Don’t Sell Yourself Short When Quoting Managed Print Prices

Figuring out the right costs for managed print services is no small consideration. For VARs looking to expand their services offerings, or for managed service providers planning to enter the market for the first time, determining what to charge customers for managed print may mean the difference between running a profitable business and losing money.

Part of the challenge is knowing what the full cost of delivering print services is actually going to be from the VAR or service provider’s perspective. Much of the process involves conducting the right assessments so that you can draft contracts that maximize your profits and don’t weaken returns because of problems with estimating page volumes and page coverage.

“To be successful, you really have to know what your costs are,” including service and repair costs, says Sean Carey, president of Laser Technologies Inc., a St. Paul, Minn., provider of printers and copiers and managed services including print. Laser Technologies has achieved success—the company was one of Inc. Magazine’s 2010 fastest-growing private companies in America—in large part by delivering what its customers want and by pricing services properly.

“When you factor in service costs, you have to have a good idea of what it’s going to cost you to roll out that truck” when doing a service call, Carey says. “Try to come up with a number that covers everything. We’re not always successful at doing that, but having an idea of what you’ll be spending to do a repair is an important part of finding your true cost.”

Carey thinks many companies that provide managed services don’t really have a good handle on their costs because they don’t conduct a detailed analysis or break costs down into various components.

“They just put everything into one big pie,” he says. “But you have to have an idea of what it costs, for example, to handle service calls plus parts, or service calls without parts, or service calls that are done on the phone.”

Another important cost factor is how you handle print coverage. Carey says Laser Technologies normally tries to go above the typical OEM benchmarks of 5 percent coverage for 10,000 pages, to at least 7 percent for black and white printing. “Changing the coverage rate allows us to have some leeway when negotiating with a customer; it adds a little bit of a cushion,” he says.

What often happens is coverage ends up being greater than 5 percent, so it’s best to be prepared for that, Carey says. “People tend to underestimate what coverages really are,” he says.

Carey says Xerox, through its PagePackTM program, provides analyses for managed print service providers, in which the service providers can send pages to Xerox and the company sends an analysis of what the coverages are for both black and white and color printing. “You just print out a current page of something that’s a typical page being produced and Xerox will show you what the coverages are,” he says.

Color can be especially tricky when it comes to determining coverages, Carey says, so having the Xerox expertise and tools such as PagePack is extremely helpful. “Color coverages can be kind of ‘gotchas’ if you’re underestimating,” he says. “PagePack basically eliminates much of the risks with coverage.”

Another way to ensure proper managed print services costs is to build flexibility into contracts with customers. “If coverage starts to exceed 20 percent of what you budgeted, you should have a clause to change the rate,” Carey says. “But you need to be able to indicate to the customer the number of cartridges they used over a period of time. You have to factor in how many pages were produced and how many cartridges were used. Having a clause in the contract is important because if you’ve underestimated, then you should have the ability to raise the cost per page.”

It’s also a good idea to have the ability to raise prices by a pre-determined amount, for example by 5 percent, every year after the first year of the service agreement, Carey says. That can help service providers offset rising costs and should be stipulated in contracts with clients, he says.

Why is it so important to properly determine managed print costs? With the market being so competitive, Carey says, many managed print services providers will go in to customers and offer extremely low rates in an attempt to grab market share.

If you price your print services too low in order to win customers, you might end up losing money on the deal.