Competitive Pricing

Written by Rick Schissler on February 18, 2016. Posted in Article

The old expression says, “Beauty is in the eye of the beholder.” I suggest that applies to pricing of a product or service. The price should be dictated by what the buyer is willing to pay and what the seller is willing to accept. This relationship between buyer and seller creates a market for the products and services every business buys.
Unfortunately, many times sellers and occasionally buyers complicate and distort this simple formula. Many sellers, particularly in the small business community, do not know how to properly price their products.

A typical approach to pricing is to take their cost or what they think is their cost and add some mark-up or margin on. The mark-up or margin is supposed to cover their overhead and include a profit. Many times this simple formula either does not work or factors change which causes what they “figured” in their heads or on paper to be inaccurate. Most of the time the mistake is in the buyer’s favor and the seller loses money or leaves money on the table in the transaction.

IT Services are particularly prone to mispricing. A major cause of this is that they are a service and services are often more difficult to price than a product. The real questions for the IT business owner/manager should be, “what is my service worth to the buyer?”

The first place to look for the answer to the question is with the buyer. The seller needs to take the time to build a profile of the buyer. The key to the profile is to understand where the buyer’s IT system fits into their business. How important is the IT system to the success of the buyer’s business? I will submit there is no one answer for every buyer. Sometimes a buyer just does not relate to or understand how important their IT system is to their business. Other times the buyer has experienced one or more major crashes of their system and they put a much higher value on the system. Every potential buyer has one way or another put a value on their IT system.

This means the IT Service company needs to build flexibility into their buyer profile to allow for the range of value that different buyers put on their IT systems. Once the seller has its flexible profile in hand then it can better evaluate where it wants to compete in the market, in the low, middle or high end. The seller has the real opportunity to evaluate its own cost and profit profile and compare that against a potential buyer’s profile. This brings us back to the original statement that a market for products or services is created based on what a buyer is willing to pay and a seller willing to sell at. The difference, under the scenario I have suggested is the Seller is much better prepared to sell at a price that will help it build a profitable business.

The answer to the question of why the pricing for IT Services is so competitive is found in the fact that too many small IT businesses do not have a well-grounded pricing formula. When they enter the marketplace to sell their service they base their price on what they think not on what they know. Therefore, you end up with a market that has very inconsistent pricing, which typically ends up with the sellers providing inconsistent service as they are unable to cover their cost. What starts with a price the buyer cannot believe becomes just that as their business is impacted by poor service and maintenance delivered by their IT service company.

Pricing is a critical part of the IT service market. A price must work for both the buyer and the seller; otherwise the market gets out of balance. Once this happens, as in the case with IT service pricing, then ultimately both buyer and seller suffer.

A well-priced IT service offering will give the buyer at least the following benefits:

• Peace of mind –The hassle and worry out of technology is taken care for you. You always have a friendly face at WesTec Services to call for advice and assistance.
• One-Stop-Source – A good IT vendor will eliminate the headache, wasted time and exhaustion of dealing with lots of different technology vendors. – they will work with these vendors liaise on your behalf.
• Eliminate wasted business time – outsource day-to-day low margin technical support tasks so employees can focus on higher-level, revenue producing activities.
• Fixed prices – get all the Houston IT Support that your business needs for one low, fixed monthly subscription without any extra surprises or hidden costs.

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Three Proven Ways to Protect Your Houston Business

Written by Rick Schissler on February 4, 2016. Posted in Article

When you start and build a business it is easy to forget that you also need to protect it along the way. Then one day someone comes along or something happens and what you have built is wiped out. The best way to prevent this from happening is to protect your business from the first day you open for business.

There are three major areas of your business infrastructure which are vulnerable to “business ending” threats.

• [icon type=”caret-right” class=”fa fa-li accent”]Hiring of employees
• [icon type=”caret-right” class=”fa fa-li accent”]Loss of assets
• [icon type=”caret-right” class=”fa fa-li accent”]Loss of computer data

The first are your employees. Typically your employees are the most important asset the business has. If however, you hire the wrong one then they move from being an asset to being a liability.

Good business practices dictate that we follow a well-thought out and documented process in hiring every employee. If you look at the better performing businesses, of any size, buried deep inside the company’s infrastructure you will find a hiring process that is up to date and well-maintained. The value of a “well-hired” employee to the company cannot be overstated.

The alternative is a bad process or more likely no process at all. In turn these companies end up with the employees no one else wants. This creates a whole host of potential liabilities for the business such as workers compensation claims, employee theft, not to mention poor job performance and/or customer service. Any one or more of these liabilities has the potential to create a situation or incident which by itself can threaten the future of the company.

A second potential “business ending threat is the failure of the business to protect its assets from theft. This would include equipment, fixtures, product and most importantly money. The first three, equipment, fixtures and product can be protected by the installation of proper procedures as well as physical security. A properly designed, installed and maintained integrated security system can reduce or eliminate the theft of these physical items.

The monitoring of the business premises and its operations is a best practice when operating any type of facility. Properly placed door controls and cameras will maintain the comings and goings of not only employees but also visitors. A well-design system can control access to certain areas that need extra security. A facility that is not monitored and controlled is open for the taking.

The fourth area of theft concern is the funds of the company. This could include cash as well as money in the bank. Cash can be controlled by developing proper handling, recording as well as depositing procedures. Cash control also requires the physical holding of the money and that in and of itself can create a different kind of security problem. The rule of thumb here is to get the cash in the bank as soon as possible.

Bank accounts present their own challenge, particularly if they are accessed online. The installation and maintenance of security software on the company’s IT network is a must. Many business owners/managers feel this is best done by a 3rd party. An outside IT firm usually is more up to date on changes in software that will prevent the hacking of the company’s system. The theft of a company’s funds is now more likely committed by a guy using a computer than a gun in today’s world.

The third and final potential threat to the business is the loss of computer data. In today’s business world this is probably the most serious threat to the average business. It has been my experience that many business owners/managers do not place a high enough of level of importance on the issue. My theory on this is that data is not like a piece of equipment or product, in that it is typically not seen or missed until it is just not there when needed. To make matters worse, many business insurance policies offer a minimum amount of money to recapture or rebuild the missing data.

Backup and disaster recovery of computer data is a field that has exploded in the past five years in the small-medium sized business (SMB) arena. There are three keys that the business must focus on to give themselves a minimum of protection when backing up their data:

1. Onsite backup
2. Offsite backup
3. Maintenance of the system

On-site backup is one of the issues a number of businesses overlook. A good on-site back up system gives the business a chance to quickly get the business back up and running say if the server itself crashes. If the only backup is available off-site then there will be a delay, for transportation, to get the system back up.

Off-site backup is the easiest piece to find in the market place. There are consumer driven companies such as Carbonite, which sell off-site backup for pennies. In turn, there a number of companies whose systems and process cater to businesses. The key is to find one that has been in business for a while and preferably provides the entire package, including on-site backup.

Every system needs some kind of maintenance and backup systems are no different. However, many companies simply forget or ignore this important step. It is critical that the system be tested from time to time to make sure that the data is being properly saved. Too many times a company will go to access lost files and find out exactly that, they are truly lost.

The hiring of the wrong employee, the loss of a key asset or the loss of the company’s computer data can all put the company out of business. Many times business owners/managers do not even realize that they have lost the business when one of these events happens. Sometimes it takes time to become a reality, but ultimately it happens. Buy business insurance can provide important protection for the company. However I would argue that even better protection is available when the business owner/manager understands these threats and takes the necessary steps to develop and implement the procedures and process that will prevent or minimize them.

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