By: Jim Roddy, VP of Marketing & VAR/ISV Business Advisor at the RSPA
I won’t bore you with my formal HR-approved job description as a VAR/ISV Business Advisor, but these two phrases essentially cover it: I mobilize the expertise of others and share their collective wisdom. That’s what I did when an RSPA VAR member recently reached out to me with this question: “I was wondering if you might have some data on labor rates? We are in the process of analyzing our current rate structure and would very much welcome some industry statistics or averages.”
I shared his question on LinkedIn to generate answers from the reseller community. Eight VARs from across the U.S. and Canada offered insights on this topic which I first forwarded to the inquisitive reseller and now will share with you. I think you’ll find the range of philosophies, the specific details, and the context around these answers to be helpful.
- $125 per hour on site, first hour $70 vehicle charge. After hours $155 per hour on site.
- Phone support is $90 per hour charged in increments of 30 minutes. After-hours emergencies are $135 per hour with a minimum one-hour charge.
- If someone has a maintenance agreement in place, they are then billed $95 per hour onsite all the time.
- Our rates are variable depending upon what other income streams our clients bring to us. Additionally, we sort by type of systems/cash registers:
- ECRs (electronic cash registers) are lower rates, like $150 for the first hour plus a flat travel fee if outside of core area.
- POS systems are typically $225 for the first hour, then we bill in half-hour increments, usually $75 per. These rates have not gone up for competitive reasons.
- Also, most of our clients are on a maintenance agreement so there is not much billing. Furthermore, we are flexible in billing when a client is providing credit card residuals. I forgive some bills.
- For telephone support, where there is no coverage we charge $75 to $150 per incident but allow the client to convert to a Telephone Support Agreement (TSA) or, if we visit a site, to convert to our Labor Support Agreement (LSA).
- Our goal is to charge enough to make it worthwhile for them to convert from time and materials to a maintenance agreement – and be painful enough to know that our efforts are worth something!
- We have gone a different way. In conjunction with converting 100% of our business into subscriptions, we have done away with hourly work. We took the 100% conversion to subscription quite literally. All work is done as part of an existing subscription.
- If a customer does not have a subscription, they can opt to get one in order to receive service. That said, we do some fixed price contracts for custom development or integration, but they are not hourly based either. They are based on a fixed-fee structure we created several years ago to accommodate these non-subscription anomalies.
- It has done amazing wonders for our business. We went from having to chase down hourly bills and running weekly invoices to no chasing down of money, and all of our subscriptions are automated (connected to EFT (electronic funds transfer) or credit card accounts) so no weekly invoicing either. We were able to cut costs while increasing cash flow and decrease customer and internal frustrations.
If I were to try to give you our rates right off the top of my head, it’d be a vague recollection of a rate from a few years ago. Why? Most of our customers are on PaaS (POS-as-a-Service) agreements where service is included for most issues. It’s a rare occasion that they get billed. But, beyond that, one of our core values is “We provide more value to our customers than we receive in payment.”
Since all our PaaS customers are processing credit cards with us, we strive hard to provide more value in several ways, one of which is trying to not bill customers for labor. When we do bill labor, it’s typically for something like travel, something not covered under our agreement, or an excessive amount of time like a six-hour dedicated training session. Often we comp these things as well – we try to look at the overall picture for the customer and us (the relationship if you will) before doing so. It makes it more of a human decision than a rote procedure.
Looking it up, here are our rates:
- For when we do bill PaaS, these labor rates are $130 per hour, with a half-hour minimum for onsite.
- Our non-contract and legacy systems rates are $195 per hour, with a half-hour minimum for phone/remote support, one-hour minimum for onsite.
- All labor rates are portal to portal (when we leave our office to when we return).
- If someone is not on a PaaS/SaaS maintenance agreement, our rates for phone support are $150 per incident no matter how long it takes. We don’t charge hourly because a fast technician could be done in 20 minutes while a newer tech could take much longer. We believe customers don’t care how long things take; they only care about things being done. If we can be more efficient in our own ways, we make more profit. And if we mess up, it’s on us.
- We are considering moving that phone support charge to $200-$250 to encourage more customers to move to a maintenance agreement, but we held off raising prices during the pandemic.
- Before we charge a customer, we say, “We can charge you $X or you can begin a maintenance agreement with us.” We also credit that fee towards a maintenance agreement.
- We get 4-5 calls a week, take their credit card, and then do the work.
- For onsite labor, we charge $170 per hour plus a trip charge of $70-$130 depending on how long the drive is. If the labor is required after hours, we charge a 1.5x rate – this is all if they’re not on a maintenance agreement.
- If someone is on a maintenance agreement and they need us to see them on site for something not covered in our agreement – like hardware damaged due to neglect or abuse – we charge them $85 per hour.
- Those on a service agreement pay $1,500 a year. We charge them $125 each month.
- For professional services setup and training, we stopped using a complex estimating tool because there was too much overhead. We flipped to a model where you get a fixed bid for the services you ask for (e.g. menu training, time and attendance training). The customer wants something done; they don’t care what all goes into it. They want to buy what they’re looking for. Let’s cut out the complexity; tell people what they’re going to get.
- We don’t like doing advance inventory, so we charge $6,000 for that. That rate usually prices us out of that project which is fine with us.
- We bundle our services into our subscription, so the rate is buried (not in a negative way). I essentially average out the time required to implement and support a customer over the term of the contract and use that as a gauge for all contracts. It gives the customer an easy one cost per month for their budget and also peace of mind they won’t be dinged every time they need our assistance.
- Back to your original question, the rate is $195 per hour that is used for the basis.
- Typically, our support rate is between $150 to $250 per hour. Our metrics for this is based on the vast amount of knowledge transfer we do with customers in the beginning as well as training packages we offer.
- This seems to work for us because we put money back in the customer’s pocket to use for other products and services we offer. The pandemic did offer us some time to diversify to enhance our product and service offering as well.
- We have three techs who are hourly. Labor is cheaper where we are – we pay them $10-$12 per hour for a 90-day probationary period. Halfway through or sooner, if we have identified they’re a fit, we typically end their probation, make them a permanent hire, and raise their pay to $12-$13 per hour. We conduct employee evaluations with a raise every six months: $1,500-2,000 bonuses for senior/veteran employees, $500-$1,000 for less tenured.
- We charge merchants a flat support fee for everything based on the number of terminals they have. This includes 24-hour support for emergencies, 9AM-8PM support for non-emergencies, plus software maintenance. We charge $50 per month for the first terminal, $40 per month for every additional terminal. So a four-terminal system is $170 per month. We don’t charge per call unless a merchant is abusing the system or are asking us to do something they should handle on their own. (e.g. If they want us to do a password reset instead of calling their manager to do it, we charge $45).
- If they want us on site because they’re too busy to troubleshoot it themselves, we charge $95-$125 per hour. We will likely raise that fee. It’s based on colleagues of ours based in Orlando, and they raised their rates a couple months ago.
- One unique thing we do is allow merchants to schedule a remote training session free of charge. We give them 30-60 minutes training because we expect to get fewer calls down the line from them. We don’t charge them unless they overuse this service.
- 100% of our customers are on monthly support agreements. We bundle software maintenance with our support plan. If you don’t pay for the support, you also can’t get gift cards, labor scheduling, etc. – you need to be on the support agreement.
- We are doing lots of as-a-Service for systems: they pay a set-up fee and then pay a monthly service fee that includes support plus hardware maintenance. It’s a $2,500 setup then $250 per month maintenance for three-year term. If a printer breaks, as long as it wasn’t abused, we get them a new one and they don’t pay anything for that. If it’s a Saturday, we send them the printer via Uber or Lyft and charge a weekend service fee.
- During implementation, we train them on how to build their own database. We start with a starter shell database; we don’t program in their menu. We sit with them and walk them through building out their database. We didn’t change our implementation pricing for this. We end up with clients who are more knowledgeable. When they get hands on the system on the front end, the first day of go-live is a lot smoother. They can make changes and are responsible for data not entered or entered incorrectly. It’s a good fit for us because we sell a simple system. I’d say one out of 15-20 we have to take over because they are unable to.
Clearly there isn’t a one-size-fits-all answer to the VAR’s original question. But there is a common thread woven into the prior 2,000 words. If you’re a solution provider confronted with a tricky challenge, you don’t have to go it alone. Lean on the RSPA community to shed light on your situation.
Also, RSPA members can receive coaching and guidance through the association’s VAR/ISV Advisory Services offering. Email me at JRoddy@GoRSPA.org if you want to learn more – or if you have a burning question that needs answered.