Do I break my own rules for this client?

[thecomputerguy]

I've had this client for about 2 years. They are pretty easy to deal with. I tried selling them on MSP a couple times but they declined because they were in a "transitionary" period. Turns out that transitionary period was that they were being bought out. The good news is after the purchase, the new owners (from out of state), retained the previous owner as an employee/consultant, and they also decided to retain me for IT. The previous owner vouched for me and encouraged the new owners to move into MSP with me instead of break/fix as needed. It turned out well for me, they are on MSP now and pay me about $1000 a month for remote support, Win win.

They have been on my MSP plan for about a month now, and they aren't needy at all.

The new owners (We'll call him Bob) asked if I provided hardware, which I do. Then proceeded to send me a list with links to what products he wanted me to order. I don't know if Bob thought that I could get Surfaces and Docks/Monitors cheaper than he could from Amazon but nonetheless, Bob is a pretty smart guy, he knows what he wants, and he is familiar with computer & networking hardware.

Here's the deal. I have a hard rule that anything I supply gets hit with a MINIMUM of 20% margin for simply supplying the product. This is to cover front end costs like ordering, tracking, pickup, transportation. This is also to cover backend costs like something I supply fails within an unreasonably short period of time. If something fails in an unreasonably short period of time then it typically doesn't matter how it happened, the client looks to you because it came from you and if they are looking to me because it came from me then I need to make money on it.

The only reason I'm doubting myself is because this client is FRESHLY onboarded to MSP, he knows the hardware already and what it costs, and he send me links to what he wants me to order. ALSO, once these computers are installed they will be added to the MSP plan which means I will make monthly re-occurring revenue on them.

So as I see it I have a couple options:

1.) Bite the bullet and sell it to them for near cost and make it up over several months on MSP.
2.) Tell him I don't get a discount for those types of products and have him order it, in which case I will also probably lose future hardware sales.
3.) Tell him I will order it for him but make him aware that anything I supply must come with a 20% markup.

Thoughts?

We're talking about roughly $7k in hardware so 20% is a good chunk of change.

 

[britechguy]

Whatever you do now, with this client, is what will go on forever forward.

For myself, and myself alone, I'd go with option 2. If they are not seeking your advice on speccing things out (which you should charge for time, if they do) and know what they want and can shop for it, that's what they'll do, and it's unlikely you would ever be able to compete on price if we're talking low volumes. Another advantage, in my opinion, is that ownership including warranties, etc., all fall to the actual owner from moment one, and if they want you to register the stuff, that's billable.

Option 3 is perfectly OK, too, and they may agree to it if they'd prefer you to handle all of the hardware acquisition tasks over time.

 

[callthatgirl]

3.) Tell him I will order it for him but make him aware that anything I supply must come with a 20% markup.

Don't break your process. I always regret it when I do.

 

[callthatgirl]

and if he doesn't like option 3, then tell him option #2 will work but any support/work on the hardware is billable by the hour outside of the MSP contract and as well, night and weekend emergency rates apply.

 

[MichaelBits]

I assume he signed some kind of agreement/contract for the MSP.
Does it not state prices for hardware include 20% markup? Or similar language to reflect hardware costs?

I would have him purchase himself, or accept the markup.

 

[thecomputerguy]

I assume he signed some kind of agreement/contract for the MSP.
Does it not state prices for hardware include 20% markup? Or similar language to reflect hardware costs?

I would have him purchase himself, or accept the markup.

No it does not state this. It's never been an issue. Plus on some items I make 100% or 1000% markup. Depends on the item.

 

[britechguy]

option #2 will work but any support/work on the hardware is billable by the hour outside of the MSP contract and as well, night and weekend emergency rates apply.

I sincerely doubt you'd get anyone to agree with this. And using it to force option 3 wouldn't go down well.

Equipment additions and changes should be part of any MSP contract, whether MSP supplied or not. Not everything will ever be coming strictly through the MSP, at least for small businesses, and big businesses have in-house "MSP."

 

[thecomputerguy]

I sincerely doubt you'd get anyone to agree with this. And using it to force option 3 wouldn't go down well.

Equipment additions and changes should be part of any MSP contract, whether MSP supplied or not. Not everything will ever be coming strictly through the MSP, at least for small businesses, and big businesses have in-house "MSP."

Yeah so basically the way I handle new stuff is I call them and consider them "Projects" I explicitly state that MSP is for active and preventative maintenance of CURRENT hardware. When new equipment is introduced, the equipment is billed in full with my markup. The equipment is installed at a discounted rate ($15 discount) then once the equipment is installed the equipment gets added to the MSP invoice and is now billed for monthly.

The extreme example of why I do it this way is to prevent something like a client going into an all you can eat remote and onsite MSP contract that may cost them somewhere around $1500-$2000 a month then approving a $30k job while under contract and stating "Well you said it includes any onsite service"

Not that I have, or have had, or will have unreasonable clients that would do this. I do still have Business clients that I don't particularly like that were never offered MSP as an option, and I have no intention of offering MSP because they suck and I don't want to be tied to them with paperwork.

I seem to have re-occurring issues with female lawyer business owners. I don't say that to be sexist. In the 20 years I've been in business it is a re-ocurring theme.

 

[britechguy]

@thecomputerguy

And if all you really want, truly want, is Option #3 that is all I'd offer.

Offering #2, per Lisa's method, strikes me as very "blackmail-ish." I'd rather not piss off my existing client that way. You either handle them doing their own purchasing and your on-boarding new equipment "with grace" or you make it a rock-solid practice to supply all equipment. But you can't have it both ways.

Of course, there are limits as you've mentioned. A major change of scope means a change in contract, unless the maximum scope change was part of the initial one.

 

[thecomputerguy]

Well here's what I sent him

I am still working on the estimate for you but I want to be fully transparent with you.

I do not get any special pricing on any of these products. Sometimes I might get a small discount for products I order through Dell.

In any case, any product I supply will incur a 20% markup to cover front-end and back-end costs. If this is a problem, I will gladly hop on a call if you need some explanation.

Most, if not all of my clients prefer to just have me handle everything from start to finish.

 

[YeOldeStonecat]

Here's where our contracts helps us out, also our discussions with our clients early on.

For our MSP plans, we ONLY include "DA approved hardware"...and we list what software we support.
(DA is initials for our company)
So...approved hardware is in there to narrow down the list of computers and models we'll support. The top 3 brands...and their business models only. None of the residential grade models. Same with network hardware, etc. And..specs. Must be at a minimum spec.

Also, when a client purchases from us, we don't add "labor to set up the computer". I'm typically 20-25% markup...with Lenovo that still often gets me at MSRP, but I'll also ensure it has the Premier warranty on it also, which end users usually won't get.
If a client purchases a computer, even if it's a model/spec that we approve, we will add "in house service" time on the bill to "unbuckle it". We always prep computers before delivery on our bench. All Microsoft updates, all vendor drivers/BIOS updates, prep with Office and our RMM tool and AV.....and even prepare the users profile right here at our office (if it's a 365 client..which more and more are). We're use our RMM to download other stuff from the old computer they're currently using, to further prep things from our office. This is a BIG time saver for us, our tech can work on a half dozen computers at the same time. This is stuff we can prep ahead of time, often in small bites. Once brought onsite, the rest of the setup is often very quick and minimal.

When the client gets a computer, has it waiting as their office, you have to dedicate a tech to go onsite...unbox it...unbuckle it...run those updates, all the other prep....copy data over from old rig, etc. The techs time is dedicated to this one job...and it's taking much longer.

So...client wants to order a computer direct themselves...to save, what...150 bucks? Less? Heh...if they want to do that, and we have a guy tied up onsite for 2, 3 or more hours to unbuckle and set up...heh...ended up costing them at least 500 bucks more at the end of the day. Which, sure, we'll take that much more money, but...we also had a tech tied up for quite a while. So it's sorta a loss for us.

Also end users often cannot get the superior warranties or options that we can get on Lenovos and Dells.

 

[thecomputerguy]

In the end he just ended up approving the hardware + markup + prep labor + install labor

All is well.

 

[Sky-Knight]

I came here just to say stick to your guns. Because it's exactly as Stonecat laid out. You have a markup because that includes your setup process, if they don't pay it they get to pay for an ad hoc setup. The latter process should be more expensive than the markup.

And POOF client magically does what you want. But int his case you're not even playing any games with dollars, it's literally more expensive to do an ad hoc setup than it is to do a standardized one. For all the reasons Stonecat illustrated above. Being shy about that in my experience is how you get to work for free... which never ends well.

 

[callthatgirl]

@britechguy Offering #2, per Lisa's method, strikes me as very "blackmail-ish.

I would say it's outside the scope of the current contract and very "business-ish". But again, that's just me being disingenuous. Always trying to sneak one over on someone lol.

 

[britechguy]

@callthatgirl

Graceful, as always . . .

 

[Blues]

Glad you stuck to it. I was going to say I would go with #3 and if they didn't like it a modified #2 indicated there will be standard rate cost for install. Not sure how your MSP is priced out so hard to say but if there is or should be any impact to it this would need to be added to any option. I would say that any equipment not provided or setup by you should not be covered by any MSP though I feel that goes without saying but one must never assume.

 

[britechguy]

I would say that any equipment not provided or setup by you should not be covered by any MSP though I feel that goes without saying but one must never assume.

That would pretty much prevent on-boarding, wouldn't it?

You could certainly specify that only the equipment that was in the initial scope, or acquired and setup by you afterward, was "in scope," though.

 

[Sky-Knight]

That would pretty much prevent on-boarding, wouldn't it?

You could certainly specify that only the equipment that was in the initial scope, or acquired and setup by you afterward, was "in scope," though.

It does actually! Part of the SALES process is doing a full inventory of equipment to identify what gear can be supported. This is before onboarding, so everyone knows what they are getting into.

 

[britechguy]

Part of the SALES process is doing a full inventory of equipment to identify what gear can be supported.

Which is on-boarding, as far as I'm concerned. My point is that, at least initially, most MSPs don't have an awful lot of control over what already exists. They also don't generally get to tell a potential client, "Well, I'll support you, but only if you ditch 80% of what you're currently using and replace it with what I require."

There is a dance to be done, and I'd bet most people on-boarding will on-board at least certain hardware that they'd not choose themselves, but that they feel they can support after checking out whatever it is they need to check out first.

The way the statement was made that I responded too seemed to me to be saying you would pretty much insist on an entirely clean slate of only equipment that you, the MSP, provided and set up. I just can't see that happening at all often at the on-boarding end of things. Yes, you do get to pick and choose, but if you choose zero (which you could) then there's no contract to begin with in all probability.

 

[Sky-Knight]

@britechguy What you're talking about is only true for small MSPs. The sort of MSP that doesn't realize they have to be an MSSP or they're going to die soon. And the MSSPs? They WILL tell a client they have to replace all their hardware, but those shops are also usually building in a lease for all impacted platforms into the cost per month anyway.

So they'll just come in with a fresh batch of everything, because that monthly charge is that high, and it transfers ownership of all equipment to the MSP, and makes all maintenance their problem.

But yes there's a dance in the space we both live in, and it's buried in the "onboarding fees".