How To Grow Your Business

Getting a Bank Interested
Taking on debt, however, is less attractive for fast-growing VARs. Well down the list is borrowing money from the bank, with less than 20 percent saying they would use that method. Solution providers said that as they shift to a more services-oriented model, banks, which traditionally view hardware as loan collateral, sometimes think twice about financing services.

Acropolis Technology's Butler, however, says that his bank is now on board with his managed-services model. "Most banks are interested in, if you default, 'What can I come get?'" he says. "My managed-services tools aren't worth anything to them."

The ability to finance growth is crucial for VARs that intend to grow 15 percent more than the market. Those same VARs listed cash-flow problems as their No. 1 obstacle to growth, with almost 50 percent of the growth VARs surveyed citing cash-flow problems.

Butler, however, notes that banks are starting to come around when it comes to financing a services business. "You need to be fairly profitable first doing it the old way. Services are just the next iteration. Then if you talk about the recurring revenue [from managed services], that really gets the banker's interest. My advice to VARs going to get money, just show them a recurring model vs. 'Hey, I've got this contract with a block of hours on it, and when it expires they don't have to do anything.'"

Butler, too, figures his move to a managed-services model helps solve the problem of finding qualified technical employees. CMP Channel Research found that nearly 40 percent of the fastest-growing VARs consider finding new sales employees critical to the success of their businesses, while 44 percent cited adding new technical and consulting employees as a crucial factor in reaching growth goals.

"Typically, when we go in [with managed services], if a company has an IT department, that's the first department to get cut when there are budget crunches because it's not a profit center for the customer," Butler says. "The majority of the IT people then come to work for us and they say, 'Wow, this is great because I'm working for a company where IT makes a difference.'"