How do I check how a reseller bills for consulting hours?
Ask for a sample of consulting invoices next to the time records and the quotes behind them. Check whether hours are billed as worked, bundled into a fixed fee or discounted to win equipment sales. Then ask who delivers the work, because billing that depends on one person may not carry over to you.
Pull a handful of recent jobs and follow each one. Look at the quote, the time sheet, the invoice and the payment. Do the hours billed match the hours logged? If they do not, ask why. Sometimes consulting is a loss leader that helps sell hardware or licences, and the real margin is hidden in the product line.
Ask how the rate is set. Is there one rate for everyone, or does it change by client and by technician? Find out how often work is written off, given away or left unbilled at month end. A reseller that bills close to the work is usually watching its time carefully.
Ask who does the work. If the owner delivers most of the hours, a buyer must ask what happens when the owner leaves. Check whether any clients are on prepaid blocks of hours, because unused hours may be a promise you inherit. Also ask how disputes about hours are settled and how often they come up. Your accountant can help you read the revenue split between consulting and product sales, and can explain how it should be treated.
Key takeaways
- Trace several jobs from quote to time sheet to invoice and see whether the hours agree.
- Find out how often hours are written off, discounted or given away.
- Ask who delivers the consulting and whether prepaid hours become your obligation.
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Due diligence
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
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