it service contract secrets

8/12/2019 IT Service Contract Secrets

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IT Service Contract Secretsfor Getting MoreRepeat Clients and

Recurring Service RevenueFour Areas You Must Tackle to Become a Sustainable

and Profitable Service Contract-Centric Business

www.SPHomeRun.com



IT Service Contract Secrets

SPHomeRun.com

Contents

Breaking Down the Challenges Facing Computer Consultancy Businesses ...................... .. 3

Improving Your Business Means Realigning Your Mindset ...................... ......................... ..... 3

Positioning Your Services for Maximum Revenue Impact ................................ ...................... 5

Strategies for a Successful Step-By-Step Sales Process ..................... ....................... .......... 6

The Key to Client Retention: Exceeding Expectations ...................... ......................... ............. 9

Action Items .............................................................................................................................. 9

Additional Recommended Reading ........................ ......................... ...................... ................. 10




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Breaking Down theChallenges FacingComputer ConsultancyBusinesses

Computer consulting businesses, VARs,network integrators, IT solution

providers, MSPs, and computer repairbusinesses all trade within a highlycompetitive marketplace. If yourcompany’s primary purpose is to helpsmall local businesses with their ITproblems on an outsourced basis, youneed to make your company as supportcontract-centric as possible. Thefollowing questions come up over andover again, and it is likely that you haveasked yourself one or more of them:

• How do I turn new clients intorepeat business and recurringrevenue?

• What are some methods I can usein order to create residual incomefrom service contracts?

• How do I secure clients on aretainer for maintenanceservices?

• How can I better my servicecontracts?

These questions define some of thebiggest challenges that face businesses inour industry. If we step back and reviewwhat we are doing, it is often easy to see

where we can make improvements.These suggestions below will go a longway towards solving these thought-provoking, business-challengingquestions.

Improving Your BusinessMeans Realigning Your

MindsetIf your clients only call you when theyfeel like calling you, if you have noproactive project plan or IT strategy inplace for what you are doing with them,then you have a problem. Not knowingwhat services you are providing month-to-month, quarter-to-quarter, or year-to-year provides for a dysfunctionalrelationship. You cannot work with a

client on a break/fix basis, or just getcalled in to firefight, meaning that youonly take care of emergencies.

It just isn't a feasible long-term businessstrategy.

It is vital that you think way far beyondsimply providing maintenance services.You need to stop thinking about yourbusiness in that context, because it's anold-school way of thinking. Youshouldn't just be your clients’ firefighterperforming tasks, such as taking care ofthe break/fix work, running updates andpatching problems. There is more tobeing an outsourced IT provider thantaking care of system lockups, failednetwork connections, blue screens andoverheated system boards. You need to




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start thinking strategically about thebigger issues your clients face. Once youhave identified the issues, you need toput forward solutions that will solvethose challenges for your small businessclients.

If you’re just thinking break/fix, you’remissing the point and operating morelike a system engineer, which can make

you oblivious to many more substantialproject opportunities. You need tochange your mindset and start thinkinglike a CIO or CTO. Your businessshould focus on delivering proactivevirtual CIO services.

Being a proactive virtual CIOmeans:

• Having project plans in place that

contain anything and everythinghaving to do with clients’ ITneeds.

• Project plans should be started atthe moment of your firstinteraction, whether for a lead ora prospect.

• Project plans need to beformalized using software. Here

are some ideas to get you started:

Microsoft Excel spreadsheet(least desirable)

Google Docs Worksheet/GoogleApps Premier Edition Worksheet(www.google.com/a)

Zoho Projects(www.zoho.com/projects)

Basecamp(www.basecamphq.com)

• Project plans should be sharedregularly with clients. This canbe done at your monthly orquarterly meetings. Also consider

providing clients with online,read-only access rights to theirsection of your software.

• Nothing should ever be off thetable, as far as the clients’ ITneeds go.

For example, clients should neverhear “it's not my job...it's notwhat we do.” If you do not have

the expertise, then you shouldsay something like, “we don'thave anyone in-house with thoseskills. Let me make a few calls. Ithink I know someone who hasthe perfect person for this whowe could bring in for thisproject.”

• The biggest value-add to yourclients, when they have no in-

house IT department, is helpingthem to prioritize:

You should be answering thequestions such as, “What do wedo now? What do we do nextweek?...next month?... nextquarter?...next year?”




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You should be thinking yearsahead into the future for clients.This map obviously changes overtime, and these changes shouldbe discussed and reflected in thecontinuously updated projectplan.

You have to act as your clients’virtual CTO or virtual CIO. This

means that you are their ITvisionary/strategist.

Once you have successfully altered yourmindset, and you are ready to act as aproactive virtual CIO, you will then bein a position to look at altering the waysin which you can make your businessstand out from the crowd.

Positioning Your Servicesfor Maximum RevenueImpact

In order to maximize your profitability,you need to position your business sothat you bring tremendous added valueto the table. By adding considerablevalue to your clients’ businesses, youwill be able to charge higher hourlyrates, because you are improving theirbottom lines. Positioning your companyas a proactive virtual CIO is the first stepin making your services add more valueto your clients’ businesses. But, there aresome other areas to look at as well:

Hone In on a Niche or Sector

If you bring industry expertise alongwith you, your business will be muchbetter positioned. For example, if youalready have four clients who areaccountants, it’s going to be easier to getmore clients who are also accountants.As a bonus, you will be able to closesales more easily and with less

resistance.

Using this strategy, you’ll be able toachieve higher hourly billing rates. It’s afantastic deal for your clients becausethey know that you can hit the groundrunning right out of the gate. You willoperate much more efficiently becauseyou already understand what makes theirbusinesses tick.

Make Your Business Stand OutFrom the Crowd

By prioritizing your clients' overallbusiness needs, you are acting andthinking like a true CIO or CTO, asopposed to just a computer repairtechnician or a plain old systemengineer. You need to plan the project,supervise the implementation, documentyour successes, benchmark your specific

measurable results and then replicate thattime and time again. Keep looking forproblems within your clients’organizations to which you can applyyour business and IT problem-solvingskills. Help your clients use IT muchmore strategically. This will allow yourclients to grow their revenue and reduce




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their overhead. You can even helpclients expand their businesses by:

• Getting into new lines of service.

• Providing new products to theirmarkets.

• Opening new locations.

All this can be achieved with minimalexpense. Plus, your clients will gain theupper hand on their competitors becausethey will be using IT much morestrategically, thanks to your keeninsights, recommendations, andimplementations.

How to Consistently Bill Out at theHighest Hourly Billing Rates

Setting your rates at the right level isvital.

Differentiating your business from therest of the pack means not having tocompete against shortsighted businessesthat are going in at $25 or $50 per hour.

Adding value to your clients’ businessespositions your company to easily be ableto demand $100, $125, or even $150 an

hour. Once you get good enough atsolving business problems and drivingbetter ROI, you may want to considercharging clients on a fixed-price basis, orperhaps even negotiating to be paid onperformance. Why? Because approachedthe right way, your firm will netsubstantially more than even $150 perhour.

Remember that all service contracts mustbe on a win/win basis. The biggestrookie mistake is giving away thebargain of the century. No client is evergoing to tell you to raise your ratesbecause you are doing a great job. Youhave to set your rates. It is not up to yourclients to know your cost structure figureout your value proposition, or determineyour rates.

When you determine your cost and ratestructure, make sure that the calculationssupport the profitability and growth ofyour business.

So far, we have looked at how you needto change your mindset and repositionyour service in the marketplace. Onceyou have differentiated your businessfrom the rest of the pack, you’ll have

essentially optimized your company’searnings potential. Next, we are going tolook at how to find potential clients,qualify them, and close service contractsales as quickly as possible.

Strategies for aSuccessful Step-By-StepSales Process

In order for your company to achieve itsgoals, you need to have the rightmindset.

If your goal is to build a solid client basewith recurring service revenue andresidual income, you need to have arobust sales process in place.




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Tightly Focus On Your TargetMarket

Service contract revenue generallyinvolves providing billable services toyour small business clients on anongoing basis. In order to grow yourclient base in a sustainable manner, youwill to need to invest time and resourcesinto client acquisition. A lack of focus in

this area can cause major sustainabilityproblems in the future.

You will need a good, proactive andspecific marketing plan. Marketing yourservices to everyone is a recipe fordisaster, unless you have the budget of aFortune 1000 company.

All of your marketing should focus onthose who are prequalified to be your

service contract clients; otherwise youcould end up with something similar tothis:

Let us say it costs you $400 in customeracquisition expenses to get a newcustomer. However, most of yourcustomer list is comprised of homebusiness users that call you once andspend about $200. Maybe, you mighthear from those customers again in a

couple of years, but the $400 it costs toacquire a new customer who only spends$200 does not make any sense at all, atleast not without additional offsettingfactors.

Therefore, you need to focus on the B2Bspace. Turn your focus to smallbusinesses that have:

• At least 10 employees.

• At least 10 workstations, up to 50workstations.

• A couple of different locations.

• A couple of different servers.

• No large in-house IT department.

Make Sure You Qualify All YourLeads Effectively

All of your pre-sales activities shouldfocus on those who are prequalified to beyour service contract clients. Be veryclear on any criteria that you set, whichmay look something like this:

• Are these leads the right size?

If they are too small or too large,it is generally not a good match.

• Are these leads geographically

qualified to become service

contract clients? If they arelocated too far away, then theyare geographically undesirable,and it’s generally not a match.

• Is there a platform/OS/NOS

match? If the platforminfrastructure that they have inplace doesn’t match your skillset,and you don’t have a technologyprovider partner or asubcontractor you can bring in tofill that gap, it is generally notgoing to be a good match.




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• Are these leads used to paying

for professional IT support

from trusted business

advisors? If they are not used toworking with professionaltechnology providers, or if theyare accustomed to getting theirhelp free from friends andfamily, it generally will not be agood match

• Are these leads in the rightindustry? If they are not inindustries similar to ones thatyou have had great success in, itis generally not going to be agood match.

So besides good marketing, you have tobe realistic about your lead qualification,so that you are spending your sales

resources and lead nurturing resourceson the right future businessopportunities.

Take Care in Preparing For andExecuting Your SalesAppointments

When owners of many computerconsulting businesses, VARs, networkintegrators, IT solution providers, MSPs,

and computer repair businesses go outon sales appointments, they are justdrifting through their meetings. Becausethey have no idea what they actuallywant to accomplish, what then ends uphappening is that prospects talk abouttheir grandiose visions of having theirWeb site look like Amazon’s and their

network infrastructure being as robust asthe New York Stock Exchange.

The best way to start the relationship isto focus on selling a small initial projectas a proving ground.

This should be something that can beaccomplished in one or two visits and isa few hundred dollars (or your local

current equivalent). Aim to do theproject on a fixed price basis. Make surethat the project has a well-definedbeginning, middle and end. An idealproject would be an IT audit ortechnology assessment, which allowsnew clients to get started with yourcompany in a very low risk manner andvice versa.

You can certainly make things in the

sales call process go faster if you bringalong some testimonials and some casestudies from your satisfied clients. Focuson selling that small initial project. Ifyou bring your simple one page letter ofengagement, it’s something that shouldbe able to be agreed upon on the spot, orcertainly within a week.

Now that you know how to gain thatinitial foothold with your new clients,

you need to start to focus on retainingtheir business.




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The Key to ClientRetention: ExceedingExpectations

Client retention is really about exceedingyour clients’ expectations. You need toconstantly “wow” them. Delight them byshowing them that you are really on theirside and that you are looking out for

their best interests at all times.

Assuming your proving ground projectsgo well, there are almost always followup remediation projects. These could bein the form of system upgrades, networkrollouts, or something similar.

During the course of discussing thesefollow up projects, the natural thing tobring up is, “Have you given much

thought to how you would like supporthandled on an ongoing basis with thissystem once we have upgraded it?” Thelikely response is “Well no I haven’treally given it much thought, what doyou recommend?”

That’s when you bring out more casestudies and more testimonial letters fromclients, especially those clients who’vebeen long-term beneficiaries of your

service contract program.

These testimonials should be fromclients who have been with you for yearsand who have gotten tremendous valuefrom the long-term relationship. That isthe natural way to approach repeatbusiness.

Don’t get ahead of yourself. Don’t jumpthe gun. It can be a huge turnoff to smallbusiness owners and managers, if theythink you are being too aggressive or are just looking out for your own interests.

Yet you also need to be continuallyfiguring out ways for your clients to getmore out of their IT systems. Make surethat you are driving additional sources of

revenue for your clients, without yourclients having to take on additionaloverhead. In addition, you can help yourclients expand their products andservices and expand to other geographicregions by leveraging IT morestrategically.

Action Items

Think like a CIO or CTO. Look at all thedifferent business challenges your clientsface and figure out ways to apply IT tocreatively and cost-effectively solvethese issues.

You should be constantly surveying andfollowing up to make sure that you aremeeting your clients’ needs on an on-going basis. Remember, client retentionand the lifetime client value is what

builds the value of your business on anongoing basis.

Focusing your mindset andimplementing a step-by-step salesprocess will dramatically improve yourclient acquisition and client retention.

You will be able to:




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• turn new clients into repeatbusiness and recurring revenue;

• create residual income fromservice contracts;

• secure clients on a retainer formaintenance services;

• better your service contracts.

Copyright © 2012, SP Home Run Inc.

SP Home Run is a trademark ofSP Home Run Inc.

All Worldwide Rights Reserved.

Additional RecommendedReading

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