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Hi Everyone, I have a client thats wants to move to fixed monthly pricing his IT services. I handle all aspects of his IT service.

He has 10 computers and 1 server. I spend btw 5 to 10 hours a month on his system, in a break-fix model, so he is billed hourly. He wants to move to a flat rate monthly bill, so he can predict the cost.

Ideally I will move him to managed service but the monthly cost will be more than he has ever spent in any month. I don’t think the bells and whistles of managed service will convince him to pay more than he is paying now. The request is budget driven not service/performance driven.

I want to know if there is anyone that offers a flat monthly cost for IT support, kind of like a concierge Doctor. Whats your experience with this setup, any draw backs or client abuse.

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Hi, back in the day my MSP company charged a flat rate of £30.00 per workstation & £120.00 per server per month which included network support too for unlimited support during work hours.

I suppose as long as a win-win situation develops from your client’s request, probably involving a little negotiation, then all parties are satisfied. Just ensure that your costs in providing the service is covered with a little room to spare.

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How does your month to month hours look while working for this company? Do they wildly fluctuate or do they stay in some standard range for you?

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The support hours are btw 5 to 10 hours (8hrs average). This are not man hours but actually visits. Most of my support is done onsite, because he is not on a RMM and company is like 10 mins from home.

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If you’ve been supporting them for a while and are comfortable with the steady flow of support from them, then setting them up for a 8-10 hour monthly fixed cost probably wouldn’t be a bad thing. But for a new client, you’d want to collect that data first before diving into a fixed monthly agreement

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Hello,

I was in a similar situation not 2 months ago and switched one of my clients from a break-fix/hourly model to a managed services model. In order to help you find what is the best fit for you and your client, I need more detail on what exact services you provide (E.g. complete on-site repair/troubleshooting of existing computers, network troubleshooting/repair of all devices end-to-end, complete server management, complete backup management, etc., etc., etc.,) And the list goes on…!

The reason why I am asking for such detail is because to understand how much you will be charging as a fixed cost, you have to understand what it costs you to provide the service. This should be pretty much pure labor cost, but sometimes material costs go in there as well and you can go as far as taking into consideration how much gas costs from your office to the client.

If you want to bypass all that and go the lazy route (wouldn’t blame you for a quick, but dirty solution), you can simply take your average amount of hours you will be spending every month multiply that by 1.5, then multiply that by your regular hourly rate. For example, If your hourly rate is $100.00/hour and you work on average ~ 8 hours/month then you would charge:

Managed IT Price = ((8 x 1.5) x 100.00)

= $1,200

The purpose of the 1.5 is to take your average and account for any unforseen hours spent on fixing non-regular issues.

I hope this helps you in some way, but if you do get a chance please list what services you typically provide for this client so that we may provide a better and more precise answer.

Cheers,

Tech4Hire

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I have a client on a fixed fee model and it works out pretty well. This is a smaller client with predictable needs. The client is comfortable paying the fixed fee each month knowing they will be covered up to that amount (kinda like a declining balance). Sometimes if my time comes in under what their fixed fee is they question why…so you may want to prepare for that in case that happens. If my time goes over the fixed fee amount I just bill them my hourly rate. Hope this helps…

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Hello Chris,

If I may offer a quick perspective to your current fixed pricing model:

The reason why Managed IT Services are taking such a strong hold in businesses today as opposed to the old “break/fix” model is because the clients (as the OP mentioned) can have a predictable cost for the end of the month, regardless of how many hours are spent as long as the services you are providing are a part of that agreement.

I mention this in response to what you said about “Sometimes if my time comes in under what their fixed fee is they question why…”

Well, my response to that is: Sure the client may question why they are paying X amount if you worked less hours this month than is typical, but in the occasions where, let’s say a Virus outbreak occurs where it can typically cost thousands of dollars to fix under a break/fix hourly plan, you just saved them a good chunk of that by simply charging your fixed monthly fee.

Another quick example is if the client decides to install Microsoft Office on 10 of their computers; well in my area that would cost approximately $100/computer On-Site totaling $1,000. Whereas, if the client was on a Managed Service Plan, the cost would simply be covered by their fixed monthly fee.

My point is, as Managed Service Providers we have to be able to explain to our clients these benefits they are receiving by playing out scenarios such as a Virus outbreak or a network wide software install so that they understand what they are getting with a Managed Service Provider: “Someone who is going to be there for them no matter what.” They have to see you not just as their on-call tech guy, but as their IT Department they can rely on.

It is a mutual benefit for both the client and us (the providers) and it is our job, not the clients to explain the benefits of this relationship.

I’m sorry for this long response, but I felt that I had to get this point across and I hope that it helps someone along the way.

FYI My response is in NO way a “be all, end all” absolute answer to managed services, it is simply the accumulation of my knowledge over time factored in with where I physically provide my services (Los Angeles, CA). For example, it can be a completely different scenario for someone in New York.

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Well said Tech4Hire. Sometimes I have to “remind” my clients about the way to look at this model as you portrayed it…I guess that is why I said be ready for that in my last post. Most are so used the break/fix scenario. You are spot on.

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My clients span the range of break/fix, block purchase as well as full managed services agreements. Since you are sure he won’t go for the managed services approach, sounds to me like you are simply looking at having your client purchase a block of hours each month. This still requires a contract/agreement where you provide the details about how this block is allocated, whether there is an adjustment or true-up period, how much for any additional hours, whether hours can carry over (like unused mobile data plans - BTW I do NOT recommend this carry-over approach approach)…etc.

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proactive/reactive. In the break fix customer shop, do they monitor backups, or just call you when something has gone really wrong only to discover backups haven’t completed in months?

Are you including stuff like server migrations so that their costs are totally predictable? That’s a bonus to them. If not you need to spell it out in the contract and explain it to them so they don’t sign it thinking they won’t have overages.

Add to your costs some kind of remote management. You’ll want to be alerted if something isn’t working so you know about it before they do and so you don’t have to show up onsite everyday to check on things.

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Thank you all for the great responses.

We decided to go with 12 hours fixed monthly on a 6 month trial. Cost is fixed whether I exceed the hours or not. I plan on implemented a RMM and moving him to managed services even though the contract does not dictate it. This will make my job easier because I can be proactive.

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If I may further your topic, with your permission @Mobytube, I am curious in finding out what others charge for a managed/fixed monthly service agreement in their service area? Not so much to find out the varying prices, but more so to see if anyone discounts their pricing for managed service clients…For example, I provide IT services in Los Angeles, CA and my hourly currently is $100/hr and so I’ve taken on the logic of $100/user/month as my typical managed service calculation.

I am curious to find out if I should be (and if others currently are) charging less per user or device if it is for managed services as opposed to just going out there for a break/fix customer whom I will charge my regular hourly fee.

If anyone is willing as I have done (to further mine and others knowledge in these matters), to list what your currently charging as a base hourly price, in what location, and most importantly, if you charge less for a managed service client since they are paying you monthly up front.

I know some people are big on their privacy as to what they charge, but my logic behind it is that I believe my prices are very competitive and I have absolutely no problem advertising that out there for others to see and that is why I have clearly stated my hourly wage and how that converts into my managed service pricing. Nevertheless, I will respect others decisions in not wanting to mention their price and will not push any further if you decide not to list it.

Thank you very much in advanced!

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I am also interested in this. $100 seems on the low end for LA. I am in Dallas Area (Plano) and that’s also my listed hourly rate but I discount to $85/hour for managed service.

My pricing also varies(+/- $5) from customer to customer depending on the maintenance level of the customer.

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You are correct about the $100 being on the lower end Mobytude. Most of my competitors charge anywhere from $125 minimum to $165/hr. I also want to clarify that I only do on-site calls for break/fix customers; I don’t have a shop where they drop it off for me to fix and then pick up again, so my hourly rate might have been even lower for drop-off customers since I wouldn’t have to leave the office or send out a tech.

Nevertheless, I priced myself at $100 because I believe it to be an extremely competitive price point in the already crowded market of IT in LA, but it still also gives me enough room for profitability to grow my business successfully.

Feel free to comment on what you guys think, I won’t take offense I promise :slight_smile:

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I’ve seen this situation several times, and almost invariably the amount of support requested increases significantly. There’s a change in perception between “if we call him it costs money” and “we’re already paying the money, might as well call him”. Also, because they’re paying you anyway, there will likely be an increased expectation of responsiveness. I would make sure those kinds of things are laid out in the support agreement.

Consider putting in place remote management systems because as your business grows you need to be available to more than just this one customer. If you’re going onsite every time, it’s not just the amount of time you’re there that it costs you, it’s the time from when you leave your desk to when you sit back down.

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You may also want to consider going down the SLA route where 9-5 support on working days costs x but with extended workday support costing more and weekend and public holiday support costing even more. Just make sure the terms are well defined and understood and expectations are well managed.

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Thanks JDubs, I had a feeling that might happen and it has already started. I am already at half the hours I budgeted. Good thing is we will be reviewing it after 3 months.

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Good idea Comodo, but they operate at normal hours. That will come in handy. Didn’t think of that.

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You’re welcome