Pricing Structure for my Small Business

[kevin11951]

I am working on a small business called Kviero-IT (see sig), and it is finally turning into a reality.

The business model is to replace expensive closed-source products with less expensive open source ones. Eg. Microsoft Exchange with Zimbra, or Cisco with Untangle/pfSense.

Obviously I will also setup open-source services from scratch for the businesses that don't have anything yet vs. replacing them.

However, I have yet to come up with a viable pricing structure.

I could charge per product. $699.99 for Ubuntu Server Edition.

I could charge labor. $50.00/hour

But neither if these, nor anything else I have come up with, will make me enough profit to live off of.

Basically, I plan to have about one customer per month on average. Using that average, how would I charge enough to live off of? (Lets call a living wage $30,000/year ;))

edit: A little math tells me I would have to average out to about $2,500/project/month to make $30,000.

[sydbat]

I am working on a small business called Kviero-IT (see sig), and it is finally turning into a reality.

The business model is to replace expensive closed-source products with less expensive open source ones. Eg. Microsoft Exchange with Zimbra, or Cisco with Untangle/pfSense.

Obviously I will also setup open-source services from scratch for the businesses that don't have anything yet vs. replacing them.

However, I have yet to come up with a viable pricing structure.

I could charge per product. $699.99 for Ubuntu Server Edition.

I could charge labor. $50.00/hour

But neither if these, nor anything else I have come up with, will make me enough profit to live off of.

Basically, I plan to have about one customer per month on average. Using that average, how would I charge enough to live off of? (Lets call a living wage $30,000/year ;))Basic math (and my calculator) tell me you need to charge your one customer per month, $2500.

[Calash]

I do IT work on the side.

$50 an hour is where I start for personal visits. Business related is a bit higher, around $70 depending on the client.

Alot will depend on your area and any competition you may have. However to start I would stick with an hourly rate unless you get a project, then quote them a full price for that.

[kevin11951]

Basic math (and my calculator) tell me you need to charge your one customer per month, $2500.

Sounds like a lot though doesn't it?

[sydbat]

Sounds like a lot though doesn't it?It really depends on what you are giving them. If you are updating/upgrading a small office (say 10 - 15 boxen), $2500 is probably on the low end. Setting up the same office from scratch, at least 2 or 3 times as much $$.

[kevin11951]

I do IT work on the side.

$50 an hour is where I start for personal visits. Business related is a bit higher, around $70 depending on the client.

Alot will depend on your area and any competition you may have. However to start I would stick with an hourly rate unless you get a project, then quote them a full price for that.

Well, I plan to only work for businesses (how many individuals want to pay $2,500 for an email server?)

Also, I have no competition unless you count the Cisco router thats already there (for example).

[kevin11951]

It really depends on what you are giving them. If you are updating/upgrading a small office (say 10 - 15 boxen), $2500 is probably on the low end. Setting up the same office from scratch, at least 2 or 3 times as much $$.

That makes sense...

[kevin11951]

Here are my current prices I came up with today:



Products

Note: Software Costs Only!

osTicket - Support Ticket System - $20/user/month

Feng Office - Online Office Suite - $20/user/month

Ubuntu Server Edition - Operating System - $749.99

Zimbra - Email Server - $524.99
+$10/user/month

Citadel/UX - Email Server - $499.99
+$5/user/month

Untangle - Router Operating System - $299.99

pfSense - Router Operating System - $224.99

vTiger - CRM - $269.99
+$5/user/month

Drupal - CMS - $262.50

Mediawiki - Wiki - $10/user/month

Samba - File Server - $20/user/month

[sidzen]

Suggestion:
Become a Non-profit and set up schools (as you've appeared to do) to run Linux. This will begin the ball rolling with the next generation, familiarizing them with GNU/Linux.

In today's economy, not paying taxes is as good as profit, and you'd be planting seeds that will germinate who knows where.

There are lots of private schools in the area (i.e. Christian and others), are there not? They want to cut costs. Help them to do so, if you can.

[sydbat]

Here are my current prices I came up with today:



Products

Note: Software Costs Only!

osTicket - Support Ticket System - $20/user/month

Feng Office - Online Office Suite - $20/user/month

Ubuntu Server Edition - Operating System - $749.99

Zimbra - Email Server - $524.99
+$10/user/month

Citadel/UX - Email Server - $499.99
+$5/user/month

Untangle - Router Operating System - $299.99

pfSense - Router Operating System - $224.99

vTiger - CRM - $269.99
+$5/user/month

Drupal - CMS - $262.50

Mediawiki - Wiki - $10/user/month

Samba - File Server - $20/user/month
I would make it the whole cost, not just "software costs". Someone out there, most likely someone who works for your clients, will find out that these things are free and wonder why you are charging for them.

A competing business could then come in offering the software itself for free and take away your potential business (and, possibly, give you a bad reputation for "charging for free stuff").

Making your price list the "total" cost (including labour) is much more attractive to clients, because it = no hidden charges. Of course, you should also make it for 'basic' installation/configuration with a caveat that you charge x amount/hour thereafter for additional configuration/troubleshooting.

[Elfy]

How many businesses are going to pay you $2500 for anything when the only work you have apparently done is "Kviero-IT Deploys Support Ticket System for Local High School"

You also need to deal with some spelling errors on your site :) If I was a business I would be put off by simple to instead of too errors.

I'd also think again about your plan to have one customer a month to live off of. What are you going to do in the months - and you will have them - when you have no customers ?

Edit - that said I wish you luck with your venture :)

[kevin11951]

Suggestion:
Become a Non-profit and set up schools (as you've appeared to do) to run Linux. This will begin the ball rolling with the next generation, familiarizing them with GNU/Linux.

In today's economy, not paying taxes is as good as profit, and you'd be planting seeds that will germinate who knows where.

There are lots of private schools in the area (i.e. Christian and others), are there not? They want to cut costs. Help them to do so, if you can.

Perhaps in the future I will work for schools, but for now it seems like too big an undertaking. Plus all the public schools around here are run by the AISD, and they are very good at what they do... In other words they would not move to Linux in the near future. That said they use OpenOffice, and other open source projects like that already.

[kevin11951]

How many businesses are going to pay you $2500 for anything when the only work you have apparently done is "Kviero-IT Deploys Support Ticket System for Local High School"

You also need to deal with some spelling errors on your site :) If I was a business I would be put off by simple to instead of too errors.

I'd also think again about your plan to have one customer a month to live off of. What are you going to do in the months - and you will have them - when you have no customers ?

Edit - that said I wish you luck with your venture :)

Well, I am not even incorporated yet (soon, but not yet). The school job was done as a favor to the system admin who I know personally, and she told me I could use it for PR.

Also, I have tried to address the spelling errors, and can't believe I missed something (though apparently I did).

[sydbat]

Suggestion:
Become a Non-profit and set up schools (as you've appeared to do) to run Linux. This will begin the ball rolling with the next generation, familiarizing them with GNU/Linux.

In today's economy, not paying taxes is as good as profit, and you'd be planting seeds that will germinate who knows where.

There are lots of private schools in the area (i.e. Christian and others), are there not? They want to cut costs. Help them to do so, if you can.Not-for-profit companies pay taxes. And they are limited in using whatever profits they do make, like having to reinvest into the company (whereas a for-profit company is simply wise to reinvest in itself).

Besides, not-for-profit organizations look to for-profit companies to do things for them, because they have that inside knowledge of how a not-for-profit works and they want something more reliable (especially concerning technology, construction, finance, etc, etc, etc).

[kevin11951]

I would make it the whole cost, not just "software costs". Someone out there, most likely someone who works for your clients, will find out that these things are free and wonder why you are charging for them.

A competing business could then come in offering the software itself for free and take away your potential business (and, possibly, give you a bad reputation for "charging for free stuff").

Making your price list the "total" cost (including labour) is much more attractive to clients, because it = no hidden charges. Of course, you should also make it for 'basic' installation/configuration with a caveat that you charge x amount/hour thereafter for additional configuration/troubleshooting.

Well they don't see that chart. From there point of view, that just get a bill for $2,576 for a support ticket system, wiki, and operating system. They don't know the reason unless they ask. If they do I will say labor.

[juancarlospaco]

The website need more photos, i think you are OK.

[wirepuller134]

Pricing will depend heavily on where you are and whom your target is to service. We charge 400 dollars an hour per technician for time/material jobs. For bid jobs we rate at 1200 dollars per 8 hour block with travel time to and from charged as an extra day per technician. We have to carry 5 million dollars in liability insurance to enter most plants, so we have to charge according to our potential liability if something goes wrong. We have been back charged up to 2000 dollars an hour for down time if we run late on finishing a project and it keeps the plant from starting back up on time. We build SCADA systems to monitor processing plants, catering to the food industry.

[earthpigg]

Do some free work, to build your resume/portfolio. Fill up that "Examples of our Work" page! Once you are well known locally, i suspect customers will start popping out of the woodwork without any effort on your part.

You could also lease hardware.

I suggest creating a page titled something to the effect of "What we Offer" that can be understood by complete computer novices.

You may as well offer things that you yourself cannot do. subcontract out web designers, if you have to, for example. Make yourself the one-stop-shop that a small businessman can come to for anything. From the customer's point of view, make it Best Buy for Small Businesses. Make deals with other local startups that you trust with expertise in areas you lack. The advantage of subcontracting is that you don't have to pay these folks when they aren't actually doing something for you, unlike a full time employee. Take your cut and let the subcontractor do his thing. construction and landscaping firms do this on a regular basis.

i like the website. i noticed the quote from the debian website at the bottom of one page. consider using quotes from non-linux/unix people, instead. For example, the Army General that said something to the effect of "When we rolled into Baghdad, we did it on Open Source". I suspect that will resonate well with Texans? consider linking to case studies done by larger firms, for example the NYSE or wikipedia, and make the case that you can offer those same benefits to small businesses.

[macem29]

instead of starting with what you think you need to charge to gain business away from competitors,
you need to have a very hard look at costs, analyze every little activity involved in delivering your
product to the customer and arrive at an hourly rate for costs, add in the hourly wage typical for
that activity in your area, and decide what profit margin you want, I'd suggest starting at 25%...
compare that to what competitors are charging, are you competitive? if so, and there is sufficient
volume in your area, assuming you promote properly, you will make money and stay busy enough,
if your price based on costs is not competitive you will fail to gain business volume sufficient to make
a living, if the market price does not allow you to cover costs and make a living you should not do it,
as for that 25%, may sound excessive, it's not, it's retained earnings AKA rainy day money, like when
have to unexpectedly run out and buy a new PC to meet a deadline, or you get stiffed on a big job,
don't take everything as earnings...the banks also really like to see some retained earnings and it
helps tremendously if you need to borrow some day

[LowSky]

Look up competitor prices
Look up how much tax liability you will have. you might make $2500 a month but how much of that will be lost to taxes. Get an accountant.
Look up Insurance costs. Liability and health.
Possibly find a partner or hire some co-worker pay them with promised earnings (going to be hard with the recession), to grab more work.

There is no reason you should only have 1 client a month. That's just bad business.

Also you should create a page on your website for the non tech savvy customer on why they might want your services. Why only cater to companies who already have complete and working networks and servers. In my experience a customer will only switch products if the current one doesn't work anymore. Not because they want to save money. The only time a company want to reduce operating expenses is on new equipment when replacing the old.

You should cater to smaller business with no or little IT staff in house.
Your main source of income should be Support of the application and networks you install, you should be making contracts on the customers who need an on-call IT staff.

Your next should be from New Service setup. And I would leave the open source preaching out as much as possible, it will only confuse your clients if they are not tech savvy. Don't sell open source, sell the product. show that a low cost option is a better choice, not because its free but in how it works. Little or no cost often comes across as cheaply made or not as superior.


You should make a price chart and use it as a reference point for contracts and bids. Like so:
XYZ software installation - $xxx
XYZ software - $xxx
Less than 4 hour response time support services - $xxx/year
one time support, no contract - $xxx
after business hours surcharge -$xxx
weekend surcharge - $xxx
service evaluation - Free

Write down your current expenses. Your business should make double that. If it can't you shouldn't be in business for yourself.

The website is a bit confusing. No one will care what you do, they want to know Why, as in Why do they need you. think of pitchmen like Billy Mayes, the first thing he always said when pushing a product was why it was needed. "Has your company recently expanded and needs better connectivity to be more efficient? Do you want access to the same files as other coworkers? Are you looking to get a website up and running?"

List the services you know on your web page. "We offer XYZ as trained and certified installers," is a great way to list the applications you use. but actually be certified, lying can get you into a lot of trouble legally if your not careful.

[sidzen]

Where you from -- another planet? Oh, Canada! We'll all be socialists soon. Go Canucks!

[kevin11951]

Where you from -- another planet? Oh, Canada! We'll all be socialists soon. Go Canucks!

Who are you referring to?

[Khakilang]

Get more customer. Than get people to get more customer. Than your customer will get you more customer. Price is only one factor. The most important to have more regular customer. Once you are establish your business will go up.

[sidzen]

Who are you referring to?
Someone with bats in their belfrys -- sorry, kevin11951, not you.