Support Contract

[WordIsBond]

I am leaning to the hourly model because as you say, odd phone calls here are there, how do you bill for that on a daily basis?

All my billing is hourly anyway, but it's definitely better for this kind of thing.

But I would say that the minimum unit of work would be 2 hours, nothing less.

Depends on what kind of support you are providing. For me, it's often a phone call which can run between 5-15 minutes. If I billed two hours for that they would be unhappy. I start the clock running, if it is less than 5 minutes I don't bill. More than that I have a minimum 15 minutes.

Not sure about the discount either as I don't need the work as much as they need it doing.

Everyone is different. It's how you want to run your business. For me, it's not a case of needing the work, it is a case of wanting the contract and not wanting them to be looking to cancel because it is expensive.

And just to be completely clear, it rarely works out to a discount. On average over the last year I've made about 115% of daily rate on support contracts, because most months they use less than half of the retainer hours. Using the model I gave above, you only get hurt if they use more than 6.5 hours a month, and less than 12. Anything less than 6 or more than 12 you make a premium.

[Spikeh]

Lucky! I'd snap their hand off if I were you - some great advice here too.

[mudskipper]

Really like this idea - would work well for me with ClientB.

[oliverson]

I do some of this. We have four of these running right now. Three of them are identical, estimated 1-3 days of work a month (8-24 hours, I bill hourly).

X is my regular rate. I have a retainer, 8 hours * X * 0.80. They pay a retainer every month, whether they use it or not. If they do use it, they get that day at a discount rate. If they don't use it, it doesn't carry forward. They can cancel with no notice, but if they do, the offer won't be renewed. They can suspend it a month in advance if they know it isn't going to be used.

For hours from 8 to 25, I charge X * 1.33. 33% premium. I want them to have an incentive to not use these hours. Above 25 hours a month, we're going to need a different contract. I've told them if they want a planned, organised project, I'll give them my usual rate. But if they want more than 25 hours of support in a month, it is likely to be at a 50% premium. I'm happy to help out clients and even give them a good rate for minimal work, but I don't want to become a support monkey.

The other contract is different because it involves support by three people. Same general principle applies, a discount on a retainer, premium for hours after that.

Why do I structure it that way?
A. I like continuing relationships. It's good business. Giving a lower cost incentive on the retainer makes it easier for them to swallow the retainer and not demand a carryover. "Well, I know you may not use it so I'm giving you a discount, but you get that discount even if you do use it." I give the discount because I want this relationship.
B. I'm convinced it is also good for IR35. Helps to demonstrate "in business for yourself" to have multiple contracts that no employee would have.
C. I like retainers. A lot of months it won't be fully used, so it's free money even at a discount. If it is fully used, almost always there will be some of those premium hours to compensate, or more than compensate, for the discount on the retainer.

So, if I were in your place, I'd go for a 2 day discounted retainer, and up to 3 days above that at a premium. You might also consider doing it as an hourly rate, depending on the work. Support might mean just a half hour phone call or an hour or two fixing a small problem, depending on what you do.

Very interesting and useful insight, thanks. I am leaning to the hourly model because as you say, odd phone calls here are there, how do you bill for that on a daily basis? But I would say that the minimum unit of work would be 2 hours, nothing less. Not sure about the discount either as I don't need the work as much as they need it doing. Fortunately, this client deems 7 hours a working day :-D

[WordIsBond]

No, it's their IP, they just need somebody to support/enhance it moving forward but no on a full-time contract basis. A figure of 3-5 days a month was banded around. I like the idea of not rolling these forward because it's easy to see several months down the line an expectancy to spend a full month on it, which won't sit well with another full-time contract. So, given my current rate is £ x, do I sell them 3-5 days a month at £ x * y%? The burning question is what is that percentage, assuming there is one? I think their need is more than mine. I'm considering doing this partly to help them out as it would put the team I worked with in a hole if I didn't. But I could equally walk away if the terms weren't acceptable.

I do some of this. We have four of these running right now. Three of them are identical, estimated 1-3 days of work a month (8-24 hours, I bill hourly).

X is my regular rate. I have a retainer, 8 hours * X * 0.80. They pay a retainer every month, whether they use it or not. If they do use it, they get that day at a discount rate. If they don't use it, it doesn't carry forward. They can cancel with no notice, but if they do, the offer won't be renewed. They can suspend it a month in advance if they know it isn't going to be used.

For hours from 8 to 25, I charge X * 1.33. 33% premium. I want them to have an incentive to not use these hours. Above 25 hours a month, we're going to need a different contract. I've told them if they want a planned, organised project, I'll give them my usual rate. But if they want more than 25 hours of support in a month, it is likely to be at a 50% premium. I'm happy to help out clients and even give them a good rate for minimal work, but I don't want to become a support monkey.

The other contract is different because it involves support by three people. Same general principle applies, a discount on a retainer, premium for hours after that.

Why do I structure it that way?
A. I like continuing relationships. It's good business. Giving a lower cost incentive on the retainer makes it easier for them to swallow the retainer and not demand a carryover. "Well, I know you may not use it so I'm giving you a discount, but you get that discount even if you do use it." I give the discount because I want this relationship.
B. I'm convinced it is also good for IR35. Helps to demonstrate "in business for yourself" to have multiple contracts that no employee would have.
C. I like retainers. A lot of months it won't be fully used, so it's free money even at a discount. If it is fully used, almost always there will be some of those premium hours to compensate, or more than compensate, for the discount on the retainer.

So, if I were in your place, I'd go for a 2 day discounted retainer, and up to 3 days above that at a premium. You might also consider doing it as an hourly rate, depending on the work. Support might mean just a half hour phone call or an hour or two fixing a small problem, depending on what you do.

[oliverson]

Do you own the Intellectual Property to the software?

A mate of mine once did a small bit of software for London Underground - 15 years later they were still using it and he's charged them thousands over the years.

Probably why my bloody tube is delayed most days

No, it's their IP, they just need somebody to support/enhance it moving forward but no on a full-time contract basis. A figure of 3-5 days a month was banded around. I like the idea of not rolling these forward because it's easy to see several months down the line an expectancy to spend a full month on it, which won't sit well with another full-time contract. So, given my current rate is £ x, do I sell them 3-5 days a month at £ x * y%? The burning question is what is that percentage, assuming there is one? I think their need is more than mine. I'm considering doing this partly to help them out as it would put the team I worked with in a hole if I didn't. But I could equally walk away if the terms weren't acceptable.

[silverlight1]

Do you own the Intellectual Property to the software?

A mate of mine once did a small bit of software for London Underground - 15 years later they were still using it and he's charged them thousands over the years.

Probably why my bloody tube is delayed most days

[oliverson]

Hate to use the standard search blurb on a more experienced poster but we've have had some good threads about this in the past that would be very useful to you. The questions from what I remember cover the cost, how to contract, retainer/call off/T&M etc.

Here's one example of a search but might be worth playing with the term a little..

https://www.bing.com/search?q=suppor...d=&adlt=strict

or maybe retainer

https://www.bing.com/search?q=retain...CB&adlt=strict

Ha, ha, I knew you'd chip in ;-)

I did some searching but really couldn't find the answer I was looking for. Thanks for the link, I'll check it out.

[northernladuk]

Hate to use the standard search blurb on a more experienced poster but we've have had some good threads about this in the past that would be very useful to you. The questions from what I remember cover the cost, how to contract, retainer/call off/T&M etc.

Here's one example of a search but might be worth playing with the term a little..

https://www.bing.com/search?q=suppor...d=&adlt=strict

or maybe retainer

https://www.bing.com/search?q=retain...CB&adlt=strict

[Lurker101]

Contracting 14 years and until now, I've never been asked if I'd provide a support contract for software I've written (I'm the sole developer on this). Usually it's just a case of handover but the client doesn't have anybody with the necessary skills or knowledge or plans employing anybody.

Curious (and clueless) as to how best to approach this? Increase the rate to reflect the fact it's only a few days a month? Charge a retainer as well? I'm no longer a member of IPSE so don't have access to any standard contracts. Any other sources you can recommend?

Many thanks in advance.

I'm just working one of these support agreements for some server infrastructure my current client wants me to support for them. I have structured it as a monthly retainer which includes a few hours of non-rollover support time as required then if they actually need more formal support it moves to an hourly rate. That way they keep my company engaged with the retainer but operate on a pay as you go basis for the main support. It should work well running alongside my other contracts and if I need to spend time on the support the loss of income from one contract is covered by the hourly rate. There is an IT Support SLA contract on Legal, Business & Property Documents & Templates that I have used.

[oliverson]

Contracting 14 years and until now, I've never been asked if I'd provide a support contract for software I've written (I'm the sole developer on this). Usually it's just a case of handover but the client doesn't have anybody with the necessary skills or knowledge or plans employing anybody.

Curious (and clueless) as to how best to approach this? Increase the rate to reflect the fact it's only a few days a month? Charge a retainer as well? I'm no longer a member of IPSE so don't have access to any standard contracts. Any other sources you can recommend?

Many thanks in advance.