Pay Yourself First


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More than a few solution provider owners have gone out of business over the years because the one person they forgot to pay was themselves.

A big problem for solution provider owners is the cost of keeping consultants and salespeople in the field.
Often, there is very little left over to keep the business profitable enough to make all that time away from home worthwhile for the owner (see Salary Survey online).

MICHAEL VIZARD
Can be reached at (516) 562-7477 or via e-mail at mvizard@cmp.com.

One channel chief who is probably the most focused on this issue, as it relates to making sure that his company has a vibrant and profitable channel, is Taylor MacDonald, senior vice president for business partners at Best Software. One of the rare channel chiefs who is actually a former VAR, MacDonald has put his experience and money where his mouth is by creating the Best Leadership Academy to teach VARs how to run their businesses better and by investing $1 million to specifically help VARs hire salespeople.

Many owners don't focus enough on consultant utilization, especially the time that consultants spend working vs. what their actual billable hours produce in revenue for the business. MacDonald notes that consultants who bill fewer than 1,200 hours probably cost a business more than they are worth. For that reason, many VARs are better off with contracts based on a flat rate and an identifiable profit goal.

Moreover, most owners have done little to identify which customers are most profitable and, conversely, which 10 percent to 20 percent of their customer base is actually costing them money to service. Another 50 percent of their customer base is typically an underutilized asset because the solution provider has failed to create a deep enough relationship to drive additional business.

VARs need to have the fortitude to dump customers that provide little or no value to their business in favor of concentrating on truly profitable relationships.

MacDonald said VARs must have a real owner-compensation plan; focused marketing to grow additional profitable business after dumping unprofitable customers; and designated customer account managers who can evaluate business relationships on an ongoing basis. Beyond all that, they must have the will to say "no" when appropriate.

Are you learning when to say no? I can be reached at (516) 562-7477 or via e-mail at mvizard@cmp.com.

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