This article was written by Simon Bell, Technical Director at Achab
Convincing customers to pay a fixed fee in exchange for managed IT services can be challenging. This is especially true in today’s climate where companies have grown comfortable with their operational methods and have little desire to change their IT support services model. That is until their service is disrupted by a ransomware attack, and then every resource is needed to recover files and ensure business continuity as soon as possible.
Let’s take a look at how to successfully convince customers to switch from the traditional ‘break fix’ model to a managed services model, and why selling ‘packages’ of prepaid hours are essential to a managed service provider’s (MSPs) profitability.
The ‘break fix’ model leaves money on the table
How often do you give your services away for free? For example, let’s assume that a customer calls asking for advice on purchasing PCs or printers. We’ll approximate that calls of this nature take 15 minutes. Once the call is complete and the customer is satisfied, are you sending an invoice for the 15-minute consultation? The likely answer is no, and often for good reasons such as the administrative costs of creating the invoice, and the time it takes to track and log your time.
While giving away your services on a 15-minute call doesn’t appear to be a lot of money to lose, especially when customer goodwill is taken into consideration, these types of ‘freebies’ can quickly amount to a significant amount of money.
Get paid for all services rendered and improve customer relationships
To better manage client projects and prevent lost revenue, many IT service providers are using Professional Service Automation (PSA) software. This software enables you to track your time – whether it’s five minutes or five hours. Essentially, PSA software enables you to better understand your operations, improve efficiency and increase profitability. However, PSA software is just one piece of the profitability puzzle.
To really ensure that no money is left on the table, changing your business model from ‘break fix’ to selling prepaid packages of hours will generate the biggest return. What are ‘packages’ of prepaid hours and how can you get your customers to switch to this payment model?
As the name implies, you’re paid upfront for the number of service hours the client purchases. Let’s say that a customer buys a 10-hour block of IT services time. Before any work is done for this client, you’ll receive payment for future projects and consultations. When you sell prepaid hours packages, you’ll be able to comfortably bill for every minute – and get paid for the work provided.
While getting clients to switch to prepaid packages may be a challenge, there are numerous benefits your customers will receive. For example, the traditional ‘break fix’ model is typically limited to a specific service issue. In these situations, the customer may experience downtime as a result of the issue or from the time needed to identify and fix the problem. With a managed services agreement, customers receive a higher level of support. As an integral part of the client’s regular operations, you’re able to provide the constant monitoring and support customers need for business continuity – resolving potential issues before they become business threatening realities.
Collect revenue on a recurring basis
A key advantage of transitioning customers to a prepaid package of hours is in your ability to continually collect revenue. Known as a recurring revenue business model, the contract with your customer will stipulate that once the remaining number of hours falls below a certain threshold, the contract automatically renews. For example, you could establish that if five or less hours remain, then a new 10-hour package is automatically generated. This ensures that you’ll always be able to collect for the IT services provided, and that the customer always has hours available for ongoing monitoring, service, and support – keeping their business running at an optimum level.
MSPs provide indispensable value to businesses large and small
Selling ‘packages’ of prepaid hours ensures that you’re paid for your IT support services. In addition, it ensures that regardless of the service required – planned updates or unexpected issues – customers have paid hours available to them.
When using this payment method be sure to track all of the minutes spent on a client’s activities. With the help of PSA software, you’ll be able to easily track time, ensuring that your invoices are always accurate and payment has been collected. Finally, when creating contracts for prepaid packages, make auto-renewal a standard contractual clause. This gives you a predictable recurring stream of revenue and provides your customers with peace of mind in knowing that their systems are constantly being monitored and supported, ensuring that any issue (even potential problems) are quickly identified and addressed.
