Anecdotal evidence is fine to allow you to form a hypothesis but if you want to make firm decisions in relation to your business, it is better to do it with cold hard statistics.
I have long been a believer in the Managed Services concept and it was over ten years ago that I actually started the process of transitioning my business. I must admit that I started this process without having all the facts at hand but I had to do something. I could only see a future of decline in my business until finally it ceased to exist.
Luckily my gamble with the business model was a good move but last year I wanted to gauge the feeling of the marketplace in terms of attitude to payment models. I have a monthly newsletter that is delivered to over 6,000 people across the world from a variety of business types. On a newsletter last year, I asked the subscription list what is their preferred method of paying for their professional services. This wasn’t isolated to just IT services – this was in relation to a range of professional services. This covered accounting, legal, IT and a variety of other services.
The results of the survey were in line with my anecdotal evidence but even stronger than I had suspected.
Just over 35 percent of respondents said they preferred a fixed annual amount for all of their professional services. Almost another 30 percent said they preferred a fixed price per project. Looking at those two combined it means that almost two-thirds of people prefer to pay for their fixed services under some form of fixed fee arrangement.
For those of you who believe that having a Managed Services model simply requires a block of hours to be sold upfront, the news is all bad. Less than three percent of respondents said they preferred a model whereby they pay for block hours in advance. I have always said that this model seems unfair and clumsy and it would appear that the general business public is also not a fan. To round out the survey results, the last two options involved hourly rates. Over 18 percent of people said they prefer to pay hourly rates charged at completion of a job and just under 14 percent said they were happiest with hourly rates charged at intervals during a project.
The 32 percent who said they prefer hourly rates was a little higher than I would have guessed but when I analyzed other answers in the survey it dawned on me that some people preferred these methods due to one simple fact. They didn’t know any other methods existed. No professional services business had approached them and told them there was a better way to pay for their services. No business had offered them a better alternative.
My conclusions from all of this data are pretty simple. Give people what they want. With so many people showing a preference for fixing prices, give them that. Ultimately, my personal belief - gained from information in surveys such as this one and real-world experience – is that if you can offer an annual fixed price arrangement (in line with a true Managed Services offering) and then have a fixed price for any project work that is required, you will steal a march on your competition that will be almost impossible for them to claw back. Once the competition realises what has happened, they will have already lost most of their clients – to you!
Tell me how you prefer to pay for your professional services at firstname.lastname@example.org.