Rural residential development could have a positive or negative effect on the supply of ecosystem services. In most cases, the effect tends to be negative. One way of managing the impact is through a market based instrument. In this paper we present a development offset MBI as a way of cost effectively managing the ecosystem service impact of development in the Murrindindi Shire, Victoria. In this paper we note that design of the instrument is critical to the success of any MBI, including development offsets. Key development offset design issues discussed in this paper include defining what is traded (the metric), facilitating trades in a thin marketplace with high transaction costs, and ensuring the offset is commensurate with the impact.