Do you offer computer service contracts to your small business clients?

If so, be sure to go through this tutorial on four simple ways to improve the computer service contract part of your business.

But we should warn you ahead of time...

The recommendations you’re about to hear can cause a rapid increase in your service revenue and bottom-line profitability. Not all technology providers are equipped to handle this kind of good fortune. If you prefer to wallow in the status quo, and don’t want your business to thrive, please forward this post to one of your competitors who you’d rather see dominate your local market for small business computer service contacts.


A lightly edited transcript follows below...

So the question is, “What are some of the ways that I can better or I can improve my service contract offering? ”

(1) Consider Scalability, Profitability, and Growth

I think that the first thing is to think about scalability, then think about profitability, which ultimately should lead to growth.

Why is scalability so important?

Because all too often, when people are first getting started with service contracts, they are so concerned with getting the service contract signed, that they are willing to absolutely, positively give away the store. It’s a very common rookie mistake that I don't want you to make. 

Sure, you have to have a great value proposition for your clients.

(2) Make Sure that Your Computer Service Contract Program is a Win-Win

But the reality is, it (your computer service contract program) has to be sustainable. In order for it to be sustainable, it really has to be mutually beneficial. It’s got to be a win-win for both parties.

That’s the reason why you want to actually have a formalized agreement in the first place. If you just kind of let your clients bully you around, then your clients are the ones deciding what your pricing structure should be. 

Ultimately that’s not cool. They are just looking for a kind of hit and run mentality and then it doesn’t become win-win: one party wins, one party loses. And that’s not going to work for the long haul.

So in terms of bettering your service contract program, you certainly need to have a good value proposition for your clients, but it also needs to work for your company. It needs to be profitable, it needs to be scalable, and it needs to work as your company grows. 

You need to think about whether your service contract program is still going to be effective and profitable when your company’s volume quadruples.

What about when it quadruples again? Is the program still going to work as you are adding more and more staff to it?

The best way to do this is to sit down and do a pro-forma profit and loss statement, with your accountant if you need to. Because you want to figure out what all of your expenses are. All too often, when people are coming up with an hourly billing rate and a computer service contract program, they overlook certain not-so-obvious expenses.

So you want to make sure that you capture all of them into the math when you figure out what your rate structure is going to be. Now, of course -- as we said earlier -- all service contract programs need to be win-win.

The biggest rookie mistake is giving away the bargain of the century. And remember, none of your support contract clients are going to call you up and say, “Gee, I’m really worried. I don’t think you are charging us enough. Why don’t you double what you are charging us? Why don’t you triple what you are charging us? I really don’t think you are charging us enough, you know.” 

That might happen on Fantasy Island or Fantasyland at Walt Disney World or something like that.

But in the real world, customers and clients just don’t do that. They don’t call up their vendors and say, “Hey, I think we are paying too little, why don’t you charge us more?.” It’s up to you to determine what your cost structure is.

And it’s up to you to determine a rate structure that supports your overhead, your operating expenses, your need for training and certification, and research and development, to grow and propel your company forward. 

Remember, if you mess up any of this, not only are you harming your company, but you are harming your clients that depend on your business to be there and to be their outsourced IT solution.

So it’s really important that you get it right. The big point with all of this – in terms of bettering your support contract – is: once you’ve figured out how to make it scalable and profitable, and to actually help with the growth of your business as opposed to hindering its growth, think proactively. 

(3) Stay Two or Three Steps Ahead of Your Small Business Clients

All too often, people are thinking about service contracts and the idea of “Well, I’ll provide warranty repairs service if something breaks.”

It's way beyond that, of course. You absolutely, positively need to take care of those kinds of issues and if it’s not you, it’s you arranging for whoever is going to take care of those issues. 

That’s kind of the minimum price to entry and that’s what you would have needed to provide 15 or 20 years ago.

At this stage of the game, though, you need to be a lot more proactive. You need to understand all of their IT needs.  You need to understand what is going on in their business, what’s going on in their competitive landscape, and what’s going on in their industry. And fold this all together into an integrated IT solution that makes sense for them. 

You always want to be two or three steps ahead of where your clients are.

You need to know what needs to be done now; you need to know what needs to be done next month, next quarter, and next year. All of this needs to be organized into a well-thought-out project plan.

That’s probably one of the biggest keys to being a successful outsourced virtual CIO. It doesn’t really matter what kind of software you use to create and manage that project plan, whether you want to use a Web-based project management system or just a simple spreadsheet. 

But you have to have a proactive project plan.

You always need to be thinking about, “what’s next?”

Our four-year-old daughter always loves to ask us when we are going out and about on the weekends and doing fun things, “Daddy, what’s next? what’s next? what’s next?”

You need to be thinking of the same thing for your clients, you need to be thinking ahead because essentially if there is no in-house IT person if there is no in-house CIO or IT visionary, you are it.

You are the one that is going to come up with the strategy. You are the one that needs to understand their business needs well enough to suggest what’s coming next. And in the same way that being a fun-enabling dad is by thinking ahead to make sure that we have another activity lined up to make the weekends as much fun as possible, you want to do the same thing with your clients.

Of course, it’s even better if they get business results and they are having fun with you being their technology provider.

But the reality is you need to be thinking ahead as to what their business needs are, what their challenges are, and making sure that their IT systems and the IT decisions that they have made in the past, can continue to keep up with all that and help provide leverage to grow their businesses.

And remember, you’ve got to understand their business and industries inside out and backward, just as if you were their full-time, salaried CIO or chief technology officer. 

(4) Only Market to Prospective Clients that Need Computer Service Contracts

And remember, in terms of bettering your computer service contract program, think about what you do with your marketing activities, all of your marketing and promotional and demand generation activities.

These should really be much more squarely focused and laser tuned into the needs of small businesses that are prospective service contract clients. 

It’s really about making your business much more support contract-centric focused. After all, why do you want to spend your marketing time and your marketing budget capturing the attention of people that are just plain too small to be on your support agreements?

Once you’ve made the decision that you want to make your business 100% service contract-based – in other words, 100% of your clients need to be on service contracts -- why would you want to waste time and resources chasing after “everyone,” when they are just too small?!?

It is kind of like a car manufacturer running commercials for an SUV on Nickelodeon or the Cartoon Network or something like that. Sure, there are going to be moms and dads watching once in a while with their kids.

But for the most part, they are wasting their money advertising something like that to a demographic of 5- and 10-year-old kids that are at least 10 years away from buying their first new car.

Now, if you are Chuck E. Cheese, on the other hand, or you have a new toy you’re selling, it makes sense to advertise to that demographic. 

You want to make sure that you are not committing the same way-off-base targeting with your positioning and messaging. Make sure that you’re getting your message in front of small business owners that are big enough to be able to afford your professional recommendations, but not so large that they have a big in-house IT department that would negate the value of all of your outsourced IT approach.

So 10 to 100 workstations, 10 to 100 employees, 30- to 60-minute driving radius, knowing how to make sure that there is platform compatibility. In other words, if they are predominantly invested in the Macintosh platform, can you support that? ...understanding who is providing their IT support today...understanding who has provided their IT support in the past.

Those are some of the key basic qualifying questions that will help you get further along in building a service contract-centric business and improve your service contract program. So all of your marketing should be focused on those issues. 

All of your pre-sales activities should be focused on them, all of your lead qualification should make sure that you’re spending your lead nurturing and sales resources in the right places, so that they (prospective clients) are at least in the right ballpark of people that should be on a service contract with your company. 

Think about the service contract-centric business.

  • Are they geographically qualified?

  • Are they the right size?

  • Are they in an industry that is a good fit for what our experiences have been in the past?

All these are really important questions. In the same way that you have to be very proactive about what you do for clients as their outsourced CIO, be a lot more proactive about what you are doing to grow your client list. And don’t just take on as clients every Tom, Dick, and Harry that comes along and says, "I need your help."

Think in a much more laser-focused, precise way about what you’re doing for business growth.

If you want to have a 100% service contract-centric business, you really need a strong plan of attack with your marketing, what you do with sales, what you do with new projects, what you do with remediation projects, and making sure that everyone really fits into that definition.

These are some of the things that you really should be thinking about if you are looking to better your service contract program.

So I thank you for asking this question: "What are some of the ways that I can better or I can improve my service contract offering? "

It’s a fantastic question. It’s something that all technology providers and consulting firms, VARs, solution providers, integrators, MSPs, computer repair businesses, and everyone that’s in the ecosystem of supporting small businesses, local small businesses with their IT needs on an outsourced basis, really needs to be thinking about. 

You need to continually raise the bar to improve what you are doing with your computer service contract program.

Action Items

  1. Make sure that your service contract program takes into account scalability, profitability, and growth.

  2. Keep your service contract program a win-win (e.g. mutually beneficial).

  3. Stay two or three steps ahead of your clients’ needs.

  4. Market only to potential candidates for your computer service contract program.

So thanks for tuning in, we appreciate your time and attention.

But before you go, please let us know:

  • What have you done to better your company’s computer service contract program?

  • And what are you planning to do, to continue improving how you offer and deliver service contracts to your small business clients?

Let us know in the Comments section below. If you got good value from this tutorial, please post this link to your favorite social network and send it to a friend who could benefit as well.


And if you're looking to level up your IT business with more modern go-to-market best practices, learn more when you enroll now in our free 7-day eCourse: Go-to-Market Strategy 101 for B2B SaaS Startups and Scaleups.

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