From The Editor | June 17, 2011

CharTec Academy: It's All Just A Math Problem

Webinar: Cloud 101
By Gennifer Biggs, security, storage, and managed services editor

During the opening keynote at the CharTec Academy held in conjunction with the grand opening of its new facility on June 16 to 17, CEO Alex Rogers talked about flat-fee pricing as key to managed services success. Each time he talked about it, several partners questioned the impact of unique tech situations — high-end, high-maintenance devices, etc. — that could lessen their profits if they took the flat-fee, parts replacement, "just take care of it" approach that Rogers recommends. His answer: It's all just a math problem. So what's that really mean?

"You have to give your customers one flat monthly fee, and stick to it," explains Rogers. The hiccup for some partners is understanding what goes into that flat fee. By no means is it a standard fee, but rather the monthly fee reflects what you've learned about the customer's environment, its unique business needs, its operational processes, and more during the deep discovery that Rogers' preaches. "Your insurance company doesn't insure you without asking what kind of car you drive, and you shouldn't set a fee for your customer until you really understand what goes on in that environment." With a full understanding of what your customer needs and wants, an MSP can build a unique proposal that highlights the IT solutions it offers that can alleviate pain the customer has, plus extra value such as parts replacement. "How much would your customers love you if you just told them – we'll get you a new one? No questions asked," challenged Rogers. You don't pay any penalty, he stresses, because you've considered all the options when you did discovery — you've noted expensive equipment that might need extra care and maintenance, you've jotted down what equipment you would need to replace using HaaS, and you've added all those costs into the flat fee.

Now, keep in mind, you have to start with a core price that covers your cost of delivery and meets the margin goals you have in mind; the additional costs you layer on top of that core price are what makes up your full flat monthly fee proposal.

So how do you find that core pricing? Rogers says there is no magic formula, you have to use metrics to determine what your costs are before you can expect to find a good solid pricing model. Then, you have to continuously evaluate that base number. "You need to get your information into your PSA, get your hours and your costs, and then run that pricing model for a few months and revisit," explains Rogers. "You have to be willing to invest time in this, because just like everything else in IT, it changes constantly." Once that core price is determined, be ready to create unique flat fee proposals for every client. "Each proposal is like a fingerprint, so while you are offering customers a flat fee proposal, that fee is not static across your customer base," says Rogers.

Still confused? Talk to your peers and take advantage of best practices from vendors such as CharTec, which offers guidance to its partners through its online knowledge base, CharTec Connect.

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