Growth Takes Many Forms

Considering it's September and your financial planning for 2007 should be well under way, we thought it would be a good time to explore the issue of how to grow your business along with the obstacles many VARs face in growing or maintaining their businesses. Certainly, growth is a complicated and multifaceted challenge for many of today's VARs, spanning such choices as financing technique, technology focus and personal lifestyle—do you want aggressive or managed growth?

If you were to boil down the recent research CMP Channel has conducted in this area, you would find a rather mixed bag. Hypergrowth VARs are focused on growing their businesses in excess of 25 percent to 30 percent a year. These VARs are hard-charging entrepreneurs who thrive on 12-hour days, deal-making and high-powered salesmanship. Another group of solution providers finds themselves somewhere in the middle. We'll call them the middle class. Their growth is somewhat more moderate with a wide range of factors related to the age of their businesses or the constraints of cash flow, but they are, nonetheless, a critical part of the solution-provider ecosystem. And while it's difficult to break the market down into just three pieces, there's a third segment we've identified as companies that are in maintenance mode. They're not necessarily focused on growth, yet they operate viable businesses. These organizations could be changing business models, or focused on a tertiary market that doesn't provide the kind of opportunity that, say, a major metropolitan market would. And let's face it, some solution providers may not want to grow their organizations but, rather, focus on servicing customers with a high level of satisfaction.

You can debate this issue until your business plan for 2010 is due, but what we provide in this issue is a blueprint for growing your business, along with the ways in which your fellow VARs are growing theirs. What we found is that VARs, like nearly any other business in the United States, move between growth phases based on their goals, local economic conditions, their vendors and, of course, their customer focuses.

Let me tell you this up front: There's no right or wrong way to grow. Whatever path you pursue should be custom-tailored to your business and ambitions. But you have to consider the ramifications of a business that's stuck in slow-growth mode. Will it be able to attract new vendor partners that could help it grow, even modestly, and just how attractive is a company to prospective employees if it's not growing? Talented workers will flee if they sense the company is merely meandering or if the ownership is just milking them. But let's not be nave here. To grow requires capital, which has to come from somewhere. Despite the stock market's recent cooldown, there's plenty of private-equity money available for the solution provider with a good business plan.

One of the things you need to consider is the affect your growth has on the vendor community. Publicly held IT vendors need to deliver top-line and profit growth, so they need a mix of companies that are in growth mode and those that are maintaining their businesses. Certainly, vendors will spend more time and effort with VARs who are growing rapidly but they need a well-rounded portfolio.

So, where does this leave you? Well, for starters you have to take a long, hard look at your business. Do you have the right personnel or the financial wherewithal to drive revenue? Next, you have to map out the technologies or products that can help you grow and how to go about adding them to your business. Acquiring or merging with another solution provider might open up new opportunities. We're witnessing a great deal of this activity, particularly among the VARBusiness 500.

More than anything, our growth feature is designed to get you focused on the issue of growth, which is difficult to do. One VAR recently told me that he was so focused on growing that he was actually looking outside of technology. Contact me and tell me about your growth plans.

Robert C. DeMarzo (a href="mailto:[email protected]">[email protected]) is vice president/publisher of VARBusiness and GovernmentVAR magazines