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Fourth, solution providers should charge based on value, not volume, he said. For example, if you quote a customer $100 an hour with an eight-hour projection, you would gross $800. But if the client talks you down 20 percent, the discount comes out of your gross margin, even though your cost is not discounted. Assuming your costs are $50 per hour, your profit would drop 40 percent, from $400 to $240. And if you have a good engineer that finishes in six hours instead of eight, then you can only charge the customer $480, and your profit drops to $80, because those two saved hours are not likely to be billable, he said.
"That is bad. You have to look at value pricing. What is this thing worth to the client," he said.
Finally, your proposals should target results, Stelzl said.
It's a waste of time to simply propose that you can make a customer more efficient if they sign up for managed services and they can cut half their staff to save the company money. Too many VARs tell clients, if you do X, the impact is Y or if you don't do A, then B will happen.
"Your competition is selling impact. It's about finding the likelihood. Bring a deliverable back to an executive that says you told me if this goes down, you'd lose this. We've assessed the likelihood of that based on our experience. If the likelihood is high and we can show it to you, you're going to buy. Or, if you're likely to experience this gain, and I could demonstrate it to you in a way that's credible, you're going to buy," he said. "Annuity sales are based on trust. If you don't establish trust, it's difficult to sell."
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