same owners are usually the loudest voices in the room arguing that hourly is dead and that recurring revenue is the only defensible way to run an MSP. The gap between the conviction and the evidence is the real story, and it is why we start every engagement by asking for the number almost nobody has: the profitability of the agreements themselves. Once that number is on the table, the pricing debate changes shape. The argument stops being managed services versus hourly billing done well and starts being about whether an owner has confused predictable revenue with profitable revenue, which is the specific trap behind getting hooked on recurring revenue.
Robert Weber has run Weber TC in the Kansas City metro since 2003, serving businesses under roughly fifty users, and he does not use termed contracts. His reasoning is not sentimental. He believes a term contract manufactures a decision point, and that a client who reaches the end of a one, two, three or five year commitment is a client who has been formally invited to go shopping. A month to month client could leave any day, so the leaving never gets scheduled, and it mostly never happens. That is an uncomfortable idea for an industry that has spent a decade treating contract length as a proxy for loyalty and as the primary input into exit valuation. It is worth sitting with, because the choice between a signed term and an earned month is not really a billing decision. It is a decision about whether an owner is willing to hold the client with service quality, account management and honest margin, or would rather hold them with paper and hope the buyer at the end pays for the difference.
Two out of fifty. That is Josh's working estimate of how many managed service providers could pull last quarter's agreement gross profit report on request and then say something useful about it. The other forty-eight would ask what the report is. This is not a knock on the operators. It is a description of an industry that adopted a business model faster than it adopted the instrumentation the model requires, and then defended the model with conviction because conviction was the only evidence available.
The consequence shows up in the pricing argument itself. When an owner insists that hourly billing is dead, the claim is almost never grounded in a comparison of the two models inside their own financials. It is grounded in what the model is supposed to do. Managed services is not a bad model. Executed without measurement, it is an expensive one, and the expense is invisible because the revenue keeps arriving on the first of the month regardless.
Robert has been on a month to month plan with Verizon for ten years. He could leave tomorrow. He never has, and his explanation is that nothing has ever forced him to look. On the other side of the same conversation, Josh admitted he has been tracking one renewal date for five months and is, in his words, chomping at the bit to attack that contract when it comes up. Same buyer psychology, opposite outcomes, and the only variable that changed was whether a date existed on the calendar.
That is the case against the termed agreement, and it is stronger than the industry usually allows. A term does not buy loyalty. It buys a scheduled moment when the client is required to consider leaving, and it converts a diffuse, low-grade willingness to stay into a concentrated procurement event with a deadline attached. Robert's position is that his firm should have to earn the business every month. The commercial argument is subtler than the ethical one. If a client never faces a formal decision point, inertia works for the incumbent instead of against them, and one of Josh's own partners now pays roughly fifteen percent more to stay month to month on tooling precisely so he can walk away the moment a vendor stops earning it.
Even Weber TC's purely hourly clients have to buy a baseline from Robert: a SentinelOne endpoint and a firewall. At the most fundamental tier he does not even include response. The client licenses the tool through him, and if something breaks, the work is billed by the hour. He is candid that this is deliberate stickiness. It gives him visibility into a network he is not formally managing, and it makes his firm the first call when something goes wrong. No term, no exit penalty, no signature holding anything in place.
Josh has watched the same logic run for fifteen years. One of his most profitable clients was pure remote monitoring plus block time, with a P&L that ran roughly seventy percent hourly, fifteen percent recurring and fifteen percent project, and it exited well above average. What kept that book together was not paper. It was disciplined account management: staying in front of small clients, asking what was changing in their business, what regulations were coming, whether they were growing or shrinking. That firm earned the right to be called before anything broke, which is the only kind of stickiness that survives a bad quarter.
When Bering McKinley digs into a large managed services portfolio, the numbers that come back are frequently thirty-five, forty or fifty percent gross profit on the agreements, and an effective hourly rate that lands below what the firm's own published hourly rate would have been on the same work. The agreement, in other words, negated the value it was supposed to create. The owner did not notice because the deposits kept clearing. The comfort of recurring revenue functioned as a security blanket laid over a margin problem.
Here is where the honest version of this argument gets harder. Josh is direct that private equity buyers want big recurring revenue, profitable or not a lot of the time, and that a seller sitting on a large recurring base is not wrong to expect a higher multiple for it. So the choice is real: take the profit while you own the company, or take the outsized return at the end. It is not completely binary, and Robert's own answer is a blend. Managed services is his predictable baseline, the thing that pays everybody if nobody else calls this month, while hourly and project work pays better, arrives unevenly, and is often the more interesting work. He will not put every egg in one basket. What matters is that an owner makes that trade deliberately with the margin data in hand, rather than discovering years later that they bought a multiple they never got and gave up profit they could have banked.
Robert says he hates the conversation that begins with "technically, this is excluded." His experience is that reaching a genuine meeting of the minds on inclusions and exclusions is nearly impossible, because the distinctions are obvious to the provider and invisible to the client. His rule follows from that: if you have arrived at the point of arguing about what is covered, push the client the rest of the way to all you can eat, assuming the model fits them at all. At Weber TC, all you can eat means becoming the client's technology department, including vendor relations, copier contracts, and evaluating security cameras and door access systems the firm does not install. The client calls them for technical questions the way they call outside counsel for legal ones.
This is about to be tested harder than it has been. Josh's point about AI and automation is that nobody is as good at this work today as they will be in two years, which guarantees that what gets deployed now will break and need support. Inside a fixed hourly relationship, the boundary is trivially clear. Inside an all-inclusive agreement, the boundary is a negotiation nobody has had yet, conducted with a client who cannot follow the distinctions. Owners who have not decided where emerging technology work sits will decide it accidentally, one uncomfortable invoice at a time.
Not reliably, and the mechanism runs the other way more often than owners expect. A term creates a fixed date on which the client is expected to evaluate options, which is the moment competitors and cost-cutting exercises get their opening. Robert Weber's argument in this episode is that month to month clients could leave any day and therefore rarely do, because nothing ever forces them to look. Retention comes from service quality and account management. The contract mostly determines when the client stops to think about it.
It is the profitability of your managed services agreements, measured per agreement, after the labor and tooling cost of delivering them. It matters because it is the only way to know whether recurring revenue is actually creating margin or simply creating predictability. Josh Peterson's estimate is that roughly two in fifty MSP owners can produce the report on request and discuss it intelligently, which means most pricing decisions in this industry are being made without it.
Yes, and Weber TC does it by asking what each client actually needs and pricing accordingly, with clients moving between models as their business changes. The common objection is that hourly clients become service disruptions and never receive priority. Robert's answer is a mandatory security baseline for every client, including hourly ones, which gives his team visibility into the network and makes his firm the first call regardless of how the work is billed.
It can, and this episode does not pretend otherwise. Josh Peterson is explicit that private equity buyers pay for large recurring revenue bases, profitable or not in many cases, and that a seller with substantial recurring revenue is not wrong to expect a higher multiple. The real decision is whether to take profit during ownership or a larger return at the end. It is not completely binary, but it should be chosen deliberately with margin data in hand.
Decide before you deploy. The work being built today will need support tomorrow, because the tooling and the people using it are both early. Under hourly billing the support boundary is clear. Inside an all-inclusive agreement it becomes an inclusion argument, and inclusion arguments are nearly impossible to settle with a client who cannot follow the technical distinctions. Robert's position is that once you are arguing about exclusions, you should probably move the client to all you can eat instead.
Communication and customer service, according to Robert Weber, who has had better hiring results with candidates who have no technical background. His reasoning is that the technical skills can be taught while the human ones cannot: he cannot teach someone how to talk to a client, how to convince them you care, or how to follow up and show up when you said you would. Weber TC currently interviews roughly as many non-technical candidates as technical ones, and one current team member came from recreational management.
Robert Weber is the CEO of Weber TC, a technology services firm based in Prairie Village, Kansas, serving the Kansas City metro since 2003. The firm focuses on businesses under roughly fifty users, a segment where pricing flexibility and personal relationships matter more than scale. Robert runs a deliberately blended book, with clients on hourly, project and all inclusive managed services arrangements, and moves them between models as their businesses change. He does not use termed contracts, and he hires for communication and customer service ahead of technical background.
Connect with Robert on LinkedIn →
Josh Peterson is the CEO of Bering McKinley and host of The BMK Vision Podcast. Since 2004, Josh has worked with hundreds of MSP owners to build operationally sound, profitable businesses through consulting, peer teams, and direct coaching.
Connect with Josh Peterson on LinkedIn →
Whether you hold clients with a signature or with service is a strategic decision, and it should be made with agreement margin, account management capacity and exit intent all on the same table. That is the work Vision is built for, and it is the conversation we have with MSP owners every week.
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