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Retention Contracts?What's your M.O?

By VanAlex ·
Hi! I've been wotking as an independent IT Consultant for some months now. I do network implementations, troubleshooting, training, etc.
My clients are very satisfied and now they are asking for some sort of support contract. The problem is that I have no idea of the modus operandi on this situations.

The ideia of having a steady income is welcome but of course there must be something in it for the client.

What do you charge hourly/monthly for how many hours/services etc...

Lets say my regular fee is 100% for technical support (A+ Stuff) and 200% for consulting services (MCSE Stuff).

Thanks in advance, every opinion will count.

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Retention Contracts?What's your M.O?

by CG IT In reply to Retention Contracts?What' ...

well you could do a service contract in hundreds of different ways. Depends upon you as a business person and what you want to achieve with the ability to provide service. Also depends upon the client and their ability to pay for the service, how much service they would need, how much your willing to do and so forth. Some clients you might provide more for less because of their propensity to grow as a business[hense you grow] some you want to provide less for more [cuz you know they will alwayscall you for the littlest thing]. Some you give away for virtually free [as good will] so they promote your business [hense they recommend you to others].

Take a look at Microsoft, Gateway, HP, Symantec, and their service contracts. Most providea couple of free tech questions and then charge either per incident or per hour [some per minute].

Having a good financial business plan outlining projected income, expenses, profit can provide you with what you need to charge for your service and make the business profitable. Then compare that with competition and see where your at cost wise to the customer.

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Retention Contracts?What's your M.O?

by VanAlex In reply to Retention Contracts?What' ...

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Retention Contracts?What's your M.O?

by timwalsh In reply to Retention Contracts?What' ...

I can think of two ways to go about this.

The first is basically how you are working now, i.e. per-incident service. A contract of this type would guarentee fixed rates for service for the period of the contract. In return, the client would agree to use your company exclusively for all IT service contracted for. While there is no guarentee of a truly steady income, it does provide for a steady customer base.

A second type would be the Retainer-type of contract. In this type of contract, a customer agrees to pay a fee every month for a guarenteed minimum number of support hours. The fee charged is normally at a discount from your standard rates for the same number of hours. The customer agrees to pay this fee whether they use the minimum number of hours or not. Reuired support over the guarenteed minimum would be charged at your standard rates. In return for the steady income, you agree to give the customer discounted support and priority of service.

Chances are, youwould do well to offer both types of contracts. Smaller businesses might not feel they are getting their money's worth in a retainer-type contract and thus would prefer per-incident support. Larger businesses, or those with lots of problems might prefer the retainer-type contract because it guarentees them priority support at a discount.

The actual rates you charge will be determined by both the local market and your reputation.

It should be the customer's choice which type of contract they prefer.

Hope this helps.

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Retention Contracts?What's your M.O?

by VanAlex In reply to Retention Contracts?What' ...

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Retention Contracts?What's your M.O?

by FirstPeter In reply to Retention Contracts?What' ...

I would offer that a lot of it depends upon your client base. As you've probably discovered, there's not a "magic structure", where one type fits all. Here are some thoughts:

A volume discount with a minimum.
You offer them a rate of 90% of normal if they agree to a minimum of 10 hours a month (for whatever contract period), 85% for a 15 hour/month commitment, and 75% of normal rate for a 25 hour commitment. Substitute your comfortable rate and hourly minimums as appropriate. If they don't meet the minimum you still bill them the minimum rate. Typically you'd have them sign up for a term of several months at a time - a bigger discount if they sign up for a longer term.

A tiered structure.
Similar to the above, but instead of making them sign up for a set commitment per month, you give them some level of volume discount for more hours. So, 5-15 hours = 5% discount, 15-20 hours = 10% discount, 20-30 hours = 15% discount.

In either case, though, you'll want to give them a contract with some sort of a service level agreement ("I will respond to you within x hours, and will be on-site within y hours.", or something like that) so they feel comfortable that they're high on your list. I'm not an attorney (consult with one before you do a real contract), but you can gain a lot of client confidence if you're willing to put your name on the line and sign up for something. Just make sure YOU'RE comfortable you can meet those timelines.

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Retention Contracts?What's your M.O?

by VanAlex In reply to Retention Contracts?What' ...

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Retention Contracts?What's your M.O?

by SeanMConsult In reply to Retention Contracts?What' ...

For my own, I have chosen to let the customer decide which they want to use. Some of my customers have decided to the "retainer" type of contract, in which they pay up front for xx number of hours, which gives them a discounted rate. The hours expire after one year, used or not. But they can then be assured that they have me, when they need me, unless I'm handling a service call that is of greter importance. And it is up to ME to educate THEM to the fact that a company that has an entire network down takes precedence over a PC that is running slow. That type of triage cuts both ways, and they understand that.

Other clients choose to "pay as they go". They don't get a discount, but they don't pay for what they don't use.

So - long and short of it - let them decide. And as for how much to charge, see what others in your area are charging, and meet (or beat) that, unless you can offer something truly outstanding that others can't, in which case - you can justify charging more.

Just my opinion. Hope this helps.

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Retention Contracts?What's your M.O?

by VanAlex In reply to Retention Contracts?What' ...

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by VanAlex In reply to Retention Contracts?What' ...

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