August 4, 2021
How do you price maintenance?
NOTE: Apparently there was a glitch with my email service provider this week and you may not have received a few of my messages. You can find anything you might missed in my daily list archive. My apologies for the inconvenience! —J
Fellow list member Rahul Gulati wrote in with a question about pricing maintenance work (shared with permission):
how do you price application dev maintenance work
fixed monthly retainers or what
is there a video I can refer
When a client is interested in maintenance, what they really want is the peace of mind that comes from knowing that they are covered if the thing they want maintained breaks down.
It’s like an insurance policy, but instead of them getting a cash payout if something goes wrong, you just make sure nothing goes wrong, or if something does go wrong, you fix it quickly.
Since the client is paying for peace of mind and not hours of labor, a fixed recurring amount makes the most sense. Monthly is common but I have also seen quarterly and annually.
The trick with monthly maintenance plans is finding a price that is acceptable to both you and the buyer.
Like all prices, it needs to be higher than your cost, and lower than what it’s worth to the client.
NOTES:
- The more important uptime is to the client (or the more expensive the downtime is), the more money they will be willing to pay for the maintenance plan.
- Maintenance plans are not about hours worked, they are about 24/7 coverage. Fire fighters get paid whether there’s a fire or not. Sell the coverage, not the hours.
- Some months you might lose money on a maintenance plan because you had to put in more hours than normal for some reason. This is to be expected from time to time. As long as on average you are making more than you’re losing across all your maintenance clients, you should be able to turn a reasonable profit.
- Do not confuse maintenance with development. I have a maintenance plan for my car that covers routine things like oil changes and tire rotation. But if I want to add 20 inch rims and a spoiler to my Outback, that’s not covered under my maintenance plan and would cost me out of pocket.
- I wouldn’t call a maintenance plan a retainer. They are similar in the sense that the client pays a fixed amount, probably monthly, for access to you that decreases their exposure to risk, but the nature of the engagement is fundamentally different.
- IMHO, selling maintenance plans is not something to dabble in with one or two clients that you built something for. If you want to offer maintenance and be profitable, I would orient my entire business around it and probably just sell that.
I hope that helps! Thanks for the question RG :-)
Yours,
—J
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