Time For Some Recurring Revenue

recurring-billingThis is Part 4 in a 5-part series titled ‘5 Ways Integrators Can Charge More for Their Services‘.  In the previous post we explored the idea of charging for system design.  An equally common, and equally surprising, area in which many Integrators are leaving money on the table is in the service department.  We’ve explored this concept in previous posts namely “The Hidden Cost of Free“, but it’s worth reiterating.  The time to start charging for ongoing service and maintenance in the form of recurring revenue contracts was yesterday.  Haven’t implemented this in your business yet? Then you’re already behind.

The challenges to rolling out service contracts (or service agreements if you prefer more euphemistic phrasing) are plenty. It requires a fundamental shift in the way we think of our entire industry.  There used to be a time, not that long ago, when product margins were sufficiently fat, and we could afford to position ourselves as glorified middle-men, moving boxes and collecting checks.  Those days are gone.  And for those relying on the old way of doing things, the scene has gotten significantly worse even over just the last year or two.  Can you say “$49 Home Automation Hub” anyone?

But there is a silver lining to home automation hardware proliferating at rock-bottom prices.  Cheap electronics fail often (some of the expensive stuff is even worse, but I won’t name names).  And this provides us as Integrators with a real, tangible way to add value.  However, the value can only be perceived (and thus paid for) if clients understand what they’re actually buying when they sign up for our services.

As Integrators we know that parts of our clients’ system will fail, often at very inopportune times.  It’s just a part of the game. We know this based on years of experience dealing with it.  But we often forget that what we see as an acceptable rate of failure is anything but acceptable to our clients.  However, I argue that more often than not this is the simple result of poor expectation management.

Want to get you clients expectations in line with reality? Show them a well-crafted service agreement.  Explain to them that you’ve created this agreement based on years of learning the hard way.  Explain to them that no matter which Integrator they select, things will break.  And that by charging all of your clients for ongoing maintenance you can afford to provide an unmatched level of service when the inevitable happens.  Setup the contracts monthly or annually, and charge as much as you think your time and effort are worth, not a penny less.  Be unapologetic and forthright in explaining that agreements like this are a win-win when structured correctly.  Then be prepared to back it up!

Happy Integrating,

P.S. – For some great resources on implementing service agreements check out the remote monitoring company Ihiji.  Not only do they sell an outstanding product / service but also offers some really great resources to help get you started!

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  1. Building the Referral Pipeline | Integrators AcademyIntegrators Academy - July 23, 2014

    […] part in a series titled ‘5 Ways Integrators Can Charge More for Their Services‘.  In the last post we discussed the importance of adding recurring revenue to your business.  In this final post we […]

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