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Isn't it a bit perplexing that doctors and lawyers can ask for $400 per hour for any and every consultation, but IT service providers are too shy to ask for $200 for their expert advice and often just give it for free? Why is the highest possible value MSPs give to the clients so devalued? Let's investigate this discrepancy and check out a couple quick tips for a solution. We are going to take a cue from Dentists.

There are many hurdles for IT service providers selling IT consultation. There is a lack of definitions of boundaries between these services, no expectation about what’s included in a package and what’s not, whether it is project based or ongoing, sales or consulting, and so on. This poor service design and impromptu handling of custom questions leaves us little or no margin on vCIO services.

Do you remember ever selling an MS Small Business Server with Exchange, SQL, File server, and other add-ons? That could easily have been a $20 000 - $30 000 project with servers, licenses, and upgrades. Would we give away our advice for free to get the deal done? Sure. We made a sizeable markup on the devices, licenses and project overall, so it was common practice to include advice. It was an entirely viable model at the time.

However this is no longer feasible for MSPs, so new philosophies need to be created to charge for our advice. MSPs have created a "vCIO" term and put it into the agreement as a line item to highlight some consultation on the service side.

While this makes sense, it’s only the first part of the fix.  Delivery of the services is still a challenge for most IT managed services providers. As this is an increase of the price for the client, MSPs are losing to competitive pricing from lower quality providers.  

Clients engage us for quality service, and seem to need a CRM, so we start working, expending time and resources to produce an evaluation and suddenly they change their mind. Sound familiar? We’re stuck in the one-phase model, where remuneration came with the project.  We need to create a channel that dissects the concerns of the client into phases for which we can charge.

We have to slice it up like the dentists.  

Dentists are the perfect example of channeling your problems into phases they then monetize in a big way. Once you’re in the channel, you’re likely to stay in it.

Phase 1:

ou have a toothache - you go to a dentist. You expect a free check up and that’s what they do. Then the dentist informs you “You know I see some problems, but we’ll need to x-ray to get a clear picture. It is going to be $250, but it’s our best bet to see what’s going on.”

You say, “Go ahead…”

Phase 2:

Back with the x-ray the dentist, nodding sadly, tells you there is an enormous hole in your right upper 2nd molar. It’s probably going to need a root canal. It is still somewhat hidden but definitely nasty. Unfortunately, they cannot say for sure until he opens the tooth up. It’s your decision...at best it will be around $400 to do, but if it is a root canal, it is $1.500.

You say, “Go ahead.” 

Phase 3:

Turns out it is a root canal, but you’re comforted that at least you don’t need an implant for $5.000. You’re so glad you have paid only $1.750.

Now let’s turn this analogy onto our industry.

Phase 1:

“You seem to have a CRM/Sales issue... Let's have a brainstorming session with your team. As you know, your contract includes 2 brainstorming sessions every quarter, and this is just what they’re made for.”

You do the exercise, and it turns out there are problems with their current CRM...nothing is working, there is no valid data, etc.

“We can see where your problems are at this point, but we have to investigate further...have a meeting with the vendor (tech issue?), see how people are using the system (human problem?). After that, we can give better advice. It would be a couple of hours with the team and a couple of hours with the vendor, and also a couple of hours with a CRM specialist. I estimate $1500 to clarify the problem.

The client gives the go-ahead, because the pain exists and they haven’t the expertise nor the tools needed.

Phase 2:

We conduct the investigation and it turns out that the current CRM is obsolete...not supported; not cloud-based, etc.
“What we can do is to evaluate a better system. This means sitting down twice with the team to define requirements and put together three scenarios with three different systems that can be integrated with their accounting package. We would create an implementation plan, as well to roughly see the costs of that project.

“It will be around $2000 to put it together” we offer.

The client says “Go ahead. We’ve already come this far, I want this solved.”

You can charge for each next consultation phase with a clearly defined delivery goal. Instead of being all-encompassing and all at once, we keep it real, and let them make decisions how they want proceed. Also, some clients aren’t going to want to pay for this, so we are cutting our losses earlier and not wasting our precious resources. Many clients will see the value in what we do, if we can establish and communicate this process.

 
Denes Purnhauser

Written by Denes Purnhauser

Denes has grown his MSP from 5 people to 17 staff in less than a year by implementing business problem focused sales processes with vCIO. He has transformed the client engagement processes of hundreds of MSPs.