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Time Is Money: How To Make The Most On Managed Services
Customers need solution providers, and they shouldn't be bashful about setting prices strategies that emphasize their value, said Karl Palachuk, author, blogger, and former IT consultant and MSP owner.
Palachuk, speaking at The NexGen 2017 Conference & Technology Expo on Wednesday, discussed pricing strategies and how partners can get the most for their time by sharing the lessons he learned along the way.
First, solution providers should start with the end in mind by identifying their earning goals and being realistic about billable hours, Palachuk said.
"I'm huge on tracking numbers, " he said. "I keep track of how many hours a technician worked, drove from one place to another, or spent time waiting for something."
Including meetings and time spent traveling, no one is 80 percent billable, Palachuk said. Instead, solution providers should assume technicians are putting up between 50 to 60 percent billable hours. But while the easiest way to earn more money is simply to raise prices, partners can boost their earnings by making a few small tweaks.
Then, pick a price to charge by the hour and go with, Palachuk encouraged solution providers. "Give 30 days' notice to everyone and stop using different numbers. Too much money is lost when people are paying different prices," he said.
And if there is a history or emotional attachment to the client? Hire an administrator, Palachuk offered.
"Turn billing over to someone who won't give away your time," he said.
Another small change that solution providers can implement is to set a user minimum for customers, Palachuk said, reminding partners that they "don't have to pick up every nickel" they find. Small clients can take up time and overhead. Some smaller customers, especially those under ten seats, often spend the most time trying to haggle on prices, which can be a monumental waste of time for partners, he said.
"Investing in [partners] is investing in the own businesses … so find customers with money. If a customer leaves you, they almost invariably spend more money somewhere else."
Perhaps one of the easiest ways to start getting more bang for the buck is to cut the nasty "break\fix" habit, a method of serving customers after something breaks. Palachuk called this approach "immoral."
"The technologies exist for us to do patches and updates to make sure things don't break. Dollar for dollar, I make more profit because I spend a lot less time doing labor because I'm preventing problems," he said.
Ethan Millrood, chief marketing officer for Go2Tech, an IT consulting firm and managed service provider in the audience during Palachuk's session, identified with some of the lessons during the session, including break\fix as a poor strategy for serving customers.
"We work to get things right the first time with our customers and avoid repeat visits," he said.
Springfield, Pa.-based Go2Tech is evaluating how to monetize its managed services differently.
"These concepts, like selling in packs of five seats and [break\fix], have given us some food for thought and were eye-opening," Millrood said.
The break\fix strategy isn't just immoral, according to Palachuk, but it's also highly labor-intensive.
"If you're trading dollars for hours, you're going to burn out. There is a limit," he said, asking partners, "You wouldn't want a surgeon operating on you in their 10th hour of their day … would you want someone working on your $10,000 server in their 10th hour?"