Costing / Pricing query

Hi All,

This might be too much of a “personal” question for an open forum but I wondered if anyone would be willing to share some of their cost calculations and hourly rate. I know Tom has his hourly rate on the website and thought that given his general open approach that some others here might do the same.

I’m going through the process of moving from break fix to a more managed proactive service. I’m currently trying to decide what I should be looking to charge per device and am really struggling. I think that most of the computers I currently manage I only ever need to touch once or twice a year so coming up with a monthly “On average I spend x hours per PC” seems a bit silly and I will be calculating my billing by the second almost. Same applies to phones, switches, servers, access points etc. The actual hands on per device time per month is really quite low.

I’m also not sure where to place my hourly rate. I’ve been doing this for 20 years so I know I can’t be too far off or I wouldn’t have any work. I know that hourly rates will vary massively by region and that I need to be charging enough to cover my costs. The UK nationals minimum wage is just short of £9 per hour and I currently charge between £50 and £75 depending on the customer and the type of work (pulling network cable costs less than sitting on management committees). This works out at somewhere between 5.5x and 8.5 times that minimum, I wondered if anyone else could look at a similar ratio (easy if you are in the UK…).

I do understand that some people might find this too detailed to be prepared to share but if you can I would appreciate it, a DM would also work if you don’t mind sharing but don’t want it on the forum.

I’m from the UK so I know the cheapskate culture it’s all to pervasive, that is a major hurdle.

While I work in a different domain as a management consultant my rates are in the 800-950€ range, in a past life I implemented microsoft project server and was pimped out at 1500+£.

Not sure the actual rates are so important but the justification is that the best part of 20+ years of experience has gone into building up my knowledge (across a range of fields). The customer simply doesn’t see the effort that goes into building up the knowledge they see that you identified a permission was incorrectly set in SQL, they could have solved that in 5 mins !

They are paying for the effort it takes to keep up with the technology, most companies suck with crappy workers hence they need external help, that’s when you come in.

If the job is easy to scope it’s easy to price, if it’s tricky then it’s time and materials.

For most customers if it’s on budget it’s too expensive, if it’s on time it’s too late and if it’s to quality it’s not good enough !!

Stick to your guns, if you know the value you are able to add to their business charge them accordingly.

If you are looking for pricing models compare with lawyers and dentists.

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Thanks @neogrid,

I feel like my current rate is appropriate and am absolutely not in a race to the bottom. I also remind people sometimes that, as you say, you are not paying for the 10 mins it just took to do the job but the years of experience that made me able to do the job in 10 mins.

I think my struggle is more about estimating costs, for example, maintain a PC for a year. My head tells me I should be allowing 15 mins per month to install updates and do the proactive stuff + maybe another 15 for “other work” but the reality of my current situation is that I don’t think I spend anywhere near that amount of time (but I don’t have good enough records to say for sure).

I like your suggestion of comparing rates to other industries. I have also found a few websites aimed at UK businesses looking for support giving some idea of costs, again, they seem to be roughly in line with my thoughts so maybe I’m just massively overthinking the situation!

I usually work with the client and find something that fits their budget. I’m still building my business and tend to be fairly picky with the clients I’ll work with. I want clients that value my experience and knowledge and don’t necessarily always want the cheapest solution. I tend to charge anywhere from $100/hr to $350/hr mostly dependent on the level of complexity I’m working with the client. Basic support type work would be at the lower end, but high level design and architecture type work I push that higher end price. Personally I just don’t feel right charging a client $350/hr to fix their printer because of my “years of experience”. So I try and find that middle ground that’s fair for both sides. I feel good that I’m not losing money but also not gouging the customer.

I take the time to really understand the business and provide the right solution to fit their problem or scenario. This has helped keep the quality of my clients higher and I’m not always having to constantly be fixing cheap or poorly built systems and I can build a trust relationship with them.

From what I’ve seen so far this has lead to a much better working relationship with my clients and they are much happier than with their previous providers that want to always push the expensive solution or push their “standard” whether or not that’s what’s best for the business.

Granted this is a side-gig for me so I’m not reliant on it as my sole source of income so I can take this approach. Documentation will be key as I continue to grow for sure so that’s one of my next projects is to find a good, flexible documentation system.

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Worked on this very problem opening my business. Simplify when and where you can for your benefit and the customer’s benefit.

Here’s my approach to the problem. Where ever possible, keep it as simple as possible

  • There are basically two types of services, commodity services and custom services (a.k.a projects)
  • Commodity services are usually flat-rate with value-add highlights
  • Commodity services are like legos and snap together multiple items depending on the need
  • Project services are custom. I use a mix of commodity items with hourly billing
  • MSP services are a totally different subject. If getting into this, will need to figure if you are offering the MSP services as a complete package or à la carte. My 0.02 on the MSP offerings is its better to go with offering whole solutions vs à la carte. Offering à la carte means get out the calculator every time you need to quote and lookup what services a client has every time you work in their network. Are you and your tech going to remember do this?
  • For me, I put the numbers of the business together and looked at them by annual costs, monthly, weekly and daily. One trick i did learn to fix some gaps in my numbers between year, months and weeks is the understanding that a normalized month is not 4 weeks but rather 4.33 weeks (D’oh!)
  • Most MSP sources can help you with pricing and even pricing in your region of operations
  • Keeping it simple: Come up with a number for client computers, servers and if you manage the network (firewall, network and WiFi) come up with a flat price for that segment. Again the MSP source can help with the cost per user computer and server.
  • Contact you completion to get their numbers or look at published materials if they publicly list prices
  • Ask existing customers if they care to share the information from past service providers or estimates they have received
  • Understand there may need to be a minimum number of systems a client needs to have for MSP services to make financial sense for you

This series by Solarwinds helped me a lot