Grow, Grow, Grow Your Boat ...

For the past several months, we have been talking about growth trends in the solution-provider community, highlighting the differences between VAR organizations that are stagnant and those that can be classified as high-performance. The topic arose out of an effort to identify the characteristics of high-performance VARs so solution providers could learn from their business strategies. It also helped struggling vendors who were focused on too few VARs. We examined differences between three VAR segments: lifestyle organizations that were in maintenance mode; moderate-growth VARs growing between 5 to 15 percent and fast-growth VARs growing more than 15 percent. Many of these fast-growth VARs are on the CRN Fast Growth 100 list along with the fastest-growing VARBusiness 500 firms.

ROBERT C. DEMARZO Can be reached via e-mail at rdemarzo@cmp.com.

Our growth study coincided with two other seismic shifts in the channel. The first is an explosion in the number of solution-provider organizations (from 90,000 in 1997 to some 240,000 today) fueled by professionals who jumped from being a vendor to start up a VAR business, or individuals lured by sheer opportunity. The second major shift in the channel centers on the arrival of a new generation of solution provider—the new kids on the block, if you will.

But our recently completed State of the Market study reveals new details. While it validates our prior findings that about one-third of the channel is focused on hypergrowth, it draws a direct link to those successful VARs and new customer acquisitions. Take a look at the new accounts you brought in last year. If you fell short of an 11 percent year-over-year increase, you're clearly underperforming. Half the VARs we surveyed grew their customer base by 24 percent, translating into some 24 million new accounts last year. You should also examine the number of customers you engage with, because we found the mean number of active end customers per VAR hit 181 last year, with VARs in the $1 million to $5 million revenue range touching some 250 customers. These findings confirm that the channel is healthy and, for the most part, focused on growth.

While growth-oriented VARs are focusing on getting new accounts, they're also doing a good job of retaining existing customers. Interestingly, VARs told us their existing customers made up a slightly larger percentage of their sales this year compared with last year—some 73 percent vs. some 67 percent last year. It's a significant, if subtle, shift. VARs were clearly gaining greater acceptance from existing accounts, but it was that very business that helped them open doors.

The top three ways VARs are growing boil down to these: First, through expanding new technologies they offer, second is through an increase in marketing activities, and the third is obvious—increasing the size of the salesforce. One VAR told me he spent months doubling the size of his salesforce, not by recruiting savvy veterans but by hiring aggressive, young college grads.

How are you growing your business? Robert C. DeMarzo (rdemarzo@cmp.com) is Vice President/Editorial Director of the CMP Channel magazines.