Price Increase Effective June 1, 2010

During the first quarter of 2010 we have undergone several changes, both planned and unplanned. As you are probably already aware from my previous letters, Daniel has left us to accept an exciting new internship in his field of study and Lynnei has since joined us full time. In the midst of this turnover we have also continued to innovate and expand our service offerings through new strategic partnerships with various vendors and industry associations such as CompTIA, Microsoft, Ingram Micro, OwnWebNow, SMBTN, MSPU and Chartec to name a few. These partnerships are just the beginning.

With new technologies emerging and changing at an ever increasing pace, it has become increasingly important for us to devote more time and energy into several key aspects of our business to ensure we have access to, and are trained on, the widest breadth of technology solutions available today. In order to ensure we are best able to pair your business with the best technology solution for your future growth and both efficiency and profit we will be investing heavily in our own growth over the next year.

We will continue to expand upon the work we have already started this year by increasing the number of strategic partnerships we have with leading industry vendors and associations. We will increase our investment in training on the newest technologies as well as continuing our search for additional technical experts to join our team.

Unfortunately due to the cost of this investment, including the cost of staying current on the latest emerging technologies, the projected costs of adding on to our team, and the unforeseen costs associated with our turnover earlier in the year, we are unable to maintain our current prices. Effective June 1, 2010 our á la carte hourly rate will increase to $100.00 per hour up from $59.95 per hour. This price increase affects our á la carte hourly rate only; rates for our clients with contract discounts will not change at this time.

I regret that such a large increase is necessary, but after careful consideration and discussion it is unavoidable. For more information regarding this price increase please visit my blog at swallservices.com.

Price Increase Effective June 1, 2010 - More Information

Why are your prices going up so much, so quickly?

To be candid, Swall's Associated Services operates at a loss and always has. Not every year is a loss mind you, but if you look at the past 10 years as a whole it is a net loss. This is primarily due to the feast/famine nature of reactive IT support (client's only call when something is broken) and that I have been holding down our prices artificially up until now. I have needed to increase the prices drastically for some time now.

What do you mean "operates at a loss"? You wouldn't still be in business after 10 years if you didn't make any money - that doesn't make any sense...

Let me clarify a bit. Every year, except one or two years, the company does post a profit - but what's left over after taxes usually isn't enough for me to live on. By the end of the year I am more in debt than I was the year before. Not by much mind you, but it's still an increasing negative number.

That still doesn't make any sense... doing the math you should make...

In this industry there is a lot of time spent learning about new technologies, researching solutions to uncommon problems, etc. For every hour of billable time there is anywhere from 3 to 5 hours of non-billable work as well. That combined with my additional plans going forward - needing to make time to hire, etc. that ratio will probably get worse during this year. The end result - there's a lot less billable hours in a week than you think.

Then you're probably just spending too much money - you need to budget better.

I probably could budget better - but those of you that know me personally know that I don't live rich. I own one pair of shoes, four pairs of pants, and enough shirts to go with them to last me two weeks before I have to do laundry. I don't go out to concerts or to the movies, I don't drive a fancy car, I haven't had a vacation or any length in more than 10 years and yet I still haven't found the money in my personal budget for health insurance or savings of any kind.

Why have you taken so long to raise prices then?

Good question - I don't know. I have a very deep sense of loyalty to the clients that have helped build my business over the years and I didn't want to raise prices on them. I have consistently raised prices over the years, but unfortunately due to how my business started, many of our oldest clients came in at such low rates that it's been difficult to ratchet those rates up quick enough with only a couple percentage points a year. I ultimately realized I'd eventually be out of business if I didn't just bite the bullet and raise the prices significantly - which is what I'm doing now.

Why don't you just raise prices for new clients and keep your existing clients at the lower rate?

Simply put, there are no new clients and I'm not looking for any new clients right now either. At this point I'm fully booked - in order to take on a new client I'd either have to hire immediately or let go of an existing client. Hiring takes a lot of time and money - neither of which I currently have or can afford without raising prices on our current client base.

How did your company get started?

Swall's Associated Services was started out of high school thanks to my neighbor, Stefan Malczewski, who used to bring his son's friend from across the street (me) into his company to fix their computers. By the time I was out of high school he had referred me to several other businesses and I had a client base.

Being straight out of high school my rates were dirt cheap, as to be expected, and because of that I grew a rather large client base in a short amount of time. 90% of our current clients have been with us since near the beginning - only a small handful have been added the past few years.

In Conclusion

My only motive for writing this entry is that I wanted to be candid about the reasons behind why I have to make the change I am making. I hate raising prices - I really do. Unfortunately it's time for my rates to come better in line with the rest of the industry. Clearly they all knew something all this time that I refused to see - you can't be profitable in this industry charging such low rates.

If there is a question I didn't address in this post please add it to the comments below and I'll do my best to answer it for you.