provides financial stability for you , which ( should ) facilitate a higher level of service for your clients . Instead of monthly sales being a big question mark , you start every month with a relatively guaranteed amount of revenue already sold . This is why IT firms with recurring revenue models sell for 10x higher than those that are selling VAR services , break-fix services , and / or hardware . They are more financially stable and often secure a higher LTV ( lifetime value ) per client .
Second , selling these services allows you to do planned maintenance , so the client is protected and prepared to recover from data loss , hackers , ransomware , and more , and they ' re not just calling you when their network is on fire . Because the goal of managed services is to prevent disasters from happening , the client experiences more uptime , fewer problems , and more peace of mind that everything is being taken care of . That makes your job easier as well , so you ’ re not trying to juggle techs to respond to numerous unplanned emergency calls .
Managed services also “ locks ” the client into an agreement with you , decreasing churn and making every client more profitable and valuable to you , which is why so many companies are trying to introduce “ subscription-based ” or “ as-aservice ” models to their businesses , from car sales to financial services and even medical practices .
For example , one of my clients , Charles Swihart , CEO of Preactive IT Solutions , transitioned his break-fix shop , servicing 981 clients , to managed services , intentionally losing 90 % of his clients over a three-year period to replace them with
managed IT services clients . That transition has grown his top-line revenue by 61 %, more than TRIPLED bottom-line profits , and has allowed him to run a more stable , lucrative business , and now he is free to take care of his three special needs kids . This is one of hundreds of stories I could share with you where a break-fix IT firm transitioned to managed services and discovered that it wasn ’ t as difficult as they originally thought and that their only regret was not doing it much , much sooner .
Why Selling Block Hours At A Discount Is NOT A Good Alternative
Instead of selling a managed services agreement , some IT firms simply sell a monthly block of hours at a discount , but there are two major problems with this approach . First , the discount minimizes margins and offers little to no benefit to you ; after all , delivering the services doesn ’ t get cheaper if the client buys more hours from you . Further , if a client is “ sold ” on you , they don ’ t need a discount to buy or to stay loyal . It also sets the expectation that they should get a discount on everything you do for them .
Second , selling services by the hour creates an unnecessary friction between you and the client and misaligns your mutual interest , which should be delivering a result the client wants for an agreed upon fee . Very few products and services are
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