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As I’ve said before, sales is a dirty word for most managed service providers. Don’t like doing it, don’t know how to do it, and think it’s beneath them.

If that’s the case for sales, then prospecting gets an even worse reaction from people. If you asked 90% of the people in our industry to sit down and cold call for the day, they would break out in hives. Even a huge percentage of “salespeople” don’t want to cold call. I put the”salespeople” in quotes because I don’t know how you could consider yourself a salesperson but not prospect.

I read a great article about prospecting today written by Colleen Francis of Engage Selling Solutions…you can see the article here.

It discusses what I consider to be some universal “truths” about prospecting, and is a good reminder for anyone of the importance of consistent prospecting.

MRC

I can hear it already:

“Yeah, no shit Mike, we’re all looking for sales aces.  If I find one, I’m keeping them to myself!”

Fair enough, but it doesn’t hurt to throw it out there!  You may know someone in Boston or Denver that is great but isn’t willing to relocate to your market or something along those lines.

If you know someone, we would appreciate the referral, as we are staffing up our sales teams in those markets.

If you refer someone and we hire them, I promise to make it worth your while.

MRC

I had an interesting conversation with a friend of mine in the industry recently - we were discussing sales and marketing strategy. It turns out that we have very different approaches.

His is to try to get fewer accounts, but to get bigger accounts that spend more money with him on average. He is working under the philosophy of growth by “selling more to your current customers”.

My approach on the other hand, is to try to get many smaller customers, each spending a less significant amount of money with us.

At first his strategy would seem to make more sense, but I would like to make the argument that it’s the wrong approach. Why? A few reasons:

1. Any time you have a larger percentage of your revenue coming from a smaller number of clients, your risks of a significant problem increase dramatically. If any one or two of your clients decides to leave, it can have a major financial impact.
2. I assume that most of the people reading this blog are selling to small businesses. If that’s the case, you need to be completely honest with yourself by acknowledging that your customers would rather not be spending their money with you. Nobody wants to pay for IT management and support services, they have to pay for it. Since that is the case, they will always try to get the lowest cost solution over time. Therefore, the bigger check they are cutting to you each month, the more likely they are to start analyzing those expenses and figuring out how they can cut them. It’s a funny paradox.
3. If you ever decide to sell your business, a smart purchaser is going to consider the above and lower your valuation. Think about it: if you were looking to buy a managed services business doing $5 million in sales per year that was made up of 10 clients each doing $500k per year versus a managed services business doing the same $5 million per year but made up of 100 clients each doing $50k per year, which would you consider a more risky purchase? In the first scenario, losing just one customer can completely wipe out your profits.

The net result of all of this? I believe that smart MSP’s will develop sales and marketing processes that allow them to affordably target thousands of small businesses as potential clients, not dozens. I’m not suggesting that it’s a bad thing to sign up larger clients, but I don’t think that should be the basis of your strategy, and I think you should do your best to not allow any one client to become more than 8% or so of your total revenues. I also completely support trying to sell what makes sense to your current clients to bump up their spend with you a bit over time, but again, I don’t think this is the foundation of a growth strategy.

Finding more clients is the foundation of a growth strategy!

MRC

A comment on a previous post asked me to recommend the business books that have had the most influence on Everon. I wouldn’t dare pretend to have all of the answers, but I think this list has served me and Everon well as we’ve tried to build our IT services business, and would be a good part of any entrepreneur’s library.

Here goes:

E-Myth Mastery: The Seven Essential Disciplines for Building a World Class Company - If you’ve ever been to one of my presentations, you know I’m a big fan of this one. Building a business that allows you to step out of the day-to-day requires processes, and this book teaches you how. On a side note, Arnie Bellini of Connectwise was kind enough to let me join him and others for a private lunch with Michael Gerber a few years ago when he spoke at Arnie’s Connectwise Summit - thanks Arnie!

The Great Game of Business - This is another one that should be taught in every business school but generally isn’t. It’s a great story and has fantastic lessons about how to engage your employees and run an “open” business.

Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Growing Firm - Another book that should be taught at every business school but generally isn’t. Verne “The Growth Guy” Harnish boils down the successful habits Rockefeller used to run his companies and teaches you how to apply the practices to your business.

Killer Customers: Tell the Good from the Bad–and Dominate Your Competitors - This was the first book I read that made it clear that not all customers are desirable customers, which can be a tough thing to swallow for a customer service-oriented entrepreneur. Most importantly, it explains how to tell the difference between good ones and bad ones.

Patrick Lencioni Library (Five Temptations of a CEO; Four Obsessions of an Extraordinary Executive; Five Dysfunctions of a Team; Death by Meeting) - Lencioni does a fantastic job of using simple short stories to teach important business lessons and then gives practical advice on how to implement what you just learned. These make for great quick reading assignments for your executive team!

Now, Discover Your Strengths - This is a fantastic book on finding and managing to your natural talents/strengths and those of the people that work for you. It gives you access to a highly regarded survey that determines your strengths - I was amazed at how accurate it seemed to be for everyone on our executive team.

Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the Best People, Revised and Updated Edition - This is the HR system that was famously put to use by Jack Welch at GE. It provides a clear way of evaluating talent and making organizational decisions that raise the overall level of talent at a company.

How to Read a Financial Report: Wringing Vital Signs Out of the Numbers (How to Read a Financial Report) - This book may look elementary, but don’t be fooled. It’s the best explanation of the major financial statements and how to use them that I’ve ever seen. I’ve used it to teach financial literacy at Everon with great success.

New Venture Creation: Entrepreneurship for the 21st Century with Online Learning Center access card - I think this is the best book on how to analyze a business opportunity and write a business plan; much better than any other business plan books I’ve read. This is a newer version than the one I have, but I think it’s pretty much the same.

Jack: Straight from the Gut - Jack Welch has been called the “Tiger Woods of business” by Warren Buffett. This book was written by Jack himself, and is full of lessons on how to manage people and companies.

And finally, one resource that isn’t a book but I think is some of the most fascinating business reading around is the annual reports of Berkshire Hathaway, the company that Warren Buffett runs. I’ve never read anyone that can take the most complicated business lessons and turn them into easy-to-understand language like Buffett can. His annual reports are the only I’ve ever found that are actually worth reading. Be sure to read his “Owner’s Manual” as well - great stuff!

Full disclosure - I’ve included Amazon Associates links to each of them so if you end up buying them Josh and I will make our first Internet sale! If you do, we promise to hang a “our first sale” dollar in a frame like you see in restaurants and post a picture of it on the blog.

MRC

In today’s newsletter from Raintoday (a great newsletter/site on sales and marketing strategy…worth signing up for), they had an article titled The One Service Every Consultant Should Offer.  Intriguing title, so I had to check it out.

The article is about the importance of offering paid assessments as a way of starting a relationship with a client.  I thought it was worth passing along, as I know many managed service providers still don’t offer these, or they do them for free.

I wish everyone in our industry understood that everything you do with a client sets the tone for the relationship and determines how they perceive your value.  If you give these services away for free, the client perceives you as someone who will do work without getting something in return - that’s a bad place to be in a business relationship!

I hope you find it useful.

MRC

I’m going to vent a little bit on this post - forgive me!

It seems that once a week someone on our team at Everon sends me a link to a managed service provider that is blatantly ripping off our website.  Depending on how big of a foul they are committing, I will often send a nasty-gram email asking them to have some courtesy and make changes to their site to make it original.

In some cases (I’m not going to call anyone out in public…at least not yet!), it’s pretty embarassing how flagrant they are in their stealing of our content.  We literally have had companies leave the Everon name and phone number on their site after they’ve copied our content!  A competitor that was recently pointed out to me is just down the road from us and has taken a ton of our content, as well as used our tagline.

They say that imitation is the highest form of flattery, so I try not to get too upset.  More importantly, the one thing that keeps me sleeping well at night is knowing this:

If you are copying our site to this degree, you will never have a competitive advantage over us!

Think about it.  If you are literally following another company that close, you can’t possibly win against them in the long term.  In order to win, you have to be original enough to stand out in the marketplace on your own merits.  I’m not saying that you should be referencing and learning from your competitors - you absolutely should be - but you shouldn’t copy their branding.

The biggest struggle of people in our industry is sales and marketing - copying our website is proof.  If you are in this position, recognize that you need to put a strong focus on developing your own sales and marketing skills so you can strengthen your business and your career.

MRC

Mike Schultz of Wellesley Hills Group, a leading provider of sales and marketing strategy services for professional services firms, provides some good advice on how to handle clients when price haggling occurs. Read his article here.

I’m surprised at how many salespeople don’t have at least 1/2 a dozen good responses ready to go automatically for when these situations occur. This is the difference between selling at high gross margins or selling at margins barely high enough to keep food on the table.

One of the best books on the subject is:

It gives great advice on everything surrounding the psychology of the price/value relationships and how to make sure your business is getting the highest margins for your product or service offerings.

MRC

A high utilization rate is one of the keys to success in this or any professional services business, and yet a recent study from the Technology Professional Services Association (TPSA) revealed that the average utilization rate is 65% or less!

Raintoday.com, one of my favorite resources for learning sales and marketing strategies, is work with GoToAssist to provide a complimentary webinar to provide tips on how to bring your utilization numbers up while delivering outstanding service.

We’ve used GoToAssist at Everon for years…we love it.

Check it out.  Increase your utilization.  Make more money.

Nice!

MRC

It is intuitive to understand that you will need sales engineers to support your sales team as they bring new prospects through the door – who else is going to answer the technical questions the client asks or give the demo of your cool NOC monitoring software. What is less intuitive is the fact that your support team will play an active role in the sales of services and products to your existing client base over time but they should not be compensated or motivated based on this role.

But wait a minute we are all in this managed service thing to make money! – Well yes, and I would be the first to argue that you should create profitable services and products or you should get into another business. The problem is that I see a lot of organizations that set their client management structures up in such a way that the group directly responsible for making sure the client is getting the most out of their service is also directly compensated and incentivized for selling specific products or solutions. Your reaction to this run on sentence is probably – Well yeah, that is how the industry has been doing it for years! Well, you are right but I would argue that to truly act in the best interest of your clients your team must be compensated on client satisfaction and retention over the long haul rather than the quick hit 30k project or product.

We have empowered our team to gain first position with clients by creating a system that lets them say things like “listen Mr. client, I have no vested interest in which solution, vendor, product, service, etc, you move forward with I am only recommending what I truly feel is best for your business based on the goals and initiatives we have been talking about”.

Now that is powerful thing to be able to say to a client and a sure fire way to earn a seat at their executive table.

JC

This post could just as easily have been titled Arnie Bellini of Connectwise is right: Most IT service providers SUCK at business!

I don’t mean to come across as a jerk, but it is so frustrating to find verified proof that our industry is constantly shooting itself in the foot with aggressive competitive discounting of service prices.

A just-released pricing benchmarking report from RainToday.com, a publisher of sales and marketing strategies for professional services firms, shows that of all of the professions they studied, IT service providers were:

1. Most likely to feel presssure to compete on prices due to aggressive pricing and tactics from competition
2. Most likely to feel pressure to compete on prices from prospects and clients (gee…I wonder why, given point #1 above!)
3. Most likely to discount, with the average discount being 11.7% of fees

11.7%?!  Most companies don’t even make a profit of 11.7%!

What’s the solution?  Start treating what you do as a profession of value, and not as a commoditized trade.  Start having confidence.  Take some courses in how to sell value instead of price.  Get some guts and work on some creative and firm responses to prospects that ask for discounts.

Whatever you do, get it through your head that if you continue discounting your prices, you are in the a race to the bottom of the field and an unprofitable business.

MRC