Bill By User: Growing Your Revenue, By Supporting the Growth of Clients
BY IT GLUE | September 15, 2020
Technology enables progress and innovation, and as the source of IT expertise, you have the knowledge and insight to support the growth of a client’s business, not just its day-to-day operations.
Every client has a customer lifetime value (CLV), meaning the professional relationship brings in a certain amount of revenue throughout the duration of the engagement with them. The billing strategy your MSP uses can drastically impact how much revenue a client will represent. It goes without saying that you want a billing strategy that maximizes CLV.
A Bill by User Strategy
Similar to how paying by “seat” or per licence, billing by user permits a bespoke statement of work that is suited to the size of a client. Smaller clients can afford your services, and you can accurately allocate resources based on the number of end-users you service. As the client grows, so do the number of employees, and the size of your contract with them. It’s a win-win situation for both you and the client.
A statement of work often defines ticket response and resolution timeframes, so in order to ensure you have the internal resources to deliver on those terms, you need to know the exact number of users you’re servicing. Billing by user makes this clear, and avoids some common pitfalls of alternative billing strategies.
For example, billing by device tends to establish a mindset that is averse to replacing outdated products or hardware, even when they simply don’t get the job done anymore. As a result, the client is less inclined to add new products that will help the growth of their business, and therefore, grow the revenue that flows into your pocket.
Tiered Billing
Another example can be tiered billing. When using a tiered billing strategy, smaller clients will often have little choice but to go with the lowest and cheapest level of service. Doing so also means they won’t be receiving the level of service that could bolster revenue driving internal processes, helping them grow. This cuts off an opportunity for mutual growth that will benefit your MSP. In addition to this, you also run the risk of the client supplementing any holes in the service level agreement either by themselves or through other services. Doing this undermines your role as the IT expert, and introduces the risk of you being replaced by another IT service provider.
Use a billing method that relies on two things: (1) the honesty of a client who is motivated to minimize expenses, and (2) the ability to have accurate documentation on the client’s IT infrastructure. Without the former, the latter becomes an absolutely imperative.
In our next blog we’ll go into the products and services that provide this, by giving you billing precision.
