For many IT Solution Providers who are currently selling their time on a Break/Fix basis - ad hoc work with clients - then moving to becoming a Managed Service Provider (MSP) selling flat-fee “all you can eat” contracts can feel like a big step.
Clients are often indoctrinated into the mentality of buying time rather than value, and so selling them a MSP contract is an uphill struggle.
Given this situation, moving to a “Block Time” arrangement may be a good initial step to helping the client understand that their IT shouldn’t only be given attention when things have gone wrong - but needs continuous attention to prevent things going wrong at all.
A block-time agreement is where an IT company sells their clients blocks of contracted time up-front, and then decreases that block of time every time they do work on the clients IT infrastructure.
Some IT companies sell block-time annually - perhaps 20 hours support a year before the arrangement is renewed - while others sell block-time that never expires and can be used when needed.
But why would your IT business want to move a client to a Block-Time arrangement?
Selling a block of time to a client up front means that you eliminate one of the biggest challenges of break/fix work - getting paid for work undertaken for the client. With block-time, you invoice the client up-front for say, 10 hours, and each time you do work for the client, those 10 hours are decreased. No more waiting around for invoices to be paid each time you do work for a client.
Block-time also allows you to charge for all those small bits of work and advice you undertake for a client which you’d feel uncomfortable - and the client may dispute - billing for. When the client phones for some “quick advice” on a new laptop? Well, you wouldn’t bill for all those 5 minute calls directly, but you would decrease their block time agreement by 5 minutes with no arguments. So, block-time can allow you to earn for those calls that you wouldn’t normally bill for.
A Block-time agreement also allows you to undertake work for the client that they might normally hesitate engaging you on. For instance, clients rarely see the benefit in backing up data - it’s a chore to them and one they don’t perceive the value in (until it’s too late and they’ve lost data!) - and if a clients backup failed then they are going to hesitate paying you to resolve the issue. But with a block-time agreement, experience shows me that clients are typically more open to you resolving these types of issues as they don’t feel they are paying anything more.
Of course, in all these scenarios what you are effectively doing is educating the client that
● their IT needs to be monitored and maintained
● they need a regular budget for IT
This sounds a little bit like Managed Services, doesn’t it - and indeed it is. While some IT business are content selling block-time and never moving to a flat-fee Managed Service agreement with their clients, others use block-time as a stepping stone to educate their clients as to why a flat-fee agreement would be better for them.
If you’re struggling to make the move from ad-hoc break/fix work to a flat-fee Managed Service agreement, perhaps because your clients are stuck in the mentality of only paying for your time rather than the value you provide, then moving to Block-Time agreements may be the way forwards.
With Block-Time agreements in place, you can eliminate administrative overheads associated with multiple small bills to a client, you can get paid up-front for work - eliminating late payments, and you can start to capture billing for all of those small client requests that you wouldn’t normally bill for.
From the clients perspective, they will start to see that IT needs to be monitored and maintained, and that they need to regularly budget for IT too.
Like this article? Be sure to check out Richard's next article in this series, 3 Ways to Use Block Time Effectively.
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!
This document is provided for informational purposes only and should not be relied upon as legal advice. SolarWinds makes no warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information contained herein.