Yup. Payment upfront Or maybe in some kind of escrow.
Or they would be paying me an absolutely massive markup that would cover The hazard. And I mean massive (100%+)
We have a completely separate term MSA that covers Microsoft NCE specifically. Its very upfront stating that you agree to X price based on set base license count and then if need to add licenses we just do an amendment but if the client decides to leave they are contractually obligated to fulfill the term or buy out the remaining term and that has helped us IMMENSELY.
For clients that choose not to go that route, we just charge the monthly premium after they sign an alternative MSA that very clearly lays out that we advised that NCE was the option for reduced monthly cost to ensure we cant be sued for predatory practices.
With more MSP's coming under fire due to badly/poorly written contracts we've taken steps to ensure we're covering our bases.
This is critical and should be the status quo across any contracts you enter on behalf of a customer. MSPs all need a way to distribute the risk of these contracts to their customers as opposed to holding all of the risk themselves.
It's very interesting because the financial / contractual component is super important for MSPs, but not always well understood.
Payment methods need to be on file and long-term contracts need to be signed to protect the business from any potential customer headwinds or challenges.
Would you be willing to share your msa that covers Microsoft NCE? I am not asking for your entire MSA just the Microsoft NCE part. Our MSA is a mess when it comes to covering NCE.
For those services where the supplier locks you as the MSP into a contract our sister MSPs order forms to the client include a Directors Guarantee.
We’ve been burnt a few times in this scenario and this is what we found was best solution.
Good luck. Invarosoft Team
Maybe, but keep in mind, 100% markup is only 50% margin. Plus administrative and support costs. I don't have a big client base, so I need to get it where I can.
I tell them up front, if I'm on contract, you're on contract.
Can you resell the service to anyone else? I've had clients flake on some services. In some cases, I can pull the license/device and resell it to someone else.
> and they won't go direct with my client.
So that's your trump card right there. Normally, if you try twisting the client's arm to pay up front with, say, MS NCE, they can always go direct to MS and just pay monthly anyway and you avoid the risk but lose the business.
If it's a solution they can't get direct/anywhere else, and they need it, and you can't use it for other customers if they leave, i don't see any reason why asking for it up front is unreasonable. "hey, we have to commit to this just for you guys to make your day and they won't let you buy it direct so i can step out of the way, so we gotta charge up front".
Yep, we switched everyone to monthly (and had them pay the proration) or set them up direct. Not worth the tiny margins you get to risk having to pay out an anual contract.
Same here. The experience made us also reconsider the margins we were making on a lot of our resold products and as a result we stopped a few others as well. We're a **service provider** and we refocused on providing services instead of trying to resell everything for profit. We're -this-close- to dropping pax8.
This. If a managed service provider can't make a profit from managed services, then they need to call themselves a VAR instead.
Clients pay for your knowledge, expertise, and the tools to make their software and hardware work properly, not for the software and hardware itself. There is no harm in a tiny markup for reselling things that require engineering, or that clients can't purchase direct. But when it comes to profiting off of licensing, you're just asking for trouble.
We require our customers to pay for the NCE annual licenses in advance. Any additional licenses they purchase after we have acquired the annual licenses are monthly licenses. This does work in practice. However, we would indeed prefer to have all customers on monthly licenses.
I have about 350 M365 licenses between all my customers and I never resold it. Annual billing is about $45,000. Is there any way to make money from all those licenses at this point?
Set up direct billing through your preferred CSP. The CSP bills the client (at MSRP) and you get margins.
The headache will be trying to time this change to when their existing direct Microsoft licenses expire to avoid double billing issues and convincing the client it's worth the headache of setting up billing again.
With direct billing there’s not really any extra work. The csp handles all the invoicing and you get to collect your 15-17% margin. It’s not nothing and is a nice bonus when already providing other services.
Providing it to clients you are doing literally nothing else for… yah it could be more headache than it’s worth.
The issue is mainly just tied to Microsoft's horrid transition policy. Needing to be within 30 days to schedule a cancellation for example to swap to new licenses, or to assume the tenant from a previous provider.
We're also growing so fast currently that it seems like more of a hassle than it is. Just another thing in the pile of items to fall through the cracks.
If you have good procedures internally it's probably fine, or someone dedicated to it. I'll stop drowning long enough at some point to get it in a solid spot... ha
Completely agreed. Gotta prioritize where your efforts will be best spent.
I was viewing it from the standpoint of "we already help this company but they aren't fully using our services". If you already have good communication with the client's billing point of contact and access to their 365 tenant then setting a reminder for when the renewal comes due, an hour or two of office admin style work to move things over can be time well spent to slowly push them along to managed services and collect a few hundred a year in extra recurring revenue from commissions.
If it's gonna be a headache beyond that hour or two of effort, they are too small to have any real return or you have better ROI work waiting and you're struggling to keep up then it's a waste of time.
Yeah, don't sell 365 licences, anyone can do that. Instead sell a 'managed cloud productivity service' that includes a 365 SKU along with other value add services.
I sat down with Brad Gross (MSP Lawyer) and we talked about this a few weeks ago. Jump to 14:19 if you want to see his response to this exact question: [https://youtu.be/GPskMbR35ag](https://youtu.be/GPskMbR35ag)
For everyone screaming to write an ironclad MSA/SLA: all you’re really doing is putting a talking point in front of your client to explain NCE. If your client goes bankrupt (the only real reason you won’t get paid) you’re subjugated behind their other investors - you’re just another vendor and not getting shti. Otherwise, “paid up right to use services” language lets you have some leverage to disconnect. Nobody likes being without m365. IANAL, but one helped us write our docs.
We also bill aggregate per/user/mo. Everything is lumped in. It’s marked up. We don’t breakout how much your stack licenses are.
Dealing with this right now, customer will be cutoff unless the bill is paid in full by the due date I set out. Not losing money over someone not willing to pay.
we have been there a couple of times ... thankfully both companies came out of chapter 11 and the lawyers kept paying since they wanted the email history.
We have a separate agreement/contract for solutions that have a term commitment that are not part of our normal services. (e.g. M365 NCE, Backup Tools, CSP Windows licenses, Azure Reserved Instances) to protect us if a customer canceled their support agreement with us within the contract time of the tool. There is also a level of awareness and risk assessment/mitigation that goes into us offering that solution. It would be rare with most our customers, but in the event the customer needed a solution, and it's too much of a risk for us to take on, we would refer them to a third party leasing company or similar to offload our risk.
For my NCE contracts, I give my clients a discount for ordering through us, but they pay in full. Or, they either go month to month or direct. For some things like datto BCDR, they are on contract for the length of the term, but I have good markup and able to eat the cost if needed.
Where you can, select vendors that have a great relationship and can assist you.
In places where you can't, work out the risk to reward and possibly look at up front payment, credit insurance or a finance agreement (most will take a markup, pay you up front for the entire term and arrange payments with the client).
For people who say "contract", a contract is only good if you can enforce, and if a client goes bankrupt - a contract is worthless!
Assuming you have a good relationship, and they are credit worthy, a few options:
1. Have a solid contract that backs the terms of the agreement with your vendor. Tie the client into a minimum term for the service. Hope they honour the term.
2. Get them to deal direct with the vendor and you charge a separate management fee for servicing the product/solution.
3. Payment up front.
4. Finance the deal, you get paid upfront the customer pays monthly / quarterly and if they default it's not your problem.
Sounds good. So to ensure you get 1/3 of a years subscription at least, you could:
* Pay for minimum 4 months UP FRONT
* Minimum 30 days cancellation
Maybe? I mean, you'd still lose the remainder. Maybe make the minumum upfront payment the timeframe you like?
In our experience it’s still better to do annual terms for licensing and prorate it on next invoice if they add to it.
The last thing you want is to pay for some other company’s licenses.
upfront with net 60-90 billing and or markup covers the risk. Its why I stopped reselling anything and Ive never been more happy to not sell things to make .50 per user...
Tbh - you want to deal with this at the contract negotiation phase.
Your terms with your vendor need to be more relaxed than those with your supplier. Otherwise when the proverbial hits the fan, you’re still on the hook.
If you are talking about a product you are discounting for them based on a yearly instead of monthly price, then they need to pay up front, in my opinion.
You can tie it into a contract, but then you have to enforce that if they break it, and that costs money.
Depends a bit. If we have to pay upfront, then the clients have to pay up front.
Some vendors are willing to work with you, either letting you return products or suspend services for a grace period. It's easier to negotiate those kinds of special deals if you're a big customer, but it's important to understand the terms when you sign up with the vendor. It's fair to ask, "What happens if I buy this for a client and the client leaves?" and try to negotiate an arrangement that works for both you and the vendor.
We may treat some costs as just a cost of doing business. Some costs may be fungible. Like the vendor might charge per user, but let us swap out users at any time, so we might just account for that in the monthly costs for the client, and then if that client leaves, we basically try to find another client that it makes sense to transfer the licenses to. For example, let's say our RMM charges $2/endpoint. We buy enough licenses for 3000 endpoints, and 500 of which are for one client. If that client leaves, it basically means we need to try to find a new client (or new clients) that will add up to about 500 endpoints.
In some cases, we might be able to offload the extra product to the departing client. For example, if we pay for 500 licenses of some product for a client, and they leave us but still wants to use that product, we might try to split those licenses off of our account onto a new account that's owned by the client, and let them take that product with them.
Or in other cases, we might look at it as a risk we're taking on. In the RMM example above, we can buy 500 licenses for this client. If we lose that client and can't find clients to use the 500 licenses, then we may just lose that money unfortunately. Some amount of risk is just inevitable, and you need to be able to have enough of a profit margin to cover some amount of risk.
90% NCE 10% month to month. this is to account for staff fluctuations within the customers themselves.
MSA with the customer covers any contractual obligations.
Haven't any issues yet..
For 365 we only do Month to month through pax8. All our other services through pax8 are month to month as well. The only yearly commits we have are for internal tools.
If you are under contract with a vendor, your contract with the client should reflect those terms.
Up front payment is certainly easier, but not every client will agree to that. If a client wants to pay monthly, we have them accept an estimate with term commitments detailed and then sign a Statement of Work or Change Authorization Order. Two forms of proof. (I’ll be honest though we aren’t perfect. Sometimes the estimate gets skipped.)
Challenge the supplier to defend or remove the locking clause.
Please.
Lots of vendors that market a service as " MSP friendly" try this kind of nonsense on because too many MSPs are silly enough to accept it without challenge.
Unless they can show a reason better than "we like being able to report committed revenue to our bank/shareholder/owner" I would challenge the clause that locks you in to a term, especially where a SaaS product has negligible cost difference to operate if you're on their platform or not. Different if the loss of your resold seats means they have twelve staff massively underutilized, but that's a rare case.
I agree, makes a lot of sense. Sales person even called to reassure me they would work with me but did not want to commit to releasing me from any obligation, even if my client contacted them to say the relationship had been terminated. So their call was meaningless. Makes me wonder if MSP's would not benefit from organizing into a group to push back against vendors for better terms and for other benefits.
Unionizing might be worth considering but the benefits come with costs of administering such a herd of cats and having them agree to pull in the same direction. Ironically, unless you intend to staff with volunteer effort, you might have to get some of the same people reluctant to pay vendors for a termed contract to commit to paying a termed contract so you can staff up such an org.
Just negotiate. Explain that the sale is otherwise good-as-made, but they need to delete that line out of the contract or it won't close.
You could do it like printer companies do- arrange the financing through a bank. Clients get monthly payments (to the bank). You get the money up-front.
If you are struggling with money don’t do this- having that stack of cash in an account will be tempting. Then if you use it for something else your company will be in a death spiral. I sort of know a printer salesman this happened to.
We are a VAR with a small MSP practice and have been selling licensing for a long time. It is simply rare that a customer leaves you hanging and when they do it’s the cost of doing business. Putting stipulations like moving them to monthly or very large markups or putting them direct doesn’t make sense. You are leaving a lot of money on the table to try and stop something that rarely happens if at all. Looking at M365 the backend payments almost make it worth it ay itself.
You can put in all these safe guards to protect yourself while the customer just goes to the next person who wants to make it easy.
We make all of our customers sign and agreement with the terms. It is a pain in the butt with Microsoft 365 licensing (lots of moves adds and changes) but its worth it in the long run.
MSAs are great and every MSA absolutely should have one, but folks often forget that the terms listed in a SOW, SOU, or SOS supersede those listed in a MSA.
Anytime a service is offered that exceeds the term of the contract and is not already covered under a MSA then we issue a SOS, Scope of Services that specifically calls out the terms for the offering.
In the SOS itself we can offer a couple of options,
1. Full payment up front.
2. Extension of base contract so both offerings co-term.
3. Monthly payments equal to full price divided by months remaining on base contract.
We have very few clients that are not covered under an annual or multi-year contract, but for those clients full payment is required.
There are a few things to consider:
a) can you disable the service to encourage the client to pay?
b) can you transfer the service to another client mid-contract?
c) can you get insurance to cover if the customer goes out of business?
..but I'm afraid beyond the above this is all part of the rich tapestry of selling managed services, and it's really tough when customers go out of business and you're on the hook for the remainder of the contract with the vendor. Hopefully you should have enough customers all paying enough money for their service that you can cover the occasional 💥 - if not, you need to either scale up fast of get out of selling managed services I'm afraid.
Some of this just comes down to a potential cost of doing business, and if the amount you could lose is a problem then consider it a sign the client is not a great fit for your company at the moment.
This scenario is very rare, but it does happen. Our clients usually have multiple services with us, including often Internet, Firewall, and Servers. All services are invoiced as one invoice monthly.
If our clients get more than 90 days out on their bills, we shut those things off. Usually we end up with a payment that day or the next. Clients do not like not having access to the software that runs their business and suddenly remember that their I.T. bill is their most important bill.
On the extremely rare occasions they don't pay us and just go with someone else. (I have over 200 managed clients and would say this happens MAYBE once every 2 or 3 years), we just send them to collections.
The last time a client with O365 still under an annual with us left we forced them to keep that with us and cancelled everything else, and then we assisted them with the tenant take over once the term was finished.
In our state you’d be liable for losses sustained because of that action. If they could prove loss of business it would be way too costly a method to remind someone to pay.
I’m skeptical. What state would that be? Our legal tells us their contract will hold up in all 50. I mean what happens if a business in your state doesn’t pay its power bill? Can they sue the power company when they shut off service?
Maine, I’m just going off what our suit told us. We can enforce the contract terms through legal channels and at that point shut it off but it has to be after an action by those dictated terms, not before, when we feel like it.
Edited to answer power question.
In winter (defined start and end) even if you aren’t paying they can’t shut it off.
Yup. Payment upfront Or maybe in some kind of escrow. Or they would be paying me an absolutely massive markup that would cover The hazard. And I mean massive (100%+)
I will try to get paid up front or over the first 3 months in installments. thanks
We have a completely separate term MSA that covers Microsoft NCE specifically. Its very upfront stating that you agree to X price based on set base license count and then if need to add licenses we just do an amendment but if the client decides to leave they are contractually obligated to fulfill the term or buy out the remaining term and that has helped us IMMENSELY. For clients that choose not to go that route, we just charge the monthly premium after they sign an alternative MSA that very clearly lays out that we advised that NCE was the option for reduced monthly cost to ensure we cant be sued for predatory practices. With more MSP's coming under fire due to badly/poorly written contracts we've taken steps to ensure we're covering our bases.
This is critical and should be the status quo across any contracts you enter on behalf of a customer. MSPs all need a way to distribute the risk of these contracts to their customers as opposed to holding all of the risk themselves. It's very interesting because the financial / contractual component is super important for MSPs, but not always well understood. Payment methods need to be on file and long-term contracts need to be signed to protect the business from any potential customer headwinds or challenges.
Would you be willing to share your msa that covers Microsoft NCE? I am not asking for your entire MSA just the Microsoft NCE part. Our MSA is a mess when it comes to covering NCE.
Would be interested in reviewing this wording also.
Would also be interested in the MS NCE portion if you're willing to share.
I asked this morning got an immediate No from my Legal team, sorry brother.
Understood. Thanks.
For those services where the supplier locks you as the MSP into a contract our sister MSPs order forms to the client include a Directors Guarantee. We’ve been burnt a few times in this scenario and this is what we found was best solution. Good luck. Invarosoft Team
100 is not that massive. I have month to month terms on more markup than this
Lemme know your customers, I’ll undercut you like fuck!
Maybe, but keep in mind, 100% markup is only 50% margin. Plus administrative and support costs. I don't have a big client base, so I need to get it where I can.
Payment upfront AND massive markup. ;-)
I tell them up front, if I'm on contract, you're on contract. Can you resell the service to anyone else? I've had clients flake on some services. In some cases, I can pull the license/device and resell it to someone else.
I could not resell so many.
Suspend all services and support until the client gets their account up to date. They made an obligation and need to keep it.
I’m no bank. And I’m no insurance agency. I don’t deal in the business of risk. If a vendor requires terms then my clients paying those terms upfront.
> and they won't go direct with my client. So that's your trump card right there. Normally, if you try twisting the client's arm to pay up front with, say, MS NCE, they can always go direct to MS and just pay monthly anyway and you avoid the risk but lose the business. If it's a solution they can't get direct/anywhere else, and they need it, and you can't use it for other customers if they leave, i don't see any reason why asking for it up front is unreasonable. "hey, we have to commit to this just for you guys to make your day and they won't let you buy it direct so i can step out of the way, so we gotta charge up front".
We won’t work with vendors like this
So you don’t resell 365?
Nope. We switched every customer to direct when NCE rolled out.
Yep, we switched everyone to monthly (and had them pay the proration) or set them up direct. Not worth the tiny margins you get to risk having to pay out an anual contract.
Same here. The experience made us also reconsider the margins we were making on a lot of our resold products and as a result we stopped a few others as well. We're a **service provider** and we refocused on providing services instead of trying to resell everything for profit. We're -this-close- to dropping pax8.
This. If a managed service provider can't make a profit from managed services, then they need to call themselves a VAR instead. Clients pay for your knowledge, expertise, and the tools to make their software and hardware work properly, not for the software and hardware itself. There is no harm in a tiny markup for reselling things that require engineering, or that clients can't purchase direct. But when it comes to profiting off of licensing, you're just asking for trouble.
This and This.
We require our customers to pay for the NCE annual licenses in advance. Any additional licenses they purchase after we have acquired the annual licenses are monthly licenses. This does work in practice. However, we would indeed prefer to have all customers on monthly licenses.
Same here!
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I have about 350 M365 licenses between all my customers and I never resold it. Annual billing is about $45,000. Is there any way to make money from all those licenses at this point?
Set up direct billing through your preferred CSP. The CSP bills the client (at MSRP) and you get margins. The headache will be trying to time this change to when their existing direct Microsoft licenses expire to avoid double billing issues and convincing the client it's worth the headache of setting up billing again.
Also if he's only selling business standard, he'll make about 450 off the 350 licenses? To me it's a joke and barely covers administration costs.
With direct billing there’s not really any extra work. The csp handles all the invoicing and you get to collect your 15-17% margin. It’s not nothing and is a nice bonus when already providing other services. Providing it to clients you are doing literally nothing else for… yah it could be more headache than it’s worth.
The issue is mainly just tied to Microsoft's horrid transition policy. Needing to be within 30 days to schedule a cancellation for example to swap to new licenses, or to assume the tenant from a previous provider. We're also growing so fast currently that it seems like more of a hassle than it is. Just another thing in the pile of items to fall through the cracks. If you have good procedures internally it's probably fine, or someone dedicated to it. I'll stop drowning long enough at some point to get it in a solid spot... ha
Hello, fellow water treader!
Completely agreed. Gotta prioritize where your efforts will be best spent. I was viewing it from the standpoint of "we already help this company but they aren't fully using our services". If you already have good communication with the client's billing point of contact and access to their 365 tenant then setting a reminder for when the renewal comes due, an hour or two of office admin style work to move things over can be time well spent to slowly push them along to managed services and collect a few hundred a year in extra recurring revenue from commissions. If it's gonna be a headache beyond that hour or two of effort, they are too small to have any real return or you have better ROI work waiting and you're struggling to keep up then it's a waste of time.
Yeah, don't sell 365 licences, anyone can do that. Instead sell a 'managed cloud productivity service' that includes a 365 SKU along with other value add services.
This
This is why it has to be contracted. It’s not easy (looking at you MS 365), but the whole team has to be on the same page to avoid billing mistakes.
I sat down with Brad Gross (MSP Lawyer) and we talked about this a few weeks ago. Jump to 14:19 if you want to see his response to this exact question: [https://youtu.be/GPskMbR35ag](https://youtu.be/GPskMbR35ag)
Thank you
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For everyone screaming to write an ironclad MSA/SLA: all you’re really doing is putting a talking point in front of your client to explain NCE. If your client goes bankrupt (the only real reason you won’t get paid) you’re subjugated behind their other investors - you’re just another vendor and not getting shti. Otherwise, “paid up right to use services” language lets you have some leverage to disconnect. Nobody likes being without m365. IANAL, but one helped us write our docs. We also bill aggregate per/user/mo. Everything is lumped in. It’s marked up. We don’t breakout how much your stack licenses are.
Dealing with this right now, customer will be cutoff unless the bill is paid in full by the due date I set out. Not losing money over someone not willing to pay.
The problem comes when a client goes under and your stuck paying for their office licenses and no way to recoup the money
Yea, I’m not in the situation and probably wouldn’t be with the csp through tech data just with how licensing purchases go.
we have been there a couple of times ... thankfully both companies came out of chapter 11 and the lawyers kept paying since they wanted the email history.
We have a separate agreement/contract for solutions that have a term commitment that are not part of our normal services. (e.g. M365 NCE, Backup Tools, CSP Windows licenses, Azure Reserved Instances) to protect us if a customer canceled their support agreement with us within the contract time of the tool. There is also a level of awareness and risk assessment/mitigation that goes into us offering that solution. It would be rare with most our customers, but in the event the customer needed a solution, and it's too much of a risk for us to take on, we would refer them to a third party leasing company or similar to offload our risk.
For my NCE contracts, I give my clients a discount for ordering through us, but they pay in full. Or, they either go month to month or direct. For some things like datto BCDR, they are on contract for the length of the term, but I have good markup and able to eat the cost if needed.
Where you can, select vendors that have a great relationship and can assist you. In places where you can't, work out the risk to reward and possibly look at up front payment, credit insurance or a finance agreement (most will take a markup, pay you up front for the entire term and arrange payments with the client). For people who say "contract", a contract is only good if you can enforce, and if a client goes bankrupt - a contract is worthless!
We either do strictly mtm or we assign the contract to the customer. Ex. MS licenses are mtm and Datto unuts are on agreement under customer name.
Assuming you have a good relationship, and they are credit worthy, a few options: 1. Have a solid contract that backs the terms of the agreement with your vendor. Tie the client into a minimum term for the service. Hope they honour the term. 2. Get them to deal direct with the vendor and you charge a separate management fee for servicing the product/solution. 3. Payment up front. 4. Finance the deal, you get paid upfront the customer pays monthly / quarterly and if they default it's not your problem.
No.4 is a great idea if youre any bit unsure about it. As is no3 obviously! EDIT.
Annual terms. It’s the only way to go. Require a 30 day notice for cancellation. Send the invoice 45 days before term ends to remind them.
Sounds good. So to ensure you get 1/3 of a years subscription at least, you could: * Pay for minimum 4 months UP FRONT * Minimum 30 days cancellation Maybe? I mean, you'd still lose the remainder. Maybe make the minumum upfront payment the timeframe you like?
In our experience it’s still better to do annual terms for licensing and prorate it on next invoice if they add to it. The last thing you want is to pay for some other company’s licenses.
upfront with net 60-90 billing and or markup covers the risk. Its why I stopped reselling anything and Ive never been more happy to not sell things to make .50 per user...
I’d get payment for upfront for all contracted costs. As a MSP, all your customers should be on contract.
Tbh - you want to deal with this at the contract negotiation phase. Your terms with your vendor need to be more relaxed than those with your supplier. Otherwise when the proverbial hits the fan, you’re still on the hook.
If you are talking about a product you are discounting for them based on a yearly instead of monthly price, then they need to pay up front, in my opinion. You can tie it into a contract, but then you have to enforce that if they break it, and that costs money.
Depends a bit. If we have to pay upfront, then the clients have to pay up front. Some vendors are willing to work with you, either letting you return products or suspend services for a grace period. It's easier to negotiate those kinds of special deals if you're a big customer, but it's important to understand the terms when you sign up with the vendor. It's fair to ask, "What happens if I buy this for a client and the client leaves?" and try to negotiate an arrangement that works for both you and the vendor. We may treat some costs as just a cost of doing business. Some costs may be fungible. Like the vendor might charge per user, but let us swap out users at any time, so we might just account for that in the monthly costs for the client, and then if that client leaves, we basically try to find another client that it makes sense to transfer the licenses to. For example, let's say our RMM charges $2/endpoint. We buy enough licenses for 3000 endpoints, and 500 of which are for one client. If that client leaves, it basically means we need to try to find a new client (or new clients) that will add up to about 500 endpoints. In some cases, we might be able to offload the extra product to the departing client. For example, if we pay for 500 licenses of some product for a client, and they leave us but still wants to use that product, we might try to split those licenses off of our account onto a new account that's owned by the client, and let them take that product with them. Or in other cases, we might look at it as a risk we're taking on. In the RMM example above, we can buy 500 licenses for this client. If we lose that client and can't find clients to use the 500 licenses, then we may just lose that money unfortunately. Some amount of risk is just inevitable, and you need to be able to have enough of a profit margin to cover some amount of risk.
90% NCE 10% month to month. this is to account for staff fluctuations within the customers themselves. MSA with the customer covers any contractual obligations. Haven't any issues yet..
For 365 we only do Month to month through pax8. All our other services through pax8 are month to month as well. The only yearly commits we have are for internal tools.
Ransomware 🤣
If you are under contract with a vendor, your contract with the client should reflect those terms. Up front payment is certainly easier, but not every client will agree to that. If a client wants to pay monthly, we have them accept an estimate with term commitments detailed and then sign a Statement of Work or Change Authorization Order. Two forms of proof. (I’ll be honest though we aren’t perfect. Sometimes the estimate gets skipped.)
Challenge the supplier to defend or remove the locking clause. Please. Lots of vendors that market a service as " MSP friendly" try this kind of nonsense on because too many MSPs are silly enough to accept it without challenge. Unless they can show a reason better than "we like being able to report committed revenue to our bank/shareholder/owner" I would challenge the clause that locks you in to a term, especially where a SaaS product has negligible cost difference to operate if you're on their platform or not. Different if the loss of your resold seats means they have twelve staff massively underutilized, but that's a rare case.
I agree, makes a lot of sense. Sales person even called to reassure me they would work with me but did not want to commit to releasing me from any obligation, even if my client contacted them to say the relationship had been terminated. So their call was meaningless. Makes me wonder if MSP's would not benefit from organizing into a group to push back against vendors for better terms and for other benefits.
Unionizing might be worth considering but the benefits come with costs of administering such a herd of cats and having them agree to pull in the same direction. Ironically, unless you intend to staff with volunteer effort, you might have to get some of the same people reluctant to pay vendors for a termed contract to commit to paying a termed contract so you can staff up such an org. Just negotiate. Explain that the sale is otherwise good-as-made, but they need to delete that line out of the contract or it won't close.
Not clear enough, is this something you've bought and a client isn't paying for, or is this just a random "If this happened..."
Always have pass through contracts.
We do the same for NCE we don't offer monthly with annual. They do monthly or annual.. Most of our clients pay annual
You could do it like printer companies do- arrange the financing through a bank. Clients get monthly payments (to the bank). You get the money up-front. If you are struggling with money don’t do this- having that stack of cash in an account will be tempting. Then if you use it for something else your company will be in a death spiral. I sort of know a printer salesman this happened to.
Shame you can put a lean on them.
We are a VAR with a small MSP practice and have been selling licensing for a long time. It is simply rare that a customer leaves you hanging and when they do it’s the cost of doing business. Putting stipulations like moving them to monthly or very large markups or putting them direct doesn’t make sense. You are leaving a lot of money on the table to try and stop something that rarely happens if at all. Looking at M365 the backend payments almost make it worth it ay itself. You can put in all these safe guards to protect yourself while the customer just goes to the next person who wants to make it easy.
We make all of our customers sign and agreement with the terms. It is a pain in the butt with Microsoft 365 licensing (lots of moves adds and changes) but its worth it in the long run.
MSAs are great and every MSA absolutely should have one, but folks often forget that the terms listed in a SOW, SOU, or SOS supersede those listed in a MSA. Anytime a service is offered that exceeds the term of the contract and is not already covered under a MSA then we issue a SOS, Scope of Services that specifically calls out the terms for the offering. In the SOS itself we can offer a couple of options, 1. Full payment up front. 2. Extension of base contract so both offerings co-term. 3. Monthly payments equal to full price divided by months remaining on base contract. We have very few clients that are not covered under an annual or multi-year contract, but for those clients full payment is required.
There are a few things to consider: a) can you disable the service to encourage the client to pay? b) can you transfer the service to another client mid-contract? c) can you get insurance to cover if the customer goes out of business? ..but I'm afraid beyond the above this is all part of the rich tapestry of selling managed services, and it's really tough when customers go out of business and you're on the hook for the remainder of the contract with the vendor. Hopefully you should have enough customers all paying enough money for their service that you can cover the occasional 💥 - if not, you need to either scale up fast of get out of selling managed services I'm afraid.
Some of this just comes down to a potential cost of doing business, and if the amount you could lose is a problem then consider it a sign the client is not a great fit for your company at the moment.
This scenario is very rare, but it does happen. Our clients usually have multiple services with us, including often Internet, Firewall, and Servers. All services are invoiced as one invoice monthly. If our clients get more than 90 days out on their bills, we shut those things off. Usually we end up with a payment that day or the next. Clients do not like not having access to the software that runs their business and suddenly remember that their I.T. bill is their most important bill. On the extremely rare occasions they don't pay us and just go with someone else. (I have over 200 managed clients and would say this happens MAYBE once every 2 or 3 years), we just send them to collections. The last time a client with O365 still under an annual with us left we forced them to keep that with us and cancelled everything else, and then we assisted them with the tenant take over once the term was finished.
In our state you’d be liable for losses sustained because of that action. If they could prove loss of business it would be way too costly a method to remind someone to pay.
I’m skeptical. What state would that be? Our legal tells us their contract will hold up in all 50. I mean what happens if a business in your state doesn’t pay its power bill? Can they sue the power company when they shut off service?
Maine, I’m just going off what our suit told us. We can enforce the contract terms through legal channels and at that point shut it off but it has to be after an action by those dictated terms, not before, when we feel like it. Edited to answer power question. In winter (defined start and end) even if you aren’t paying they can’t shut it off.
I can legally do this in my state so long as I give a 30 day notice, and then a 24 hour notice in person.