The Value of Peer Networking

Arlin Sorensen works amid acres of cornstalks in the rural hinterland of Harlan, Iowa. He's a farmer by trade, growing corn and soybeans and raising hogs and cattle--that is, until the early '90s, when he started subsidizing his agriculture business with a little technology-selling on the side.

Selling accounting software packages to fellow farmers began as a hobby for Sorensen. Over time, it grew into a real business, and it's come a long way since the days when tilling fields and tending livestock were his first priorities. Today, Heartland Technology Solutions is a $15 million business with eight offices in five states.

Sorensen built the business from an office attached to his traditional farmhouse. Over the years, he's grown the company faster than sweet corn under the August sun. He's merged with and acquired more than a half-dozen companies, and now sells everything from notebooks and servers to security solutions, networking gear, VoIP equipment and document-management software.

Building Heartland Technology into a viable business wasn't without its challenges and pitfalls. Sorensen learned many lessons and gained valuable experience along the way. Now he's sharing those experiences with a growing number of peers through the networking groups he founded to help shepherd other solution providers' businesses: the Heartland Technology Group (HTG).

The first group, founded in 2000, aims to help small solution providers network with one another. Today, HTG has three working groups with members across the United States and Canada who meet and communicate regularly to share best practices, business experiences and bright ideas. At the very least, HTG provides solution providers with an outlet and haven where they can compare the challenges and struggles of their peers.

"It makes a huge difference for a member to find out they're not the only person that has a certain problem," Sorensen says.

These groups go way beyond meeting up for an afternoon session and then heading out for a beer. The HTG members have serious homework to do, must report back to the groups and are "grilled" by other group members if they don't meet their intended goals each quarter. The topics for each meeting and ongoing communications between group members run the gamut of solution-provider best practices--structuring sales compensation, service metrics, mergers and acquisitions, marketing, insurance, human resources and legal matters--any one of which can keep a business owner up at night.

"It's forced me to think in ways I haven't thought before and challenged me to be accountable to my stated goals," says Jeff Wood, president of Tyler, Texas-based Wood Networks. "It's given me more confidence and insight into my own business, but it hasn't just helped me; it's made my people better, too, because I come back and share as much as I can with them."

NEXT: How HTG works, plus its rules of membership

HTG was inspired by Sorensen's experience with Ingram Micro's VentureTech Network, a consortium sponsored by the distributor to train small VARs. Sorensen genuinely liked what VentureTech was trying to do, but as it grew, he wanted more of the intimacy of the early days and the direct contact the networking provided. So he took it upon himself to cultivate his own peer-networking group.

"We started with four companies but eventually grew to 12," Sorensen says. "Twelve seems to be the magic number we can manage effectively and make valuable."

The groups meet four times a year, once each quarter, rotating locations. Each member must sign confidentiality agreements to stem any conflicts of interest and competitive issues. The company members also vary in size and focus, ranging from $250,000 businesses up through $50 million-plus companies. At each meeting, the members set three goals to work toward that quarter. Subsequent meetings begin with written and oral reports by the members on how they achieved those goals.

"They're so busy doing the day-to-day stuff that they often miss the good stuff they know they should do," Sorensen explains. "It's not rocket science; it's playground peer pressure. Once you stand in front of the group and have to explain why you didn't do what you said you were going to do, you execute."

He adds that the HTG selection process is very stringent; he has a waiting list of more than 40 companies that want in. Sorensen's main problem is scaling his efforts and putting together more groups. There are no fees for joining or participating in HTG other than travel expenses to the quarterly meetings. And Sorensen taps the help of his wife to manage the three current groups.

While vendors typically visit each two-day meeting to make presentations and possibly provide lunch, Sorensen says he hasn't pursued any type of financial support or sponsorships from them.

"We want to be independent and stay that way so we can talk about the things we need to talk about," he says.

Building Lasting Relationships

In addition to sharing best practices and business experiences, the groups' members are encouraged to deepen their vendor relationships and find new ones. For example, at one group meeting last January, Microsoft spent two hours explaining its partner program for 2006.

"Out of the 12 companies, eight moved up a level in their partner-program situation with Microsoft, and two added some competency they didn't previously have," Sorensen says.

And the e-mails fly like crows around crops each week among HTG members.

"On any given day, two to three topics are thrown out to the group that people need help with," Sorensen says. Anything from, 'I'm hiring a new salesperson' to 'I need 24-by-7 services' to 'How do I set up a package to bill SharePoint to the customer?' There are so many different topics."

Wood Networks' Wood found HTG to be instrumental in the growth of his business. He built his company organically through referrals. When business started taking off, he had to hire his first salesperson. For guidance, he turned to his HTG peers.

"I had so many questions; I didn't know how to structure a salesperson's compensation," Wood says. "So I went to the group, and it saves a lot of time to just go and ask what others have done and found to work."

Revealing such shortcomings is intimidating for most business owners, especially among peers. HTG fosters trust among its members, however, giving them the confidence and confidentiality to express their needs, confusion and inabilities so they can gain knowledge from their peers.

"We can have complete trust and share the really important 'trade secrets' because everyone is bound by the confidentiality agreement," Wood says.

Phil Kenealy, president of Cedar Falls, Iowa-based ACES, had a similar experience with his HTG peers. When he first joined, he was setting goals that were too "pie in the sky." But through his group meetings, he's learned to set more realistic goals that he can accomplish and be accountable for. For example, he figured out the percentage of his business he wanted to be recurring in his top-line revenue.

"I learned about managed services, and we're really on the bleeding edge of it because we were given the courage to pursue it after having the peer group to bounce ideas off," he explains. After setting that goal and hitting his recurring revenue number, Kenealy took it one step further and realizes all of his revenue as recurring.

While Kenealy's revenue for the past three years has been flat, it's on track to grow this year as he ramps up his managed-services business. He's also learned about employment practices, particularly salary-exempt vs. hourly-exempt workers and the best way to structure his employees. Kenealy has also benefited from learning to better leverage his vendor relationships. "We always considered vendors a necessary evil," he says. "But we've learned they are part of what we need to do to succeed, and they can benefit the company."

Collaboration and exchanging knowledge is HTG's first priority. But the groups do cooperate and collaborate in business as well. According to the HTG Web site, they engage in group purchasing from vendors and distributors, giving them more leverage in negotiating terms and pricing. And many members are working together on building deals and executing contracts.

"Obviously, they find out about competencies and strengths, and it's not the focal point, but it can be a natural outgrowth based on the relationships that are built in the groups," Sorensen says.

He adds that it's possible group meetings could expand beyond CEOs to include services managers or accountants so they can share their experiences, insight and best practices. As the waiting list continues to grow and more solution providers look for these types of networking groups, Sorensen hopes to dedicate more time and resources to sowing his HTGs.

NEXT: A different vision for networking for MSPs

Kent Erickson, president of San Diego-based Pointivity, has a different vision for networking with fellow managed-service-provider businesses. His venture, the ManageOne Group, brings together similar service providers across the country to beef up their offerings and better serve customers. The members are handpicked and must standardize their internal operations to scale and act on each other's behalf.

"I operate a large data center and have a platform for a total outsourced offering. Members of the group can tap into the data center and offer those services then," Erickson explains. "We have a member that's on the East Coast and is security-focused, which we don't have internally, so I can leverage his offerings."

The ManageOne Group currently has between eight and 10 members, but that could be expanded to 25 in the next year, Erickson says. "As long as we select good partners and each one is complementary to the others, there shouldn't be an issue of competition against each other."

The group's intention is not to make money off of each other. In certain cases, however, such as with the transfer of a large amount of intellectual property, the companies could potentially set up an agreement for payment of royalties on revenue generated, Erickson says. "The goal is not to treat each other as business clients, but real partners, or an extension."