In my last blog post, I wrote about some IT Solution Providers making the move from Break/Fix to Managed Services by using the Block-Time billing method, in which clients are billed up front for a block of time which is then decreased each time you do work for them.
The benefit of block-time billing to your IT business is reduced administration, no more waiting around for unpaid invoices from your clients, and the ability to capture and bill for those small queries that clients are always asking of you, yet you’d never bill for individually.
Executed effectively, block-time billing can be a valuable stepping stone towards flat-fee Managed Service agreements, educating clients that they need to budget for ongoing monitoring and maintenance for their IT rather than just pay for something to be fixed when it breaks.
But it’s important to realize that if you implement Block-Time billing with your clients you must remember these 3 key rules to doing block-time billing effectively.
We’ve already mentioned how block-time billing allows you to capture those small queries from clients - the “can I just ask your advice on” and “this will just take 5 minutes” queries that we, as IT Solution Providers, are used to getting from clients each and every day. While the client wants a timely response and your advice, they would push-back if you invoiced them for every one of these queries - and the admin overheads would make this difficult anyway.
Block-Time billing allows you to capture these small queries and decrease the clients block of time accordingly. Effectively, you are billing your clients for those 5 and 10 minute queries without billing them individually.
If you implement block-time billing then you need to accurately capture - and document what you did - for every interaction with the client though. Failure to do this means you’re leaving money on the table. When you capture and bill for time effectively, you’re educating your client that your time is important and to be respected. Solicitors and Accountants bill for all manner of queries - your IT Solution Provider business should too.
Block-Time billing allows you to avoid late payments from your clients - but only if you’ve billed up front for blocks of time. A common mistake made by IT Solution Providers who implement block-time billing is to not bill for a new block of time in a timely fashion when the clients existing block of time is running low.
Set an agreement with your client that you will bill them for a new block of time when the old block falls below a certain level. For instance, if the client falls below 5 hours of time, you’ll bill them for a new 10 hour block - thus ensuring that they always have time in the bank for you to help them.
In my mind, the most important element of using Block-Time billing is to remember that it is a stepping stone towards Managed Services, and you are using it to educate your client that a flat-fee billing method is best for business. With that in mind, you need to be consistently highlight and reminding clients about issues that need addressing with their IT, opportunities for upgrades and any other work that will help keep the clients IT infrastructure modern and problem free.
For instance, if a clients backup fails - you should notify them in a timely fashion and offer to remediate the work, removing the time you spend from the clients block of time. If the client has a number of under-specified PC’s, you need to inform them and offer to do the work immediately - removing labor hours from their block-time.
The key here is to always be highlighting to the client the work that needs to be done to keep their IT infrastructure working well. Pretty soon, the client will start to realize that their IT needs a lot of regular maintenance which takes time and energy - and they’ll probably approach you to ask “Is there any way we can discuss a flat-fee for the work you do?”. You can then start a discussion around Managed Services.
Block-Time billing is a great stepping stone towards flat-fee Managed Service agreements, and a very useful billing mechanism in its own right - provided it is done effectively.
Capturing time, so that the client respects not only the big bits of work you do for them, but those little bits of work, is very important. Setting automatic block-time billing triggers, so your business is always paid up-front for work done, is equally important. But the most important element of block-time billing is to look for an highlight to your client work opportunities. Doing so educates your client that their IT is something that does need regular maintenance and time spent on it.
Pretty soon, they’ll come to the conclusion that a flat-fee Managed Service offering is going to be a more cost-effective way for them to enjoy the benefits of a trouble-free IT infrastructure.
Richard Tubb works with MSP's to help them focus on what is important, free up their time and make more money. You don't have to do it alone any more!
Get the latest MSP tips, tricks, and ideas sent to your inbox each week.