Friday, June 24, 2011

SOP Friday: Used Equipment and Warranties

Some lessons we learn again and again - until we're tired of being bit in the butt!

Over time, most technicians come around to accepting that you should only sell new equipment and you should encourage every client to keep a warranty on all hardware (and a Maintenance agreement on all software).

These seem like different topics, but they're very much related to one another, and to your profit.

SOP Friday: Used Equipment and Warranties

- Overview -

As techno-goobers, we tend to have boxes filled with old network cards, modems, video cards, memory, hard drives, and all the juicy goodness that makes computers fun. We sometimes grab one of these devices and throw it into a computer. For fun. For troubleshooting. Cuz we're nerds.

And that's fine for US, in our shop, with our computers. But client systems are another story altogether.

There are extreme rare exceptions, but as a general rule You should never install used equipment in any client system.

If you waste four hours of your time finding drivers for an NE2000 compatible NIC on your Windows 7 box, that's just good fun. If you blow out the hard drive or have to set the O.S. back to a previous restore point, that's part of game.

But if you do these things at a client's office, 1) You look like an idiot, and 2) You're losing money. I've said it before, but let me be very clear: You have to decide whether this is your hobby or a business. If it's a business, you can easily put yourself in the position of never selling used equipment. Just don't do it.

Every once in awhile we come across an old video card (or nic or sound card or whatever) that just won't work. Can't find the reason. Can't find the drivers. Whatever the case may be: It won't work. Throw It Away!

The thing about used equipment is that most of it works most of the time. But the probability that it won't work goes up when a client is involved. Murphy goes along on that job every time. Just don't do it.

As with many decisions, you need to break it down to dollars and hours. A new video card is $50 plus your one hour minimum to install. Some old piece of junk might be $25 or "free" and take two hours labor to get right. Unless something goes wrong. Then it might be another two hours.

How much time will you spend to save $25? Your answer had better be less than 15 minutes. If you only charge $100/hour, then $25 = 15 minutes. Spending an extra hour to make old junk work is hardly ever worth it.

And if you're successful, you have an old piece of equipment without a warranty that cost almost as much as the new one.

Remember that you need to guard your time like the precious commodity it is. If you are completely successful with used equipment 90% of the time and only have problems ten percent of the time, you still have lost money. You are spinning your wheels on unproductive labor rather than engaged in delightful, interesting, billable work.

Warranties are a related topic. Let's just talk about hardware here and not maintenance agreements for business applications.

The key thing about a warranty is that you severely limit your exposure. When a problem arises, you call the manufacturer, then send a replacement, and you install it. Or, better yet, they install it. You manage that relationship. But they do as much work as possible.

Between diagnosis, dealing with warranty support, and installing new components, you can probably limit your time on a warranty replacement to one hour total in most cases.

New equipment, especially new equipment that ships with a three year warranty, is FAR less likely to have any problems. We actually cover the labor on equipment that's under warranty if the client bought it from us. The reason is simple: We almost never have to spend labor on new equipment under warranty, and it gives the client a strong sense that we're just taking care of stuff. Client like NOT getting additional bills.

We can only do this with new, warrantied equipment.

- Implementation Notes -

There are two pieces to this puzzle. One is an internal policy and one is in your service agreement.

The Internal Policy is simple:

    It is the policy of this company that we do not sell used equipment. This includes refurbished equipment. If a new component is delivered to a client and installed in a machine, that component belongs to the client and may not be removed and returned to stock for resale. It is used. We will only quote new hardware with a minimum of one year warranty.

The second piece goes in your managed service agreement. (If you need sample agreements, see Service Agreements for SMB Consultants.) Here's a place to start:

    Warranties. All equipment (network equipment, servers, printers, desktop computers, laptop computer, etc.) must be under an original manufacturer’s warranty, or some other similar warranty or extended service plan in order to be covered by this Agreement. Work performed on equipment that is not under warranty will not be covered under this Agreement. All such work will be billed according to the rates and terms of the Agreement.

    . . .

    Hardware Support: In addition to the maintenance of the operating system and software, above, Consultant agrees to provide hardware support for all equipment that is purchased from Consultant and covered under this Agreement, provided that such equipment is less than three years old and is under manufacturer’s warranty.

Note: I'm not an attorney. Have your service agreement reviewed by an attorney. I'm not responsible for anything you do. Blah, blah, blah.

- Benefits -

The primary benefit of this policy is that you will do a lot less work on hardware related items. To me that's a real benefit. Hardware work today is the least interesting part about this business.

Another benefit is that you'll make more money! Okay, that might be the primary benefit. :-)

You'll make money from warranties for three reasons. First, you'll sell good equipment that doesn't break. So you'll spend less labor fixing things after you've been paid. Second, you can make money on extended warranties. If clients want to keep old machines, they need to either pay for hardware fixes or pay for an extended warranty. Third, you will make money from work that's not covered by warranty.

Eventually, when machines become expensive to maintain (see last week's SOP), clients will decide to upgrade.

Overall, these policies will make computer maintenance a lot easier and more trouble-free. Clients should not be under the impression that computers and always a hassle and break down all the time. You can show them a brighter, more beautiful future!

- Forms -

See the sample policy statement above and the sample warranty language for your service agreements, above.

It is also helpful to keep track of the warranty status of machines in the Network Documentation Binder (see The Network Documentation Workbook or in your PSA (Autotask, ConnectWise, Tiger Paw).

When you have a service ticket that is for un-warrantied hardware, be sure to change it to be billable labor. In Autotask, you do this by attaching it to the "Billable Time and Materials" contract. Set the Issue Type to "Break/Fix - Hardware" and the Work Type a billable work type.

Your Comments Welcome.


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1 comment:

  1. I won't sell anything but Dell hardware with Dell Business warranties for exactly the reasons you described. It saves me so much headache!


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