Wednesday, December 05, 2012

The Knowledge Lives in the Price

My friend Josh Liberman wandered into Sacramento a few days ago. Somehow, we found ourselves at a bar. Anyway . . .

As computer nerds, we were swapping stories about our industry, changes ahead, and the general state of competence in our field. Josh told me a great story that is all too common in our industry.

I'm sure you've heard a variation of the story. I'm sure you've TOLD a variation of the story. But the lesson Josh drew from it really stands out.

The Story

A prospect decided to save a bunch of money by hiring a trunk-slamming amateur. That guy screwed up the job. So the prospect called Josh in. Josh quickly fixed the problem and showed the client how it should have been done in the first place.

The client asked: "How did you know that when the other guy didn't?"

The Lesson

Josh responded, "That other $115 is where the knowledge lives."

I loved that line so much I wrote it on the back of the bar tab!

Why are you worth $150/hr? Why do you get the "big bucks?" Why does the client need to listen to your advice? Because you know what you're doing!

Right now, as I write this, I am working with two prospects who will probably become our next two clients. One is the all-too-common story about the incompetent amateur who kinda mostly sorta set up a Small Business Server. No working backup. No anti-virus. Exchange hasn't been set up. RWA not configured. Everyone has the same password. etc.

No documentation. Zero. Nada.

And then the guy disappeared.

Is that guy worth $150/hr? NO!

The second prospect was oversold. WAY oversold. A $5,000 enclosed rack with built-in air conditioner holding a storage server, two 24-port switches, and three UPSs capable of powering the entire office for a month. For nine (9) users. It's a non-profit, so of course they bought through . . . NOT! The prospect had never heard of Tech Soup.

And when the client calls, they ask her "Who are you?" and "What kind of system do you have?"

Bad or no documentation. Often wrong or outdated.

Is that company worth $150/hr? NO!

This prospect totally knows that she has been over-sold. And she wants to save money going forward. But she is smart enough to know that she needs a different $150/hr technician - NOT a cheaper $35/hr technician.

I rant from time to time about the need for professionalism in our business. A good, qualified technician should have no problem charging $125-$150/hr. Eventually, clients will realize that they are wasting money hiring amateurs.

Does anyone REALLY think a $35/hr technician is competent enough to trust your business to?

The knowledge lives in the other $115.

Think About a Firewall . . .

Some clients believe that they can do our job because they can buy some cheap crap at Office Depot and when they plug in the cables, the lights go on. At some level, they know they are "getting by" with cheap equipment. But they must know in their hearts that it's really not the same as good equipment.

You can argue that the difference between a $600 firewall and a $700 firewall is mostly profit somewhere along the line. But when you compare a $69 firewall from the clearance table to a $700 firewall with a three year warranty, you HAVE to know that one is better than the other.

And the same is true with the $3,000 firewall.

There are differences between junk, good, better, and best.

The same is true with technicians. You might not be able to tell the difference between a $140/hr tech and a $150/hr tech. But you can guarantee without further investigation that there's a huge difference between the $35/hr tech and the $150/hr tech.

The best part is: The $150/hr tech is always cheaper. He will bill for fewer hours. The work will be done right. So there's very little re-work. Jobs are done within the price estimated. Other things don't mysteriously break when something is fixed.

Have you ever noticed that $35/hr technicians bill for everything - including their incompetent bumbling as they break one thing after another and take ten hours to do a job that should take one? They never give a "professional courtesy" discount when something takes longer than estimated.

There is no professional courtesy because there is no professionalism.

That other $115 is where the knowledge lives.



  1. Very good stuff as usual.

    One question I have, is when you mention a "Professional Courtesy Discount" is this something you actual put on the invoice?

    There have been times when I have done this, but I have struggled with if, how or to what extent I should communicate this to my client.

  2. Thanks, Anon.

    We have two approaches to free hours. If it's a small one-off thing, we physically print out the invoice with a dollar amount and then cross it out and write "Free per Karl (or Mike)." That way they see a physical piece of paper telling them they're getting something for free. We then change the invoice in Quickbooks to reflect $0.00.

    Second, we sometime just put some hours on an invoice at $0.00. We enter "No Charge Labor" and then some small note such as "Hours over estimated time."

    To be honest, I used to assume that clients paid attention to this stuff. But very often they don't. So we also make a point of pointing out free hours when we have Roadmap meetings.


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