How Do You Measure Up?

Seventy-five percent of the time logged by BIC solution provider employees was classified as billable hours. Among the industry-average VARs, approximately 58 percent of the hours logged by employees was considered billable.

The BIC group also invested heavily in keeping their employees highly trained. BIC VARs averaged 9.2 days per quarter in training for each technical engineer and 6 days per quarter for technical sales people vs. 7.6 days and 4.7 days, respectively, for the average VAR.

BIC solution providers spent more on marketing, training and infrastructure than did the average solution provider. "Success in business is not free; you have to put money on the table to get invited to the game," Morris said.

Not only did BIC solution providers spend substantially more on marketing than the industry average -- 11 percent for BICs vs. 7 percent for the average solution provider -- but they also spent it more effectively.

Of the marketing development funds received from vendors, BIC solution providers spend 15 percent more on actual marketing activities such as demand generation than the average solution provider. While both BIC and the average solution provider spent MDF in virtually equal percentages on demo equipment, personnel, training and certification, and research, the way MDF dollars were spent on premiums was markedly different between the two groups.

Don't expect to get a pen or a T-shirt from a BIC solution provider: They spent only 4 percent of their MDF on trinkets, while the average solution provider spent two and a half times that, or 10 percent, of their MDF on premiums.

BIC VARs, too, didn't leave as much money on the table as other solution providers. BIC left 12.9 percent of MDF unclaimed, while the average solution provider left 15.4 percent of his or her MDF allocation on the table.

Solution providers who attended a presentation on the IPED study at CMP's recent XChange Solution Provider in San Diego said some of the results were surprising.

"It makes sense to me, but I've never really thought about how much gets reinvested back into the business," said Tracy Butler, president of Acropolis Technology Group, a Wood River, Ill.-based solution provider. "When I came back and sat down and looked [at my business] I learned that we really do spend quite a bit of money reinvesting in new technologies. When we look at what we have going on in the areas of virtualization, we are talking about spending $30,000 to $40,000 in the base virtualization equipment we need before we sign up a client. It's something we have to get ready for to handle the next generation of managed services."

Butler, too, said he is trying to follow the lead of BIC solution providers in improving his cash flow by reducing his days outstanding receivables. "The last year and a half we have been running 15 to 20 days, and we look at that quarterly," he said.

Butler said the old ways of customer billing aren't sustainable in today's market and can be a drain on solution provider profitability. "The way we used to do it was get the P.O., do the work, then bill the customer, and wait 30 days beyond that," he said. "From the time you placed the order until the time you got paid could be 60, 90 even 120 days for a decent-size project."

So, Butler has taken pains in recent months to get paid up front on projects he undertakes—establishing some best-in-class practices of his own.

His policy is to pre-bill 75 percent of the total project or the hardware cost, whichever is greater. As a result, his company has seen a dramatic improvement in cash flow.

"We pre-bill a lot of our projects," Butler said. "We try to get our clients to pre-pay if not the whole thing at least a good portion of the deal up front. That will make the days sales outstanding really go down, which leads to better cash flow. We just tell customers that hardware is really expensive and we are going to be on the hook for it. Last quarter, we were down to 5.4 days because we really pre-billed a lot."

Results like those give even BIC solution providers a run for their money and are just one example of why no VAR, even those at the top of their game, can afford to daydream for long.