How To Grow Your Business

Bruce Geier, president and CEO of Technology Integration Group (TIG), a San Diego-based solution provider with 2006 annual sales of $282 million, notes that while hardware sales are still a large part of his business, it's imperative for VARs to focus on services as a way to drive product sales. "We have to build a compelling reason for customers to want to buy products from us, and the way we do that is by improving the services we can bring to them," he says. "One service that everyone should be in if they're not already is virtualization. Virtualization is huge today and VMware pretty much leads that charge."

Geier also notes that clustering of servers, security solutions beyond the firewall, VoIP and unified communications are all big business drivers for TIG this year as the company passes the $300 million mark in annual revenue.

TIG is in the process of expanding internationally, a new market focus that 21 percent of the hypergrowth VARs surveyed by the CMP Channel said they would pursue over the next three to five years. This year, TIG acquired a German solution provider to help serve U.S. military bases in Europe and it's also contemplating a move into China in partnership with a vendor that Geier didn't identify.

"You have to partner when you go international; you'd be insane to go in cold turkey," he said.

Close to 44 percent of VARs that plan to grow their businesses at least 15 percent faster than the market in 2007 said managing vendor relationships is critical to their businesses' ability to succeed.

Sequel Data's Richie agrees. Sequel added two full-time people dedicated to reselling Hewlett-Packard services this year with financing help from HP. Last year, Richie says he sold about $250,000 in HP services, but this year he expects to sell close to $2.5 million.

And Brian Deeley, manager of Graymar Business Solutions, a Timonium, Md.-based solution provider, says his strong vendor relationships should boost his growth from low double digits in 2007 to triple digits in 2008. That's because Graymar, with 2006 annual revenue of about $4.25 million, found out in August that it won the State of Maryland IT hardware contract.

"The vendor and distributor relationships are what's going to make the contract winners either succeed or fail," he says. "I truly believe our strong relationships with our vendor partners are what made us win the contract."

To win the contract, Deeley forged partnerships with 45 different vendors, including Cisco, HP, IBM, Juniper, Lenovo, Ricoh and Xerox, among others. In addition, Graymar helped vendors such as SMC Networks, Irvine, Calif., and St. Bernard Software, a security software specialist in San Diego, win slots on the state contract line card.

"Adding second-tier and specialty vendors will help set us apart from some of the other contract award winners," Deeley says. "There are vendors on the security and appliance side of the business that we have had relationships with for a number of years that other VARs tend to pass up. A lot of the other bidders never went to these manufacturers and said, 'Hey, here's an opportunity for us, a solution provider, to win the bid and get your product line on the state contract.'"

But VARs noted that vendor relationships can both help and hinder growth. Richie, for one, says that vendors have gone overboard in compliance audits for MDF and certification requirements. "I am audited by HP virtually every quarter," he said. "I'm now spending more time on audits and managing the vendor relationship than I am in the field trying to grow the business."

Financing growth is also a priority issue among growing VARs. While this select group of VARs has aggressive growth plans, their methods of financing that growth are decidedly down to earth. Virtually all of the growing VARs said they will seek money from multiple sources. But the No. 1 source of funding chosen by 51 percent of these hypergrowth VARs is financing expansion through cash flow, while 48 percent of the VARs with plans to grow in excess of 15 percent said they would opt for self-funding, compared to all VARs, who said self-financing was their top choice at 50.3 percent (see "Financing Options," left). Mentioned as the third most popular option among this group of VARs was financing through business profits, with about 44 percent of the solution providers opting for that route.

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