I recently had a conversation with a company that had been paying £40 per hour for their business I.T. support, it’s important to mention that they were far from happy with the service from their current supplier and that’s why we were having a conversation in the first instance. But…… before you start searching online for “cheap business IT support in [insert area here]” please make a coffee and hear us out.
It’s immediately obvious why this arrangement doesn’t work, assuming this current supplier is a one man band and works from home. £40 per hour equates to £48 gross once VAT is added (at the time of writing the UK VAT rate was 20% don’t @ me in 2027 giving me grief).
A five mile travel expense would equate to £4.00 in a sensible vehicle, and corporation tax £7.60 per hour (our accountant tells us). Net profit is therefore £28.40.
Not shameful if you can bill 6 hours a day (accounting for travel time), but the issue is, and we’ve seen this every month for fourteen years. By under pricing your time you need to “sell volume” and thus these suppliers end up rushing jobs, not finishing or if they do finish it’s to an extremely poor standard requiring repeat visits, more money for them, lost money for you and your business.
The figures however look a bit different if there’s office costs or even one member of staff, now any IT engineer should be on at least £13 per hour but we’ve already established that a “cheap” I.T. supplier is going to cut corners so lets work it out on minimum wage of £7.83, on a 35 hour week the employers contributions are going to be £31.20 a week for Pension and NI contributions and around £115 office costs (for a small office).
This all means that the supplier needs to bill 15 hours a week just to break even, so assuming they are fully booked and billing 6 hours a day Monday to Friday their profit per week is £85.20. Now let me tell you, they are not billing 6 hours a day consistently, it just doesn’t work like that. So the reality is that they are scraping by or as we’ve found with some suppliers losing money and having to make cost cuts.
All this aside, the best course of action when looking for I.T. support for your business is to build a picture of your needs, the value of your IT equipment and what the cost of not being able to access your systems might be. For the average company with 5 employees company wide downtime costs £75 per hour in labour charges, that’s without factoring delays to proposals and quotes and the loss of business that brings from a quicker response from your competitors. All in all the hourly loss to most companies from downtime is around £150 per hour.
Most companies will provide a 4 hour turnaround (though not guaranteed) on incident support so expect to pay around £70-£80 per hour for reliable support.
This may at first glance seem like a fair chunk of money, especially if the IT engineer is on site for a half day or full day (they may have rates for that that will save a few pounds just ask) but the cost of not having that valuable support when IT is down or slow is much much higher.
If you’d like to have a chat about improving the level of support you get from your current supplier please get in touch.