Crisis of faith

[Shea Smith]

This has been a good read and with interesting arguments for and against different pricing structures. I've been in business officially some 5 years now, and I adopted a separate pricing structure for Residential and Business clients from the start. In fairness, there is not a big difference between the two (£30 GBP per hour for Business or £20 GBP per hour for Residential) and this is solely down to the expectations of my service and the risks involved - I think Metanis nailed that on the head actually. Depending on client location however, there may be a surcharge to cover additional travel costs and time to get to and from them.

To get back on point however, I've been in the OP's position many times where a client has misinformed me or worst, when I failed to ask specific questions, which then leaves everyone in an awkward scenario where someone has to take a hit. If the attitude is right and I think the client is worth it in the long run, I'll take the hit, learn from the experience and (hopefully) not be blind sided again the same way. If the prospected client isn't giving me the right vibe, I'll stick to my pricing and cut them loose if need be.

 

[David Stelmach]

I had my very first run-in with a potential client the other day. I acquired this client from thumbtack. This client wanted me to check a possible failed PSU to see what kind it was so she could buy a replacement and have me install it. She also ordered a roller from Amazon and what that installed in an HP inkjet. So, I quoted her a $25 service fee for me to come out to the property, which would go towards the final bill of $90 for labor.

Once I talked to her on the phone she started telling me about a bunch of other crap that she would like to do. She wanted me to check this and that, blah, blah, blah. Well, I come to find out that it's a business that was the destination. So, after the phone call, I wrestled with myself to either honor the quote, which is based on my residential pricing or re-quote her my business pricing.

I decided to quote her my business pricing because of the future projects she mentioned and this is the email I sent her:

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Hello [prospect]:

Here is the pricing structure for businesses. It's pretty simple. There are three options:

Pay-as-you-go: $99/hr (minimum 1 hour)
Block hours: $85/hr (minimum 5 hours)
Monthly: $75/hr (minimum 5 hours)

Pay-as-you-go, is just that. You call me anytime and I come out for x amount of hours and bill accordingly.

Block hours is where you pre-pay for a block of hours (minimum of 5 hours). Those hours are then usable whenever you want. They never expire. You can call me a year from now and use whatever hours you have left. Payment is due upfront.

Finally, monthly is where you pre-pay for a set amount of hours every month (minimum of 5 hours). For example, you can purchase 10 hours and you'll have 10 hours available to you every month. Unused hours do not roll over. So, if you only use 8 hours for the month, the next month you will have 10 hours, not 12. Payment would be due the first of every month. No contract. You can cancel whenever you want.

Based on what you tell me, [prospect], I'm thinking the best option for you would be the block hours. You say you're going to need a local tech guy, so having those hours at the reduced rate will save you money. It will also save time, because we won't have to go through the billing process every time, as the hours are already paid for. Also, the networking project you're going to want to do, eventually, could take anywhere around 3-5+ hours, depending on what obstacles I run into. The amount of hours you purchase is up to you, as long as it's at least 5. Whatever you think you'll need for a given period.

You can also do monthly, however, I only suggest that for larger businesses that have an IT department that would need constant attention. I don't think that will be the case for you.

Tomorrow, it shouldn't take me more than an hour to identify everything that you've asked me to identify.

Let me know what you decide. I look forward to working with you!
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She declined, citing the reason being that she wanted to find someone more reasonable, which I took to mean cheaper, of course. I explained to her that those techs that charge a low flat rate will end up costing her more money in the long run. Plus, the reason there is a different pricing structure for businesses is because there are more variables and obstacles in a business environment that I could potentially run into.

My questions are, did I handle that situation properly? Should I have honored the original quote and chalked it up to a mistake and eat the cost of time spent? Are the prices I quoted reasonable for both residential and business? I'm aware the local market dictates pricing. I ripped the business pricing structure straight from a guy doing the same type of work that I use to work with, in this area, North Carolina. I figure if it ain't broke, don't fix it. Let me know and thanks for any replies in advance.

A different approach to pricing that may raise suspicion with a client. I find that they need to know a fixed price before attendance and this is more important for businesses. I am a one man business, so a single hourly rate works better for me and it doesn't matter whether it is a private or business customer. As you know, the first hour includes fuel, so add on hours should not be the same rate. Most private clients' work takes less than an hour, so I win on those, but rarely have a fully occupied day. Virus removal, data retrieval and backups etc take a lot longer, but other work can be done alongside it if you're just waiting for software to tick over and you take the computer away for repair.
I quote "£X for a visit and this includes up to an hour labour on site!". Some enquirers decline, but this cost is unvariable for new clients and is similar to other IT service providers.
I think you were lucky that the enquirer declined your rates as they seemed to be, what I would define as, a Vampire client who has self managed their IT and would be close to disaster, which, when it happened, would probably try to blame you for it! They may well have ordered the wrong 'roller' as well and would then try to refuse to pay for the visit!

 

[David Stelmach]

Another question I forgot to pose is how do I combat customers wanting to purchase the parts themselves? The bottom line is what I'm looking at here. I purchase the part equals a markup, which equals profit. Even more so if I'm partnered with the manufacturer, which is something I've been looking into.

If you're selling the part for more than the customer can obtain it for, you need good justification for that, but be aware that, if you sell it, you guarantee it! Sometimes customers order the wrong part and they should be aware that, if they have, they are still liable for the cost of the visit but, a second visit could then be offered at a reduced rate to keep their custom and trust.

 

[John Kennedy]

Personally, I'm on the side of consistent pricing, no changes between residential and business. I'd rather not do residential either, because I honestly find many more issues with residential clients than with business ones (payment, scope of work, scheduling, etc). I think the consensus is right above, though. I think the lead thought it was weird for you to change the pricing structure.

I think I would have handled the situation by saying that you can still do the work in the original quote for the amounts you originally quoted, but that additional work outside the scope will be at your usual business rates. Then, everything in the rest of your email makes sense without "changing" the rules on the lead midway through the negotiation.

I've never used thumbtack, but it sounds horrible and full of leads that will be terrible clients. I don't own the business I work for, but I imagine if I did, I wouldn't want this type of client anyway.

 

[Valhalla_tech]

All of you have provided great feedback. I think one pricing structure to rule them all is the way to go. However, I do feel the hourly blocks and monthly fees would work great for a client that has extensive IT needs. I'll have to marinate on that more.