The time-tested formula for MSPs when creating service contracts is to set fixed monthly fees to ensure regular recurring revenue. But that may not be the most profitable strategy, especially if you are not incorporating key business terms and conditions to clearly define the work scope, and then managing to those deliverables. And that approach can be a real crap shoot, unless you have a solid business management platform in place to help you analyze your performance against each and every contract so you can make adjustments as you go.
After all, your fixed monthly fee probably covers a combination of services and support of specific devices that can change at any given moment. On the service side, you need to be sure to state what services are included, as well as list the services that are NOT covered, so you can manage expectations right up front, and not be accused of nickel-and-diming your client when they require a service outside the scope of the contract. You also need to be sure to include the specific devices that are covered by the fee, and be sure that your techs doing the work have the means to know this at the time they receive the service ticket notification.
Hidden Costs, Hidden Profits?You may even want to draw up an ‘a la carte’ service menu that lists services that are not covered, and typically delivered on an as-needed basis. These services can cover variable offerings like setting up a system for a new hire, or configuring a new printer, and can go a long way to ensuring you do not eat up profits in any given month if, say, your client hires ten new people.
And be sure to mention to your client that any new devices that come online will be discovered by your monitoring tools or other physical inventory process you have in place. Try to set up your agreements so that the newly-discovered devices will be added to the contract as a covered item and prorated in the month added. If your client doesn’t go for that, then add a clause that you will seek and gain confirmation and approval on the part of your client first. But don’t just automatically service an added new device if you’re not going to be paid extra to work on it – even if everything else is running fine. The situation can – and will – change tomorrow for devices under coverage.
Have a BaselineAnother point is to be sure your client agrees only to add new devices that meet the guidelines you have set for your managed services. The last thing you want to support is an old desktop someone brought in from home that will constantly break down. In that case, propose a new desktop, get the setup fee, and then add that device to your list of covered items.
These are just a few of the ways that you can manage your clients’ expectations about your fees right up front, ensuring a better and more profitable business relationship. Next time, I’ll talk about other ways to manage the profitability in your managed services.
Bob Godgart is the CEO of Autotask Corp., developers of Autotask hosted professional services automation software, the VARStreet family of advanced quoting and e-commerce tools and Taskfire a hosted service desk and ticket management system sold by IT solution providers for businesses of all sizes with internal IT resources. Monthly guest blogs such as this one are part of MSPmentor's annual platinum sponsorship. Read all of Godgart's guest blogs here.