Long gone are the days when an IT organisation simply quoted an hourly rate, performed the work and then sent a bill reflecting the number of hours multiplied by the hourly rate. My absolute recommendation to any IT firm I am consulting to is to pre-quote jobs nine times out of ten and the tenth time think about performing work on a time and bill basis – and then quote beforehand. In other words, never do work on a time and bill basis. I had an eerily familiar conversation with a painting contractor recently. He told me that he always quotes any painting job before his team starts the job. He often has people ask him to do a simple time and bill job – but when he used to succumb and do it for them then every single time the person would complain about the cost afterwards. He has finally learnt the lesson and now will never start a job without quoting it first. IT organisations, especially MSPs, should be in the same situation. Never agree to a time and billing job – it inevitably ends up ugly.
When you are pre-quoting for a job, you also need to remember Hofstadter’s Law. Douglas Hofstadter is an American academic and a Pulitzer Prize winner. His law is “It always takes longer than you expect, even when you take into account Hofstadter’s Law.” I love it. I lost count of the number of times one of my technicians would tell me that a job was only a “5 minute job” despite the fact that I logically convinced them that there was no such thing as a “5 minute job”. By the time you have finished talking to the client or working out what the job is, more than 5 minutes have elapsed. So when you quote the time for a job, make sure you have Hofstadter’s Law in the back of your mind.
Of course ultimately, what you really want is to never have to quote for individual work. If you are running an advanced MSP model then you have all of your clients paying a fixed monthly fee and you never have to worry about quoting for individual work.
In all of this it is crucial to consider the swings and roundabouts. Patrick Chalmers wrote a poem in 1914 and, I quote in part:
Said ‘e, “The job’s the very spit o’ what it always were,
It’s bread and bacon mostly when the dog don’t catch a ‘are;
But lookin’ at it broad, an’ while it ain’t no merchant king’s,
What’s lost upon the roundabouts we pulk up on the swings!”
The poem was a reference to a showground owner commenting on his business. On some days, the kids would pay to pile onto the swings and provide his income and the roundabouts would be ignored. Obviously it would be vice versa on other days.
Some MSPs become very stressed about a certain client or individual job that goes over the allocated time. It is essential to consider an SLA as a 12 month agreement and consider the overall profitability of the client and your monthly profitability spread over all clients. If an individual client costs you money in an individual week then it isn’t fair to go back and try and charge the client more for that job. If you are quoting your SLAs correctly and you are training your staff correctly (and you take into account Hofstadter’s Law) then you should come out in front over the long run. In some respects, compare an SLA to an insurance company. When an individual client has a car accident, the insurance company loses money on that client for that year. When you consider the life of that client and the total number of vehicles insured, provided they have performed their calculations correctly (which they generally seem to do) then the insurance companies tend to be profitable.
So if you are still doing any time and bill work then stop. Work out a method to quote all work before it starts or, better still, just sign up all of your clients onto an SLA. If you get the calculations right, you will never look back!
Tell me if you think Hofstadter has it right at [email protected].