I’ve written columns in the past decreeing (more like begging) the virtues of selling services over selling gear.
There’s been one on selling design services – sort of like design consultants do for big clients and big systems out there. There’s been one on selling integration services – basically installing other people’s systems regardless of whether or not they bought the AV stuff from you. And, there’s been more than one on selling what I’ve coined as proactive service contracts – this is the preventative maintenance contract where you not only perform reactive service when something goes wrong but also you continuously perform on-site maintenance to keep things from going wrong!
And, over the years, I’ve received all sorts of calls and emails asking me a plethora of questions about selling services. But, there’s one question that is most constant:
What do I charge?
It’s amusing that, of all the questions that salespeople ask, this is the one that’s asked most often. Good salespeople are artists when it comes to selling, and can sell almost anything they want to clients that see them both as valuable resources of information as well as partners in their project. In fact, just recently, I was teaching a class for CEDIA (the high-end Home AV association) where one of the attendees – one who also owns a well-known commercial AV firm – said that when it comes to selling gear, he aims to sell it for 20 percent over list.
Yes, you read that right. He said 20 percent over list price.
Bravo! He gets it!
What the heck am I talking about? Well, it’s clear to me that he’s selling his expertise as part of his art of selling AV gear. He’s not simply a vendor/supplier to his clients; he’s selling the expertise of knowing what to and how to design systems by putting together the perfect AV solution.
He’s selling intellectual property – the most valuable thing he has!
What’s he charging? In his case, it’s a 20 percent service fee – or in some cases, you could actually see it as a 30 percent or even 40 percent service fee (or tip) as I’m sure there are a lot of you out there that are selling AV gear for as much as 10-20 percent below list. Figure it out.
No, I’m not oversimplifying this at all. It’s as simple as you just read. He’s charging an intellectual property fee – or a systems design fee – with each and every product he sells. But, you can package it any way you wish. If you want to start it all out by selling systems designs as a separate fee, that’s fine too. What should you charge? Well, start with 10 percent (of the total system price) and go up from there. You can (and should) get more.
What about for integration services? 400 percent – that’s the number you should AT LEAST shoot for. If your cost is $2500, charge $10,000 – a 400 percent margin.
Your expertise is valuable – a heck of a lot more valuable than your competitors – don’t you believe that?
If you don’t, send your competition your resume – as they’re better than the company for which you work. You just said so…
And, what about proactive service contracts? Well, in the ProAV market, I’d start with at least 8 percent of the serviceable products in the system – but that’s as low as I would go. We have many, many clients we’ve worked with in the past that are charging way more than that and regularly start their first year’s service contract at 15 percent.
Look, I can’t get more specific than that. I’ve given you percentages. You do the math. But, no matter what you do, STOP GIVING AWAY intellectual property – it’s all you’ve got left.
But, the good news is that each and every day, you get more.
Didn’t you just read this column?
Reprinted with permission from Sound & Communications. Founded in 1955, Sound & Communications is the premiere magazine for AV systems integrators, contractors and consultants. To subscribe or read sample articles, go here.