MSP hardware markup and margin: price the whole resale job

Price hardware from its landed cost, then quote the work required to deliver it.

A vCIO can build a sensible refresh roadmap and still send a weak quote. The switch price is copied from a supplier cart. Freight arrives later. Staging becomes a favor. The client assumes the warranty includes someone driving over with a replacement.

For an account lead at a Connectwise Manage MSP, the useful hardware-pricing question is: Which costs and promises does this price actually cover? A markup percentage cannot answer that on its own.

This guide gives you a resale worksheet, hypothetical markup and margin examples, and a release checklist for the handoff to procurement. Use it alongside your finance team's cost policy and your actual supplier terms. It does not prescribe an industry-standard hardware margin.

Markup and gross margin use different denominators

Markup measures the amount added relative to cost. Gross margin measures gross profit relative to the selling price.

Markup = (selling price - cost) / cost
Gross margin = (selling price - cost) / selling price
Selling price for a target gross margin = cost / (1 - target margin)

Penn State Extension explains the same distinction: adding a percentage to cost produces a smaller gross-margin percentage because the selling price is the larger denominator.

The following table is hypothetical scenario math using a $1,000 cost basis. These percentages demonstrate the relationship; they are not market benchmarks or recommended MSP targets.

If the owner asks for a target gross margin and the sales administrator adds that percentage to cost, they have approved different economics. Put the formula and cost basis beside the target.

Gross profit also has to contribute toward overhead and the rest of running the business. A positive gross margin is not net profit, and a hardware line with healthy-looking margin does not establish that the whole project makes money.

Build a cost basis you can explain

For quote review, start with the supplier's actual offer for the exact quantity and part numbers. Record the currency, validity, availability, freight treatment, and any conditions attached to the price.

Then agree which direct costs belong to the hardware resale calculation. Keep that method consistent across quotes. Your finance team should decide the accounting treatment; the worksheet below is an operational estimating record.

Do not count shipping in both the landed cost and a second cost allowance. Equally, do not remove a real cost from the estimate merely because you show it separately on the client quote.

An uncertain future rebate deserves its own note. Treating it as cash already earned can make a marginal sale look acceptable before you know whether the condition will be met.

The broader MSP pricing and margin protection guide covers the full quote. This worksheet focuses on what the hardware line costs and what obligations travel with it.

Dealer status does not establish the price of this order

A partner badge, public store price, distributor account, and approved deal registration are different inputs. Your quote needs the applicable terms for the order you intend to place.

Use the same purchasing questions whether you buy direct or through a distributor:

• Is this offer issued to our business for the intended end customer and quantity?
• Which exact products, licenses, accessories, and support terms are included?
• Is a discount already included, conditional on approval, or payable later?
• Does the supplier hold stock or merely show availability at the time of the quote?
• When does the price expire, and what happens if the client changes the quantity?
• Who handles a return or failed unit, under which written terms?

Record the answer rather than guessing from the program name. A lower unit price can lose its advantage if the offer excludes a required item or changes the return conditions your team expected.

If the Ubiquiti partner-program question brought you here, carry that research into an actual supplier comparison. Program eligibility alone does not supply a complete client price.

For a subscription-backed purchase, keep the hardware, license term, renewal responsibility, and delivery work distinguishable. The client should be able to tell which amount buys equipment and which amount buys an ongoing entitlement or service.

Work the resale price before the project price

This is a hypothetical hardware order, not a customer result or an MSP pricing benchmark. It excludes sales tax charged to the customer. The example cost method includes purchase cost, inbound freight, and a known direct handling charge; project labor is estimated separately.

Assume the reviewer chooses a 25% target gross margin for this example.

Hardware resale price = $4,240 / (1 - 0.25)
Hardware resale price = $5,653.33, rounded to cents
Gross profit = $1,413.33

The next table changes the target while keeping the same hypothetical cost basis. It is a sensitivity model, not a suggested range for commodity, networking, security, or server hardware.

Choose your actual policy using your cost method, purchasing exposure, service obligations, and competitive situation. Different hardware categories may create different work, but the category name alone does not justify an invented percentage.

Then add the separately scoped delivery work. A firewall refresh may require configuration review, rule migration, a maintenance window, testing, rollback preparation, and documentation. Resale profit does not tell the delivery lead how many hours those tasks will take.

The UniFi project scope and quote template shows how to separate equipment, installation, dependencies, and support. Keep that delivery estimate visible when comparing the complete project economics.

A discount comes out of gross profit

In the same hypothetical order, a 5% discount on the $5,653.33 hardware selling price produces a discounted price of approximately $5,370.66. The $4,240 cost basis stays unchanged. Gross margin falls to approximately 21.05%.

A 5% client discount did not remove 5% of the supplier bill. The concession came out of the amount left after that bill.

Before approving a discount, write down:

1. The exact revised hardware price.
2. The unchanged or revised cost basis.
3. The resulting gross profit and margin.
4. Any delivery or support concession offered with it.
5. The approver and the quote revision being approved.

A client asking for a better number may be willing to change quantity, delivery timing, or scope. Each option changes a different input. Do not remove necessary implementation work from the estimate while leaving the same implementation promise in the proposal.

Separate warranty coverage from your service promise

A manufacturer's warranty and your MSP's support commitment need separate descriptions. Read the actual warranty terms before telling the client what a replacement will involve.

The supplier may cover a defective unit under specified conditions. Your team may still need to diagnose it, arrange access, remove it, package it, restore the configuration, and test the replacement. Decide which of those tasks belongs to the existing managed-services agreement and which is separately billable.

Ask the account lead and service delivery lead to answer the same questions:

• Does the client receive a spare, an advance replacement, or only the applicable supplier process?
• Who pays shipping and any approved onsite work?
• Who holds the configuration needed to restore service?
• What does the client expect during the wait?
• Which request would create new paid work?

Only promise a replacement method or response commitment you can actually deliver under the relevant terms. A vague sentence about "full warranty support" can quietly expand the service boundary.

Copy this hardware pricing worksheet

Keep this record with the opportunity and quote revision. At a Connectwise Manage MSP, use the deal reference your sales and procurement teams already share. The worksheet can live in a document; it does not require a new system.

Client / site:
Opportunity reference:
Quote revision:
Prepared by / commercial approver:

Purchase basis
- Supplier and supplier quote reference:
- Exact SKU / quantity / currency:
- Hardware purchase cost:
- Freight / handling / other recognized direct costs:
- Discount or rebate recognized, with evidence:
- Total resale cost basis:
- Finance-approved cost method:

Resale calculation
- Target gross margin and approver:
- Selling price = cost / (1 - target margin):
- Gross profit = selling price - cost:
- Proposed discount:
- Revised selling price / gross profit / margin:

Separate delivery scope
- Staging / configuration / testing:
- Installation / travel / cutover:
- Documentation / handoff:
- Labor cost basis and selling price:
- Existing agreement inclusions:
- Exclusions and client dependencies:

Commercial conditions
- Supplier offer expires:
- Client quote expires:
- Stock or reservation status:
- Return and cancellation terms:
- Warranty coverage source:
- MSP replacement-work responsibility:
- Price / quantity / timing changes requiring review:

Release to procurement
- Client acceptance and purchasing condition met:
- Exact accepted revision:
- Supplier price and availability reconfirmed:
- Substitution approval, if applicable:
- Release owner / date:

Use "unknown" when a supplier answer is missing. Assign someone to resolve it before you release the affected commitment. A blank field tends to look less consequential than it is.

For commodity endpoints, check the specific configuration and accessories rather than pricing from a familiar model name. For network equipment, verify the power, optics, mounting, and other items required by the design. For security appliances or line-of-business systems, make the licensing and support dependencies explicit. These are review prompts, not universal bills of materials.

The worksheet should leave the owner able to explain the price and the technician able to recognize the job. If either person has to reconstruct the assumptions, it is unfinished.

Recheck supplier inputs before releasing the order

Client acceptance and supplier price validity can happen on different dates. Put a clear rule in the quote for changes before purchase, using terms appropriate to your agreements and reviewed by your advisers.

Consider another hypothetical change to the worked example: supplier cost rises by $300 before ordering. The cost basis becomes $4,540. Keeping the original $5,653.33 price reduces gross margin to approximately 19.69%. Restoring the example's 25% target would require a price of approximately $6,053.33.

That arithmetic does not authorize changing an accepted client price. Your team needs to follow the accepted terms and obtain any required approval. The commercial decision may be to absorb a known exception, agree a revised order, or choose an approved alternative.

Never substitute a different product silently. A similar-looking SKU may change compatibility, licensing, warranty, or delivery work. Recheck the technical scope and explain the commercial consequence before purchase.

Use the MSP quote approval checklist for the final send, hold, or re-scope decision. After acceptance, preserve the approved revision so procurement can compare the order against what the client actually bought.

Give the client a plain explanation

A useful account-manager talk track is:

"The equipment price covers the specified hardware and the purchasing costs shown in this quote. Configuration, installation, testing, and support are described separately so you can see what the project includes. Before ordering, we confirm the supplier offer and follow the agreed process if the price, availability, or specification changes."

Adapt that language to your actual quote. Do not promise separate itemization if you sell a bundled price, and do not imply that the supplier will reserve equipment unless it has agreed to do so.

In the client roadmap, a refresh needs a business reason and timing. In the quote, it also needs exact equipment, scoped work, and a purchasing boundary. Keeping those records connected makes it easier to explain why this recommendation costs what it does.

Keep the cost review beside the scope

Scopable's MSP quoting workflow brings scope, products, labor, shipping, recurring items, and margin review into the quote-building process. Your team still owns the cost policy, supplier confirmation, and commercial decision.

To evaluate that workflow with one client hardware refresh, create a Scopable account.