How Fast Does Your Business Grow?

For solution providers looking to shift into hypergrowth mode, there is a well-defined formula for success, according to CMP Channel Group's Business Growth 2007 survey.

CRAIG ZARLEY Can be reached via e-mail at czarley@cmp.com.

CMP Channel surveyed 286 solution providers on their growth expectations and strategies for 2007. Nearly 12 percent of the solution providers surveyed said they expect growth rates of 30 percent or more above the market in 2007 while an additional 22 percent said they plan to grow 15 percent to 29 percent faster than the market this year.

What the survey found was that there is a methodology behind those ambitious growth plans. These solution providers intend to aggressively market themselves, go after new markets, and add new vendors in the next three to five years.

10 PATHS TO SUCCESS 1 Finding new business. 2 Customer service. 3 Keeping up with changing technologies 4 Marketing Your business. 5 Managing cash flow. 6 Finding technical and consulting employees. 7 Technical training. 8 Finding sales employees. 9 Measurable, actionable clear objectives and goals. 10 Overal financial management. 3 PLANS TO IMPLEMENT FOR GROWTH 1 Growing market image and presence. 2 Building customer loyalty. 3 Reviewing and enhancing sales techniques 5 OBSTACLES TO GROWTH 1 Cash-flow problems. 2 Resource conflict. 3 Too many projects 4 Narrow product line focus. 5 Unclear product strategy. Source: CMP Channel 2007 Business Growth Survey

Among those expecting hypergrowth of 30 percent or more, about 68 percent listed marketing their business as critical. That contrasts with those that expect no more than 5 percent growth in 2007, in which only 36 percent listed marketing as a top priority.

Slightly more than 37 percent of all solution providers surveyed said they plan to target new markets over the next three to five years. But for those planning to outgrow the market by more than 30 percent, that number jumps to 55 percent. And 58 percent of the solution providers planning to grow 15 percent to 29 percent faster than the market said adding new vendors was a top priority. For solution providers forecasting growth of 5 percent or less, the figure plummets to 7 percent.

But vendors looking to hitch a ride with fast-growing solution providers should take note: Solutions, not point products, are the real growth drivers. Don Richie, CEO of Sequel Data Systems, an Austin, Texas, solution provider with plans to grow his business in excess of 25 percent in 2007, isn't adding hardware vendors, but instead is focusing on solution software vendors. He recently added SAP, for example, and is doing several million dollars in VMware applications this year after only dabbling with virtualization in the past.

On the whole, more than 58 percent of hypergrowth VARs said they expect to expand their product lines in the next three to five years. That figure drops precipitously among solution providers with less-ambitious growth plans. Some 44 percent of the solution providers looking to grow their business by 15 percent to 29 percent this year said expanding product lines was key to future growth, while less than 5 percent of those looking for growth of 5 percent or less above the market said they plan to partner with new vendors in the next three to five years.

Expanding their footprint is also a critical factor in growth, the research found. More than 40 percent of the fastest-growing VARs said they plan to expand regionally, while slightly more than 39 percent said they plan to expand nationally in the next three to five years.What's more, a significant number of the fastest-growing solution providers are eyeing global markets. About 21 percent of the hypergrowth VARs said expanding internationally is on their radar screens in the near future.

But fast growth is not worry free. Allocating the resources necessary to accommodate explosive growth was cited as the top problem among fast-growth solution providers.

Robert Faletra's column will return with the next issue of CRN. E-mail him at rfaletra@cmp.com