On Tuesday I attended Ed Kless’s one day consulting class in New York City at the Affinia Hotel. This excellent session gave those in attendance a lot to think about in the area of fixed cost engagements and how to better control and manage consulting engagements.
Ed has a full week session that’s happening from June 7 to 10, 2010 in Dallas where he’ll share even more ideas and information. There is also a Sales Academy led by Rob Johnson happening at the same time. Log into the Sageu site and browse to the academies section for more.
One of the topics that is near and dear to my heart is Service Level Agreements. In short – phone support agreements. In the last 10 years we haven’t accepted a single client that was not agreeable to an agreement 😉
And I’ve quickly compiled some tips on how I’ve adapted my plan to be sure that the agreement is fair to both parties.
Five Secrets To Making Money On SLA aka Service Level Agreements
1. “Can you just login and fix it” = This MUST be a premium service offered only to your best subscribers. The remote login support call for me has been at least twice as time consulting (client’s not ready, you wait around for everyone to log off, you wait for items to update, you deal with a client unable to establish a connection, etc, etc).
2. Always use a response time that indicates “from receipt of payment” if you offer a “pay as you go” option (and you should define pay as you go in YOUR terms and not with the clients terms).
Here’s a copy of my Pay as You Go — always have your own plan ready and anticipate questions from clients.
Note that this is NOT intended to be an attractive plan.
Customers who want to call and pay for tiny fractions of their usage are not attractive clients (and contrary to popular myth you usually won’t “make it up” on the maintenance and support margin) – why do we then give them attractive plans?
3. Scope, Scope, Scope — your clients must understand what is covered and what is not. If you “bend the rules” once – expect to keep bending.
Think of the reasons you don’t feed stray cats (I know this is a terrible analogy) — once a cat sees a free source of food they camp out on your doorstep forever – or until you stop feeding.
Repeat this often enough and you’ll wake up one day a disheveled cat lady with lots of friends on your doorstep — who pay you $0 for your professional time.
4. Send a zero dollar invoice for every single interaction with a client that’s related to support – no matter how small.
That means even email replies.
The invoice will be no charge but you have a trail of what their usage has been. This is also an eye opener and allows you to track those who are over-using support and either review the scope of what’s being offered (do you have a staff member doing free Crystal Reports?) or reconsider whether to offer added training.
5. Have a plan.
Do not ever under any circumstances go to a new client meeting without a plan for what you will offer for support.
My experience is that if you attend a client meeting invariably the conversation ends with “well we don’t hardly ever call so we’ll just pay you for when we do”.
As Ed Kless points out in his class — the pay as you go model plain doesn’t work. It does not allow you to plan for capacity or to adequately staff. In short allowing clients to be “pay as you go” is phantom growth. They’re not generating much revenue — and their support calls will appear during your highest stress time of the year.
Note: I totally disagree with the myth of “making it up on maintenance and support margin” for a number of reasons – not the least of which is that the pay as you go is often not on maintenance, doesn’t want to renew 0r (more often) leaves your firm prior to their renewal date.
If you walk into a client meeting without a clear idea of your support plan offerings – the prospect is going to talk you into pay as you go.
Instead, you should offer the client a set of options — documented on support agreements containing details that you can show the client. In my experience being prepared has been the only way I’ve found to avoid being talked into pay as you go support which produces no revenue but significant staffing and administrative headaches (typically arguing with the pay as you go client about whether their call is billable or not).
For more information on the topic – check out the upcoming Sage Consulting and Sales Academies which not only cover these topics – but expand on them and allow participants to share ideas.