Teddy Roosevelt once said, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” Of course, he wasn’t referring to IT channel companies when he said it, but in doing so he managed to sum up the dilemma many face when deciding how to grow their businesses. It can be difficult enough just managing pure revenue growth from existing operations, but when expanding services and solutions or targeting unfamiliar markets, the learning curve can be quite overwhelming.
A number of solution providers start out with a single client, typically a former employer looking to trim expenses by eliminating or scaling back their personnel. One of the fastest ways to trim a significant chunk of their payroll is to outsource the IT department, setting them up to work on a contract basis. The development of these newly-established businesses is often driven more by chance or organic growth than through strategic planning. Since a number of these new entrepreneurial endeavors occur rather unexpectedly with little forethought, the owners or management teams need time to build their own infrastructure and operational plans. Before they can actively prospect for new clients or expand their portfolio, they have to get their house in order by establishing operational routines and employing industry best practices.
Over time, each of these VAR and MSP organizations develops its own specific portfolio of services and solutions, with many focusing on certain vertical markets or business segments. But after perfecting those practices and identifying and hopefully securing all the opportunities in those selected fields, it’s time to expand. That’s typically the tipping point for most businesses, when they either succeed and grow their organization with a well-designed and properly executed plan or end up failing.
In order to prevent the latter, many IT companies start out by strengthening their core business model before expanding their portfolios or vertical market specializations. The struggle is how to optimize their current business operations and increase their customer retention rates while going after these new opportunities. The best way to accomplish all three objectives concurrently is to focus more attention on adjacent technologies and services.
At Morris Management Partners, Ryan Morris devotes a lot of time and effort to understanding the best practices of successful solution providers – and how they manage new growth is one of the most important factors. “Transforming any business is not easy,” he said. “In an environment always facing change, you have to adjust your model on a continual basis. Whether [it’s] a solution provider, managed services provider or cloud provider, growth is easier when it is a gradual expansion of current offerings or markets.”
Consider a scenario in which the owner of a tire shop was looking to increase revenue by expanding his offerings. Would he find it easier to grow sales by adding engine rebuilding or brake service? Rather than take on the expense and learning curve required to create and market an unrelated practice such as transmissions, brake repair would be a more natural extension of his existing business and could easily be presented to current customers. After all, when the wheels are off of a car while the tires are being replaced, wouldn’t it be easier to evaluate the brakes and suggest repairs than trying to upsell them on an engine restoration?
That analogy applies to the solution provider opportunities available in unified communications. Network specialists can easily transform their businesses to help manage the connections inside and outside their clients’ office buildings. “Their bandwidth needs do not stop at the four walls, but they are an essential connecting point to virtually every service a solution provider offers today,” Morris said. “Whether that portfolio includes cloud, managed services or any of the other big trends in IT, in order for it to work to its greatest effect, it has to have a solid connection to the outside world.” For many VARs and MSPs, unified communications is a lost business opportunity and a vulnerability that must be addressed as their bandwidth needs continue to escalate.
With the average length of an MSP contract being two to three years and a carrier services commitment being seven years, there’s a lot solution providers can learn to increase their customer stickiness. By adding just one incremental and complementary service, an IT firm can strengthen not only client relationships and dependency, but add new revenue without adding the costs required to attract new business.
Would you like to learn how to identify immediate opportunities and transform your organization? Register to attend the May 29 CompTIA webinar “Maximizing Client Relationships by Optimizing Your Solution Stack,” during which Morris will share the latest research and tips for improving your IT channel business.
Brian Sherman is founder of Tech Success Communications, specializing in editorial content and consulting for the IT channel. His previous roles include chief editor at Business Solutions magazine and senior director of industry alliances with Autotask. Contact Brian at [email protected].
