Hedge Your Bets

As the market for managed print services heats up so, too, is the competition. One obvious risk from that is you won’t seal a particular deal. Another, less obvious one, is that you will.

Let’s face it, not every deal is a money maker and a bidding war with one or more competitors can pressure a reputable VAR or MSP to quote dangerously low rates to win the contract. The last thing the industry needs right now is to see services follow the same downward path as hardware, where margins are too low to by themselves support a growing business.

A challenge with managed services is how to estimate the costs you’re going to be facing not only in the present but over the next three years. Determining the right charges for page coverage rates is one biggie. And there’s no guarantee that a customer’s usage patterns won’t change over time. The right partner program can mitigate this long-standing problem, but VARs and MSPs need to tread carefully to keep from losing money on a deal.

Another gotcha is on the repair and maintenance side of the managed-print contract. If you don’t have a clear idea of actual service costs you could significantly dilute the overall profitability of your managed print contracts. But knowing what to charge for services, including the time and materials that go into each call, takes a mix of art and science. The trick is determining what to charge for each type of call–onsite or over the phone, with parts or without them.

For all these reasons it’s a good idea to put a safety valve in each contract. Insert a clause that lets you raise prices by a pre-determined amount—say 5 percent—each year of the contract, advises Sean Carey, president of Laser Technologies Inc. That way, you don’t suffer if you’ve underestimated costs in any area of the agreement, if costs for labor or materials rise, or if a customer’s print profile changes.