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The One Secret I Learnt Running my IT Support Business
Article by Gordon Tan:
It’s funny to think I’ve been in the IT Support game for 10 years. It feels like only yesterday I was driving around with my car and mobile phone crawling under people’s desks to fix their PC’s. Now, things have changed slightly – we employ over 30 staff and I shuffle a lot more papers than I get my hands dirty, which is sometimes tough being a geek at heart!
Through all the ups and downs that come with running your own business there was one secret that I learnt along the way that I would like to share with you today. If I had found out about it sooner, it would have saved me a lot of grief and heartache and is the biggest thing I wish someone had told me when I started out as “an IT guy”.
The secret is… most computer technicians are charging too little to build a sustainable business. To explain, when I started I used to charge rock bottom per hour prices for my support thinking that I needed the work. But ultimately, what I was left with was a situation where I was spread too thin. True, I had interest from businesses because I was so cheap but I couldn’t deliver on my promises. If you’re feeling pulled eight different ways and struggling to keep up with clients, you need to free yourself up and the most effective way you can do that is to charge more.
Since 2007 I have raised my prices about 5 times and have lost a total of probably 3 clients over the years because of it and these clients, were the ones that are the most difficult to deal with. They dispute every invoice and don’t pay their bills on time. So ask yourself, how great would your life be without these customers?
If you charge more, you will now need to do less work to achieve the same return – in fact, if you raised your prices by 20% right now I’d be willing to bet you would not be any worse off revenue wise even if you did lose a client. Not only that, but you will have the monetary resources to at some point start hiring others to help with some of this work. And now you are responding faster, providing a better service and able to spend more time with clients without having to bill them for every second guess what – you are going to get more referrals and grow faster too!
The truth is, by charging too little you are not helping your customers. Most customers are happy to pay an extra $20 – $30 per hour to get fantastic customer service. When I started my business I charged $80 per hour and we now charge $150 per hour. The truth is I have much happier customers now than I did then because my team can give them the TLC they deserve.
So next time you are visiting a new potential client remember this secret I have shared with you, charge them more and promise to deliver them a better quality service. You’ll be doing both of you a favour!
Article by Gordon Tan:
At 31 years old, Gordon Tan is the Managing Director of one of Australia’s fastest growing IT Support Companies, R & G Technologies which employs over 30 staff. Having started the company 10 years ago he is passionate about educating others on how to grow successful and sustainable businesses.
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I agree, but only to a point. If you charge too little, clients will view you as too cheap, and associate poor quality with overly cheap prices. You have to charge enough to prove to the client you are a valuable commodity.
However, charging $150/hour is ludicrous! At that rate, they might as well go out and buy a new computer. Why would anyone waste that kind of money when it’s cheaper to replace? Even a basic cleanup & virus check takes over an hour, so the customer is paying at least $300 for a tune-up. What a rip-off.
For a company that deals with what I believe are business clients, $150 per hour is not uncommon. I am busy enough as a LAN manager for a State Agency in Florida. We have a couple of third party vendors that charge at least that. One of those does printer repair. For a smaller, lower volume laser printer I am not calling for service. If it is not a simple repair (rollers, fuser, etc.)I will price out and purchase a replacement. For a heavy volume production quality Multi-Function printer, I will call.
I get questions about looking at personal laptops and computers all of the time, as do other IT employees. I charge substantially more because my time is worth more to me. I’ve been in the business for 20 years, have a wife and 2 children, and other hobbies. Sometimes a job may sound like a simple fix, but often the jobs turn out to be more time consuming. Many of my peers sacrifice more time for less money than they expected. I choose my customers as well. I want to know that after cleaning off mal-ware or viruses that my customer is going to schedule or perform frequent updates on preventative software and not slip back into bad behavior patterns that might send them back to me a couple of weeks later expecting a free repair.
Like the author of this great article, I spent too many years undercharging and overworking. The quicker an IT Professional picks up on this, the lower the chance of burn-out and the greater the chance for expanding a viable, self-sustaining primary or side business.
WOW, $150phr, glad you “Learnt” that… now go learn english
Actually “Learnt” is correct. Learnt is strictly British English whereas US students are taught to use “Learned”. Seeing that the author is Australian and we use British English, he used the correct one.
As for the $150 per hour rate, you need to keep in mind that its all relative. If you live in a small country town in the middle of America, $50 per hour may be a normal price, whereas if you live on Manhattan Island for example, $120 per hour would not be uncommon. In Australia prices are much higher than in the US (I should have marked that these prices were AUD) but we also earn significantly more so it all balances out.
It also depends on who your clients are. If your clients are businesses then $150 is nothing to them. Gordon Tan also has over 30 staff and as you can imagine his overheads would be significantly more than the lone guy who is operating out of his garage.
He would also need to pay his staff Australian wages. Our current MINIMUM wage for full time work is $14.76 USD. Australians also have significantly more protections/regulations in place as well as more paid holidays. All of this costs the businesses money and therefor he has to put his rate up higher.
$150 AUD ($139 USD) is about on par for a business with 30 employees, doing work for business clients in Australia.
Thanks Bryce for that explanation. I knew about “learnt”, but never knew that the minimum wage for you Aussies was so high. Is this due to health care or benefits. I knew that when I was working for “the man” I would have rather been paid more per hour or year and get my own coverage than be forced into the crappy benefits package they offered. Maybe that’s why here in the states we undervalue our services and some clients look for “cheap” services. Just check out our state minimum wages (http://www.dol.gov/whd/minwage/america.htm#Georgia). I live in Connecticut, one of the more expensive states, but our minimum wage is just above $8/hr. Check out Georgia, who only comes in at over $5/hr.
I can agree. Saying that, the labor rate will very with the service and client type. (Exchange or Server support vs replacing LCD in grandmas HP) Like John says, at $150/hr, the residential client views his/her PC as entertainment. The business owner views it as a tool that brings ROI. The business owner needs it to work, yet the residential is on FaceBook keeping up with friends. $300.00 is not a rip off if both parties agree it is a fair price John. My residential clients would agree with John though, $300 is too much for most home PCs. My business clients are happy to pay $300.00 if the PC works and they are not losing $300.00 HR because of the PC problem.
This article left off a few things I feel should have been brought up. I’m sure it was written as a short read. I learned or (learnt) the hard way as Mr. Tan. Today, I still catch myself not billing the proper time. When running a business, you must bill enough to run your business and account for all of your time. I will still be the “nice guy” and invoice for 1hr when I was out for 1.5hr. This is okay to do for the very best clients sometimes. Everyday practice will discipline the client to expect it. Instead, send them a gift card if you want to thank your client. It goes much further for the both of you than discounting your rates. (Discounting your rates is discounting yourself.)
Don, Learnt is more common outside of the US. It is English lol. But yes, WOW $150.00 hr. Good job Gordon Tan.
Very good article Gordon! Will you be writing more? Unfortunately quite a few technicians do not understand and cannot comprehend the reason and psychology behind higher prices. Case in point “John” above; everyone’s situation, demographics and business is different. The price of a new computer is irrelevant because the client is paying you to protect their data and perform at peak efficiency. If they purchased a new system and hired you to transfer their data, install applications and update the system, how long do you think that will take and cost (plus the cost of the computer)? Clients have a choice and the overwhelming majority of them find better value and quality in higher pricing. The other percentage that don’t want to pay the higher prices are probably looking for a deal anyway. Price your services according to what the market will bear, don’t be on the low side and learn to value the service you provide. A business client of mine told me last week that she is happy to have me servicing her systems because the last company would charge her upwards of $1000 per service. Now granted this other company she used has many employees (I am by myself), they have a shop (I work from home), but it made me question whether I am charging enough for my services (currently $85/hr). If my client was paying the other company upwards of $1000 per visit I am guessing they would have no problem paying me $500 or more per visit (currently their average service charge is around $300).
Appreciate your kind words – I’ll be doing my best to contribute regularly. Even though you are on your own, you need to charge like you are a larger company. This is what allows you to scale the business. So on the limited information we have, I would recommend that you definately increase your prices to be more reflective of what the client anticipates paying. You can still give the new client a bargain, and make great money – not to mention hire more staff to help you with the work and deliver faster/better service. You are in a great position and can create a fantastic win-win outcome for your client too.
Good luck!
I agree with you John, is crazy price 150 for hour I 100% believe that is not honest, because when you clean well a computer take time is depend of the gb of the hard drive and how slow is the pc, minimum good cleaning 2 to 3 hours here in Canada geeksquad for best buy charge that prices and my clients before used best buy services, but after see the prices and the quality of cleaning pc, start to call me. Around 200 for cleaning pc in one hour, normally I check that pcs after one month bestbuy cleaning, and the pcs is full of virus and malwares, I ask the client if used a lot the pc for download illegal staff, the answer is not the client don’t used every day the pc, is impossible a computer have 565 virus and malwares in one month if the client used his pc maybe 20 days before best buy cleaning,
I download from Internet best buy software, is automatization cd I tested and really don’t help a lot for good cleaning.
My friend charge a lot money for hour is not warranty for customer good quality of services. For me is not honest technician.
People,
Once you get to that $150/hour rate, you’re not doing “virus scans” and “PC cleanups” anymore for Mom & Pop shops. Think bigger. Gordon Tan’s company has reached a point where his, and his technicians’, time and expertise is worth $150/hour.
All your insinuations that Mr. Tan is being dishonest and/or overcharging show your gross ignorance and small-mindedness. His company is providing professional services at such a high level that his clients are happy to pay that rate. I’m sure his clients know that they could go to Geek Squad or whatever one-man shop is in their area and pay half his rates, or less, but they have chosen to pay $2.25 PER MINUTE for Mr. Tan’s company to provide support services.
Think about this: If you are operating an IT support business in Mr. Tan’s city and charging $75/hour, his clients value him so highly that they will pay TWICE your rate be his client.
Mr. Tan has done what you should be striving for:
1) Make yourself valuable by providing excellent services.
2) Obtain and retain clients that recognize that value.
3) PROFIT
Loved the article Gordon, I have followed the same path and like you, raised my rates. Keeps the clientele at the level I like, those that respect my support and are willing to pay what I’m worth. My remote rates started at $60 per hour, now I’m at $129 for Outlook, $99 for standard day to day tech repairs. One thing our clients appreciate is fast response, I can’t tell you how many times I hear…”We have an IT guy, but he takes forever to get back to us…”
I do agree with you if you charge too little you will attract cheap customers. If you charge above normal those with money will come and see you. I ran a store for 8 years and the first thing I did was double the per hour charge in the store. It worked. Now I work from home and am doing well without all the overhead. One other thing I would suggest. In gated communities advertise. It will pay for itself. Business cards are very important. Good luck.
A local shop in our area in the uk was charging £20-30 for virus removal. Now we know how long it can take if the system is heavily infected
and we are not talking about running virus scans to sort the problem.
We are talking about when the system wont boot from a bad infection.
Well guess what the shop is no longer trading. They where charging far to cheap on all the services they provided and i should imagine they got a lot of headaches.
Best of luck to any one who wants to charge £20 quid for removing a ukash Rootkit infection and spending 4 hours messing around.
Mario and John don’t get it do they? See Bryce Whitty and Matt D.’s replies for a proper perspective (… and Don, please keep your small-minded comments to yourself and show Mr Tan as well as all contributors the appreciation and respect they deserve for sharing their experiences here).
Anyway, it’s all about what the market will bear and who your clients are. Resi clients have different budgets versus commercial clients. Shaun captured a very important point about not billing the proper time … that’s been a challenge of mine as well.
To all writers (and potential contributors) on this site, please keep sharing your experiences with fellow technibblers … these are priceless gems of wisdom to those of us who recognize their value.
Cheers from Canada!
Having been in the technical world now for more than 20 years and worked all over the world the rates and expertise vary.
Currently in (AUD) dollars I charge clients $210 per hour for remote or on-site. Now 10% of that goes to the govt. for tax so that brings it back to $189 which is yes higher than Mr Tan although I specialise in the CRM space and mainly in the 5-30 employee space. They have a very different perception of how long it may take to install, configure and customise their systems. I have a totally different rate for when I do residential work or work in the US which varies from (US)$99 to (US)$129 per hour, primarily all remote work.
Often it has been my experience to always give the customer a ball park figure of the estimate before beginning so there are no surprises on completion. If you think it might take an hour estimate 1.5, if it is going to take 4 hrs estimate 5 or 6. If the customer is price sensitive they may go elsewhere and I would much rather I not start if I am not going to get paid.
Now having built over 7,000 customised, in many cases unique databases I can often solve the technical issues in half the time than the guy with half the expertise who is charging $130 per hour. It is all relative and while I might be at the upper end of the scale I am by no means at the top end where guys (and girls) are charging $300 per hour.
Thanks for the wonderful pieces of advice. my problem is as a beginner, how much are you supposed to charge per service. There is a problem when who you are competing with charge low prices.
I would like to thank Gordon for his insight and experience. I think that anyone that believes his prices are too high are not looking at the bigger picture. If you only charge $50/hr how are you ever going to hire someone else at that wage and pay taxes and insurance? You charge now for the future not later. I am a 1 person operation right now but I am grooming my business now for success later.
I wish I had your mindset when I started our on my own – Good luck with your business!
Hard to say that the article was about mainly actually promoting his website on this one :-0
a great article Gordon, thank you and hope to se other good contributions from you, guys, we all live in different countrys with different background clients and should respect each others ways to be, where i live i charge 8USD for a full reinstall service so in some of your logics you are all ripping off your clients (cant beat my price right?) i have competitors doing it for a burguer lunch (4USD) so i rip off too? it’s the reallity and clients i have, so being all IT people we should be more tolerants, Gordon does it his way and does good (his workers should say so) i’ve done the same and worked almost for free and those where the worst clients i had ( complained a lot and wanted everything and for free and a year after would come back complaining that the neighbour or cousin did cheaper and far more and that the PC never worked well since i returned to him) and learned Gordon’s lesson in a hard way, raised prices a bit and started filtering some clients by saying i was too busy for them or asking a huge amount for the service and with that nowadays i choose my clients and jobs. as someone said before i now have family and must enjoy some godd quality time with them, so instead of 18 hours a day for little money i do 14 and make more refusing jobs.
8 US dollars for a full reinstall? Did I read that right?
Yeah you did.
wouldn’t it be easier to just work at mcdonalds?
Well they did indicate that they had raised the prices.
I guess his point is it depends on where you live. I remember when I was travelling Vietnam and the Aussie dollar was strong against the Vietnamese Dong. I wanted to do a day tour somewhere, it included a shuttle to pick us up from the hotel, a bus ride to the location, a boat ride, lunch, and returning us back to our hotel. They told me it cost XXX,XXX Dong. I worked that out… that was like $6.50 USD. So I went all out and got the $10 USD upgraded option! :)
It all depends on where you live.
i hope so lol
like i said before, where i live you got people doing full reinstalls for a macdonalds menu so… like bruce said it all depends on where you live, so dont judge someone cause you dont live there
Hi Gordon,
And thank you for the advice. I’ve actually just raised my hourly rate from $60 to $75AU. I agree that sometimes people “grade” you on your pricing & that sometimes they assume you’re only worth what you charge vs. being grateful for having an attentive tech helping them?
Now- my big question involves your clients.
I service home users, pretty much exclusively- after I found there was no one locally doing so. I’m kicking around the idea of a yearly contract where I connect remotely, once per month, to do a complete clean-n-tune. Not sure what service I want to use, only that it allows branding. I figure that once I’m “in”- any time they have other issues, I’m their “go-to” tech.
I notice that the examples here are for businesses. Any specific advice for home user businesses?
one way is (in the begining) to do a lot of favors (freebies or almost) here and there, you wont make any money imediatly but that favor will bring in that clients family, friends and neighbours, be helpfull and caring and try to give them some tips here and there, offer your advice in case they want to go buy a new PC/laptop and you’ll end up being want you wanted (my friend the techie that knows this stuff)learn about gadgets to have a valid and good opinion cause “computer guys” always know about “all new technologies” but remember to always tell them that it’s a friendly advice or help, your personnal perspective (if it’s not about computers) a good word from someone you helped out for free or almost will do more for you business then ads everywhere. (that’s my personnal perspective, and what i do on my own day to day and business keeps growing)
Hi Tracey,
I only have limited experience with home users but I’m happy to give you my thoughts.
My experience has been sometimes this can be a challenge. As an example if you are charging a yearly fee, you may encounter people who end up being angry when they still catch a virus (their thought process becomes “well what am I paying your yearly fee for?”. However I do like your idea of recurring income – as long as you can be clear that this is only for providing certain “tune-up” services, and you are clear that any issues in between are chargeable. Set the expectations up front so there aren’t surprises.
The challenge you have is your hourly rate will be traditionally lower than IT companies that service businesses, thus you have to be careful about your margins and labour costs. Going back to my point in the article, it’s sometimes hard to give great service under low margin.
However you decide to price your services, or whatever services you are thinking of offering I would recommend you price so you can get a minimum of 40% gross margin.
One more thing I can think of off the top of my head is to investigate moving to a model where you charge a fixed price for the different services you offer, as opposed to an hourly rate eg. wireless setup, virus cleaning etc. That way, you are less reliant on charging for time and there are some efficiencies to be had there eg. if you need to rebuild a workstation and charge a flat fee of $150, you can potentially line them up and do 3-4 at a time. That’s great revenue.
Hope that helps – good luck!
Gordon.
Great article thanks for posting. I have been doing onsite repair for over 12 years now (7 of these years running my own business from home and just recently opening a brick and mortar store. In the Northwest Ohio area the average rate for a onsite tech is $60 to $70 per hour for small business and residential clients. Virus removals around $90.00 flat rate if they bring it in.
The one thing that I wish someone would of told me when I started was to raise my rates. When you are first starting out you tend to want to offer your services for $25 or less per hour just to get clients coming into the door. It is scary starting out and I myself was guilty of this. But when I raised my rates to $60 per hour from $30 per hour it definitely helped “weed out” the clients I really did not want anyway. Trust me guys it will actually save you more in the long run. Cheaper rates will bring more calls but they are not the calls that you want. These types of clients will drag you down and actually cost you more at the end of the day. Hiring more employees is not really the answer either, to have employees costs you more than what you pay them per hour. In this area we of course have to pay workers comp, federal and state taxes, and Social Security. So for me to hire a person to answer phones for say $8.00 per hour is actually costing me $10.75 an hour plus any other benefits like insurance etc.
I guess the point of my post is find out what the average is in your area and charge more. If you are an experienced tech and offer good honest customer service the work will come.
Thanks again for the post and have fun and get paid for doing what you love :)
Nice write up Gordon.
here in the mid-west I agonized about raising my rates till I approached my best client and told him I was thinking about it.
His response was “What took you so long?” Apparently I was under-priced for my area and didn’t know it. So I raised my rates by 30%. I lost 1 customer who, as you pointed out in the article, I didn’t want anyway.
I’ve also gained more business in my target area since that time.
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Hi Guys,
Thanks for all your comments. I apologise I’ve been away on leave so haven’t had an opportunity to review these until now. A few people have posted regarding the high hourly rate that we charge and a few Australian’s have stepped in to explain we do have very high wage costs which in turn increases the cost of living and prices in our country.
The main takeaway I hope to provide to readers is that increasing prices is very important and can often be the indirect source of a lot of your problems. You can do it relative to your geographic location, or to your market. However I would suggest that many small business owners are charging too little. They base their price against competitors who are also charging too little. They are worried their clients will scoff at the new prices and all leave.
Often, as many commenters have said above you lose less customers than you think you will and do less work for more money – I know that sounds like a good deal to many hard working computer techs!
Good luck to everyone and I look forward to posting another article soon.
Gordon.