Let’s Not Make a Deal
It’s every channel professional’s worst nightmare: Somewhere between the initial excitement of landing a new customer and the satisfaction of completing a job and getting paid, something goes off the rails.
The customer acts abusively, tries to renege or change the terms of a deal, or simply won’t pay.
Stanley Louissaint
In almost every instance, warning signs were present. Either the MSP didn’t pay attention, left too many things up to interpretation, or minimized risks in the pursuit of a new project.
“You must have a clear understanding of your business and the specific terms of a deal before you do any work. Otherwise, you leave yourself open to problems,” stressed Stanley Louissaint, principal and founder of Fluid Designs, a Watchung, NJ-based MSP.
Added Anthony Oren, CEO of Nero Technology Consulting, a New York City-based MSP, “If you know what you’re looking for in a client and you have clearly defined service and pricing models, you avoid the vast majority of bad deals.”
Expectations Matter
Whether a problem is rooted in a legitimate misunderstanding or bad behavior, MSPs and MSSPs can avoid most conflicts by recognizing red flags that lead to a deal gone wrong.
Clashes often involve mismatched expectations, Louissaint said. This can range from what constitutes an emergency to how fast an MSP should respond to an event to what’s provided with a specific service or site visit. To weed out bad deals, an MSP must understand acceptable margins, terms, and conditions, and make sure they are clearly spelled out in a contract, he said.
Competing on price rather than quality of the service is a mistake, Oren emphasized. Although it’s often necessary to build some flexibility into pricing — depending on factors like service levels and monthly commitments. For instance, a prospect looking to aggressively undercut a pricing model is usually best avoided. “In many cases, these are the same people who are extremely demanding. They don’t respect the value of your work,” Oren added.
Nero Technology Consulting offers bronze, silver and gold service tiers with fixed pricing, he said.
“Everyone understands what’s in the package. If you get into an hourly pricing situation, you often wind up with haggling, misunderstandings, and disputes, particularly if it takes a long time to fix something or, after you have done the work, something goes wrong again. They may say, ‘I thought you fixed this. I paid you to fix this.’”
8 Warning Signs of a Bad Deal
- Excessive haggling or pressure to cut pricing.
- Unrealistic expectations or demands.
- Pressure to do work before there is a signed contract.
- An unwillingness to make essential changes and/or modernize the IT stack.
- An attempt to alter the terms of a deal after work has started or was
- Attempts to micromanage or control how an MSP does its work.
- Disrespect or verbal abuse toward an MSP’s staff.
- An ongoing pattern of paying slowly or stringing out payments.
Opportunity Costs
Anthony Oren
Even with clear terms and an air-tight contract, some deals simply aren’t worth pursuing. Take, for example, a business that is unwilling to modernize its IT infrastructure. As a result, an MSP will sink inordinate time and resources into an unmanageable environment. Other problems include business leaders who micromanage an MSP, those who disrespect or verbally abuse staff, and firms that habitually pay late or string out payments far beyond the due date.
Of course, extenuating circumstances can arise in any business relationship. A good client occasionally may need to make a payment late, or tempers can flare during a network meltdown or a ransomware attack.
However, successful long-term business relationships are rooted in respect, transparency, and a mutual understanding of the terms and conditions.
“There are always new clients out there and turning down a bad deal gives you more bandwidth to find the good deals,” Louissaint noted.
Added Oren: “With a clear understanding of what constitutes a profitable deal and good terms, it’s much easier to consistently structure good deals.”
Images: iStock
