<OT> support pricing

[Mike Reinehr]

Good analysis!

I would add two additional thoughts. First, after adding a minimum acceptable 
profit margin (+33% to +50%, IMHO), you need to try and determine what the 
competition is doing. If their support prices are higher, then you can 
consider marking your support up even more. Or, if they are lower, reconsider 
your plans.

Second, try to estimate how many billable hours you will have in a shift. If 
it's costing you $150 per hour to fill the seat, on average for an 8 hour 
shift, then that's $1,800 per day. If you only bill 4 hours per shift, then 
you've got to capture at least $300 per hour to break even.

Mike

On Sunday 22 February 2004 12:25 pm, Kurt Wall wrote:
> In a 0.6K blaze of typing glory, Net Llama! wrote:
> > I've recently been tasked with coming up with realistic pricing for
> > technical support.  Currently all that we offer is support M-F 9-5
> > support.  I need to set pricing for 12x5 and 24x7 unlimited
> > incident offerings.  Does anyone have any experience or suggestions?
>
> IANAA (I Am Not An Accountant), so caveat emptor:
>
> Pricing = Cost of Service + Markup Margin
>
> Cost of service includes (at least):
> * What it costs to have a butt in a seat, even if that butt is not
>   answering a call or otherwise generating revenue (personnel overhead)
> * The cost of the seat (physical/facilities overhead)
> * Potential cost of consumed resources when the butt *is* working a
>   support incident (value add)
>
> Markup or margin simply expresses what you think the market will bear
> by way of profit on the cost of service.
>
> So, if it costs you $75.00/hour to have a person in a seat; $25.00/hour
> to keep the seat in electicity, computer, water, and so forth; and the
> value add eats up $50.00/hour in additional resources, the cost of service
> is $150.00/hour -- you have to make *at least* $150.00 just to break
> even. Now, add, for example, 30% and call it mark-up, so your per/hour
> charge becomes $180.00/hour.
>
> Now, suppose you look at your support history and determine that the
> "typical" support call involves 2 hours time on the average. Thus, the
> per incident charge is now $360.00/incident.
>
> Finally, you run those number against various usage scenarios to make
> sure they make sense, check the usage scenarios against what you've
> done in the past, and decide if the base number you came up with works.
>
> Hope this helps,
>
> Kurt

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