As an IT service provider it is very necessary for you to price your services correctly. Most of the service providers just throw the prices in the market and wait to see whether they will work or not. This can be very dangerous, as with wrong prices you may not even reach the break-even. The beginners fail to understand that prices depend on the perceived value of their service. The assumption that only competition drives prices may cause you to sell your services short.
Factors to Consider While Pricing Your IT Service
ITIL pricing can be a tough task. But if you understand the listed factors, then you may be able to work out the numbers efficiently:
- Staff burden that is billable. This includes hourly employee rates, and payroll taxes etcetera.
- Staff burden that is not billable: This includes the payment of annual salaries to the non-technical staff that is employed at fixed rate.
- Annual Expenses: These include administrative and operational expenses, such as utility bills and rent.
The Ideal Price for Your IT Service
The initial price you may charge may be low. But you have to make sure that it is not below the acceptable levels. For instance, it you charge $40 per hour for a service, and are required to give away 70 percent of this amount in the above mentioned factors, then you will be left with a meager $12 per hour only. The ideal thing is to set your markup or profit rate at 50 percent. As a beginner, it might not be possible for you to charge it right away. But you should make this your target. As a result, you will be able to charge satisfactory prices for your services. As soon as the perceived value of your client increases, you can raise the price.