MSP Business
What should you bill your clients for?
31 December, 2013
What exactly you should bill your clients for is a big question, and much depends on the exact type of working model you’ve agreed to.
There are three main ways that IT service providers work with clients:
1. Traditional Break / Fix
This is a true “pay as you go” model, usually based on a “per hour” or “per day” pricing structure. Nobody will deny that this model can be potentially lucrative, yet it’s gradually going out of fashion in favour of managed services agreements.
2. The MSP Model
There is no set standard for an MSP contract, but the key objective is to roll as much of a client’s IT service up in one contract for a convenient and predictable monthly fee. It’s popular with both clients and service providers - due to predictable costs for the former, and predictable income for the latter.
3. Retainer Agreements
Retainer deals are something of a hybrid between the two models above. Plenty of IT companies use them as a means of prioritizing customer needs and managing demand. For example, if all a company provided was break / fix support, who would they go to first if they had limited staff and a serious problem occurred on two sites at once?
With retainers, people pay to have some kind of service level agreement in place, perhaps with some inclusive hours, but with elements of the service still operating on a “pay as you go” basis.
With all this is mind, let’s return to the original question of what you should be billing customers for.
Well, the answer all depends on customer expectations, and the only way to ensure they are aligned with yours is to lay everything out in contracts or SLAs.
The nature of IT is that you can never predict when a client is going to need your help. Imagine it’s Sunday evening and a client has a query. They see you’re logged onto Skype, so they send you an instant message. Out of kindness you reply, and you get into a discussion about their problem. By the time you’ve finished, your Skype history shows you spent 45 minutes with the customer.
In the above scenario, the customer should really expect to pay for your time. After all, even the largest multinational companies would be unlikely to provide help on a Sunday evening. However, whether you can charge or not depends on what’s laid out and agreed in advance.
You will inevitably find that some customers constantly say “make sure you bill me for this,” and others will take advantage and try to get as much for free as possible. The only way to achieve consistency is to treat both types of customer equally. Of course, there’s always room for some informal help here and there, but you shouldn’t make a habit of it. After all, this is your profession, and your knowledge is what customers pay for.
So think hard about all the things you do for clients. Do you treat a two hour meeting to plan a server upgrade as a sales meeting and give your time away for free, or is it really a “project scoping meeting” that you have every right to charge for?
Try to make these choices part of a consistent policy, and not a series of one off decisions. If you DO charge by the hour, there will only ever be so many you can charge for, so you shouldn’t give very many away at all.
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