Over the years we have been focused on  sales as an organization. Very early on our founder, Mike Cooch, decided he needed to remove himself from sales and create the systems and processes necessary to grow the business. This is quite opposite from the majority of IT businesses we talk to around the country where the principals are responsible for the majority of sales and often struggling to make their sales team or sales person work out.

Make sure you register to hear Mike reveal the ways you can adjust your compensation plan to get your sales team selling more recurring revenue on MSP TV next Thursday.

See you there.

JC

Join Michael Cooch and Josh Clifford to learn 7 specific strategies to grow your business in 2009:

• Strategies used to grow Everon 498.7% over the last three years and place #682 in the Inc. 5000 list of fastest growing companies in America!
• Specific tactics you can use to increase the productivity of your sales reps
• How to adjust your compensation plan to get your salespeople to sell more recurring revenue
• The strategies Everon used in the last year to add $324,000 in recurring revenue to their business at 73% gross margins – ON TOP of our normal managed services revenue
• How to get other people promoting your services for you – multiply the power of your sales team by 5x.

Register for this exclusive webcast presented by MSPtv.

I was talking to a new MSP yesterday about how they should structure their service plans, when a saying from Kent Erickson at Pointivity in San Diego rang in my head:

“It’s all about risk management, Mike.”

Sometimes a few words can turn on a light bulb in your head and make things so clear.  Kent’s phrase was one of those times for me.

The business of managed services is about risk management.  You are assuming a level of risk on behalf of your client, relieving them from some of the headaches and unknowns of technology.  In return, you are getting paid.

It’s all quite simple, but easy to forget in the course of your daily business operations.  I have a simple formula that can  help you put this simple insight to work at your managed services practice every day:

More Risk = More Compensation, Less risk = Less Compensation.

Pretty simple, right?  But totally powerful as well.

In all dealings with your clients, and in all cases where you are designing and pricing new services for  your business, keep this formula in mind while you evaluate the decisions you are making.

Would adding this feature to your service offering increase the risk you are assuming?  Then it must increase the compensation you will receive as well?

And if your client wants a lower price from you, what are they willing to take out of your service equation to lower the risk that you are managing?

Keep this formula in mind at all times and I guarantee you will see increased margins in your business over time.

Thanks Kent!

MRC

We discuss this and other topics in our membership site for MSP executives, MSPCoach.com.

I know Mike wrote a post about spending time with Paul after our first meeting but we just finished our second day long strategy session with him and he is an incredibly smart guy. If you have the opportunity at a conference or thorough his services to interact with him I highly recommend it.

So what did we take away from this meeting you may ask?  I can’t say that we walked out with any secrets that are going to change our business but I can say it was time well spent.

Paul has a fantastic understanding of the industry and growth trends that are taking shape and it was great to use him as a sounding board for our future plans.

Big takeaways from our time together:

1. There are very few strategic buyers in our marketplace so the acquisitions happening are finance buyers. what does this mean? Well, it means if you are acquiring, selling, or planning to do either you better be paying close attention to managing your P&L.
2. Compensation plans for your service team need not be as complicated as we make them in our heads. Create plans tied to gross margins and performance (fill in the top three key metrics for your team here) and get the plans rolled out. We spent time around structure and percentages of incentive pay but the most helpful part of the day was the realization that this stuff doesn’t need to be complicated.

Anyway, as Mike said last time we spent time with Paul, he is not cheap but he is a great resource to have in your corner as you continue to grow.

JC

It has long been a goal of ours to be the number one choice of employees in our industry and I have to say we have done a great job creating a culture and enviorment that people like to come to work in each day. Our emplyees often say they “Love” coming to work.

But once you have your culture and environment figured out the next challenge you run into when you are a business that is growing quickly is that everyone wants to be promoted and everyone wants to make more money. As I am sure you know there is a financial reality to what you can pay a person in a certain position and still have a healthy business. And there is also the reality that not everyone can be promoted after their first year – you need your front line people for the business to run. So how do you compensate and motivate the person that says the “Love” coming to work before they start to no longer feel that way?

As we continually evolve our roles, responsibilities, and comp plans I thought I would share some key factors we use to attempt this challenge and get the opinion of the group on other ideas that you all are successfully employing:

• Pay for performance -  People that want increased pay with no performance requirements or growth in responsibilities will eventually leave the company weather you help them do so or they do it on their own. It is always interesting when someone decides they should receive a 20% raise because they do a good job or a year has passed.
• Create a compensation program that rewards top performers more than everyone else. – Why should your top people not receive better compensation. Create a pay grade that everyone wants to achieve and outline clear steps and time frame to get there. Make it so attractive that once someone is there they won’t want to leave.
• Pay tied to basic job responsibilities – This is something we have been thinking about lately. The idea could be something like should a hundred bucks a week of your pay or a couple hundred bucks a month depend on you showing up on time? Sure seems like it would fix that problem once and for all.
• Compensation tied to the financial health of the company – One of the most powerful things we have implemented, and we are just in the very beginning stages, is open book management. It sure does create a whole different conversation when someone wants a significant pay increase and you can say “you know the business, show me where the money is gong to come from in your group to pay for that increase.” Amazing things start to happen in your business and with your people when you do this. Ideally they start to create new efficiencies and even products that increase profitability which is what we are starting to see.
• Create clear growth paths – It is important that your employees can see what their future can look like if they apply themselves. It is just as important that the criteria for getting there is on paper and clear to everyone.
• Make it clear that you invest in the development of your people but that it is their ongoing responsibility – Purchase the study and lab materials for the certs that make sense for your employees and your company and then make it each individuals responsibility to receive them in a certain time period. Create tests about your company, culture, and products that have to be completed successfully in order to continue on to another level in the organization.
• Bonus plans – I have to put it here because someone would call me out if I did not but in a fast growth company cash bonus plans can seem insignificant or become expected causing challenges. This is not to say I don’t think they can work, we just have not made them work to date. We have on the other hand successfully implemented Annual Themes with mini games and rewards that work wonders. The ides is to put a goal up on the wall and tell the team to go get it – the power of reaching the goal and the pride they take in doing so is all they need, although we also compensate the success with a celebration, team outing, or cash when appropriate.

These are the types of things we keep in mind when figuring out how to compensate and motivate our people.

What are you doing in your business? What have you seen work?

JC