Some IT companies offer their clients a flat monthly fee rather than charging them by the hour for IT services. This is an extremely attractive option for the business if the price is right. It can also be a good option for your IT company, as it helps build steady, recurring revenue streams; enables you to effectively manage your resources; and helps strengthen your relationship with your clients.
There are, however, some risks to the Flat Rate option, which could be bad news for your business. Careful consideration of your model should help to mitigate these risks. Some things to consider are listed below. Not all of them will suit every situation, but if you consider each item when designing a solution you should minimise the risk to your company while still coming up with an attractive solution for your client.
- Consider this as an option for existing clients only. This is the best way to understand the true costs of service for this customer before you embark on an open-ended service contract. You already have a history with these clients, and you know what services they are likely to require. You know their system, as well as the users and their personalities. You know how much time you spend with the business in an average month, so you can calculate a realistic monthly rate.
- Make a Flat Rate option something new clients can expect to negotiate after a year of using your company for their IT solutions. This gives you time to get their system in order and clean up any legacy issues or mess from the last IT company who was involved in their system. If you risk losing the client because of this criterion, you could offer a ‘fast-track’ service, whereby you charge for the cost of bringing the client’s environment up to the minimum standard required for services.
- Remember not all clients are equal. Tailor the Flat Rate for each client based on the system, the number of employees, your prior knowledge of the users, etc. in the company. This means that every company only pays for the IT Support package that they need.
- When negotiating the details of the Flat Rate service, include a time limit of four hours for a single job. This means that you are still able to charge a realistic fee for bigger projects and substantial jobs like server migrations. Get agreement that the particulars of this type of service will be agreed upon before any work is begun.
- Make sure you state the applications you will support, as some applications are full of bugs and bad support and you don’t want that to end up in your lap.
- Be clear about what the Flat Rate doesn’t include. It’s fine to exclude some potentially time-consuming or unknown work from your price, but make sure these are few and easy to understand. The types of things you wouldn’t want to include are:
- The cost of bringing the client’s environment up to the minimum standard required for services
- Parts, equipment or software not covered by vendor/manufacture warranty or support
- The cost of any parts, equipment, or shipping charges of any kind
- The cost of any software, licensing or software renewal or upgrade fees of any kind
- The cost of any third party vendor or manufacture support or incident fees of any kind
- Failure due to acts of God, building modifications, power failures, or other adverse environmental conditions or factors
- Service and repair made necessary by alteration or modification of equipment other than that authorised by the service provider, including alterations, software installations or modifications of equipment made by the client’s employees or anyone other than the service provider
- Programming (modification of software source code) and program (software) maintenance
- Training service of any kind
I believe the best way into this model is a softly, softly approach – offering it to a few known clients on specific services before diving in completely.