Archives For profit

David Stelzl Presents with Aegify – Risk & Compliance Solutions / MSSP

In case you missed it – yesterday Aegify sponsored a one hour workshop for resellers…as the managed services market continues to commoditize, it is more important than ever to be building more security into your managed offerings.  The MSSP is a critical step in providing your clients with the security they need…it’s also going to be essential to your long term profitability.

If you have not yet read The House & The Cloud, you can get it free by joining the SVLC Insider’s Circle – Read more here:  (CLICK).

Also consider going through the Security Sales Mastery Program referenced in the video above…read more here (CLICK).

© David Stelzl, 2015

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Doorway to Profit

March 19, 2012 — Leave a comment

Tomorrow’s webinar is fast approaching.  If you didn’t see my announcement a few weeks ago, I am covering the topic of accelerating managed services sales (click the link to be added to the the waiting list) – this webinar filled up in just two days…why?  I believe it is because company owners are seeing the need to build more recurring revenue as margins continue to shrink.  A little over a decade ago your company (speaking to VARs here) was worth a fortune if you had anything going on. Just before 2000, VARs were being acquired for multiples of revenue!  Looking around, it seems like M&A activity is on the  rise again for the first time in 10 years.  However, if you don’t have recurring contracts in place, don’t expect to get much.  Recurring revenue is the key to financial stability and strong valuation.  As an aside, debt does exactly the opposite.

© 2012, David Stelzl

Today was my second day teaching at Verity College in Indianapolis – working with college students who have not really experienced the pressure of the business world provides some fresh perspective.  Today we covered material from my latest book and workshop, in a session I call, Secrets of High Priced Consultants.  Over dinner I had the opportunity to meet with two young men, both interested in building businesses and looking for counsel on how to get things started. One question that came up deserves some additional response – “Where do you see companies really getting into financial trouble?”

The other day I wrote about selling unprofitable business.  Let me expand on this some, as it applies both to the company and the sales person…

1. Numbers are down, because profits are weak or perhaps sales are low due to competitive pressures – in other words, there are opportunities, but in order to win them, you find yourself cutting the prices.  In my From Vendor to Adviser book I show how a 20% cut in price leads to a 40% cut in gross profit (at least when we are talking about services with a standard burden cost).

2. Profits are down which demands more sales, but the profit problem is still there, and with all of the competitive pressure, and need for fast sales, more pressure leads to more discounting, less contract signing, and more deals on a hand shake.

3. Revenue numbers increase when this happens (assuming steep discounts lead to more sales) – and if you are selling managed services, the compensation is likely based on revenue, since there is no gross profit measurement to be had.  Often these deals are compensated with 1 to 3 months revenue paid out to the rep up front.  The rep is happy, the business will soon be dying.   As pressure mounts to keep this contact profitable, the customers are sure to pay with poor services, often resulting in early contract termination.  You can try to sue, but this rarely works in your favor – in fact, forget I mentioned it.

4. Competition is bound to come in at this point, sweeping up the pieces and promising to make things right.  Whether they do or don’t make good on their promises, chances are you will not get this customer back.

Fix the profit situation first…more contracts don’t equal more profit.  Bigger companies don’t mean bigger money.  Fine tune the profit machine, then work on the sales end.  Once you know your product offering or managed service model works, then you can press forward with a strong sales & marketing program.

© 2012, David Stelzl

I’m just leaving Dallas this afternoon after a great meeting with over  2000  home school parents and young people.  This morning I presented ideas to help people develop entrepreneurial thinking and leadership – to be less risk averse and more innovative.  A few points are worth noting here:

  • Most of our schooling prepared us for corporate America, not high risk/ high reward positions like sales and small business entrepreneurship.  Think about it – when was the last time you received high grades for being creative?  Most of my instructors requested the work be done a certain way…where is innovation in all of this.  Imagine if the teachers told us computers had to stay in data centers.  Where would iPads and Smartphones be?
  • Creativity is the key to success. Coming up with new ways to do things and solving problems no one else can solve.  What are you doing to build creativity.  I listed several things that are known destroyers of creativity…Late night television and not enough sleep are low hanging fruit, but there are many things all of do that simply keep us from thinking outside of the box.
  • Wanting the safety of high bases and lower commissions is another lie – no position is safe, and those who aim to be high producers, and work at it, will be.  Be great and take the higher leveraged pay plan.

I also spoke to young people on starting businesses in the afternoon.  It’s easy to start one, hard to keep one.  One factor is learning the four things buyers buy – learning to discover critical needs within the companies you serve and then developing lasting answers for these companies.  If you can make a company more profitable, you’ll have customers.  Become a problem solver and stop selling commodity products at commodity discounts.  We explored areas of need, examples of young people producing, selling, and profiting in their teen years, and talked about the need to learn while you’re young.  Learning the hard lessons of business while supporting a family is not the best way…most of us know that.  Imagine if your kids could know what you know about business before they hit age 18?

© 2011, David Stelzl

The Ipad – Here are some sound bites: (Source: Wall Street Journal)

1 year old

90% market share

14.8 million devices sold

9.5 Billion in revenue in one year!

200 Million Apple Accounts world wide

And a new version out this month while the competition is still scrambling to compete with the first  release.

Innovation is key.  At the 2011 RSA conference, one of the most interesting presentations came from the founder of Palo Alto, Nir Zuk.  He talked about innovation, and repeatedly asked his audience who was using what – brands of cell phones, operating systems, etc.  Through this interaction he showed that many of the technology leaders just aren’t innovating any more, and people are moving to new technology – following the innovators.  These companies that lack innovation stand to lose significant market share if they continue.  This is a wake up call…not just to those with an iPad look-a-like, but for Microsoft and anyone else with significant market share.  Companies that are innovating will win over time.  The problem is, many of these new innovations compete with the margins resellers have depended on!

Example:  How many resellers are still selling PCs to make a profit.  Perhaps yours doesn’t, but there are thousands of SMB focused resellers still in this game.  Will they start selling iPads?  Well, maybe, but that is not very strategic.  A $500 device, already set up with an operating system that doesn’t require a daily reboot to recover from the blue-screen isn’t going to make up for the loss.  And with other technologies commoditizing and companies like Google putting free tools online (Have you tried Google Apps?), the market is bound to change – expect resellers to be out of business within a year if they are waiting on the economy to pick up, hoping to be placed back into the business they drove two years ago.

Innovation for Apple means, new cool looking products that appeal to the new mobile generation.  But to the reseller and high-tech sales person, it means finding new ways to help clients innovate, automate, secure, and become efficient.  It means finding new areas to help companies with technology that puts them ahead of their competition and cuts cost out of their current IT program.  And it means helping them secure what they have before they lose everything.

© 2011, David Stelzl

Photo by Hannah Stelzl

I am focused on entrepreneurship!  When my wife and I first started homeschooling our children we caught the vision for a different kind of education.  One that would build the not-so-academic side of those we are raising, but still equip them with the essential reading, writing, and arithmetic skills needed to succeed.

My schooling history has made me more risk adverse than I’d like.  It’s taken me twenty-five years to unlearn the principles of:

– Mastering the No. 2 Pencil

– Only submitting what was asked for

– Never thinking outside the box – putting away all creativity

– Thinking that wisdom is somehow related to memorizing a certain number of biology terms

(and the list goes on)…

Photo by Hannah Stelzl

With this in mind, my kids are working on businesses – all the time, thinking about how to create new opportunities, serving the basic needs of those around us, establishing value, setting fees, and selling.   This year marks another year of Sarah’s annual Valentine’s Day Cookie bake.  This year she sold over 200 cookies by cold calling with a compelling message.  Some even gave additional money or donated without accepting cookies!  Of course she had help from Tiny-Tim who enjoys cooking (and perhaps even more, eating the left overs.)

Through this project we’ve studied how to discover a new opportunity, how to avoid working at McDonalds for mininum wage, how to sell to strangers (cold calling), how to develop a message that sells,…but also, how to count the cost of goods sold (COGS), the difference between sales, gross profit, net profit, and losses due to wrong or canceled orders.  Fortunately we have not had to deal with customer service issues on this particular project, but we’ve covered that in other projects, and hope to minimize this in the future.

Photo by Hannah Stelzl

What are you doing today to extend beyond what you learned in school – to think creatively, and to find business opportunities where there don’t seem to be any?

 

© 2011, David Stelzl

Photo by Hannah Stelzl

I returned from DC last night, having spent the day with a solution provider in the software space.  One thing  that stands out and is worth repeating here is the discovery of a profit multiplier.  According to Jim Collins, every company should have an economic engine, and most resellers can put more on the bottom line if they figure out what the multiplier are and where profits are leaking out.  The comment that triggered our direction should be understood by all resellers, “Thinking your sales  team will double sales this year simply by working harder is tempting by unrealistic.”  I would add, that setting strong financial goals and then hoping to acheive them without a significant change to the way you do business is foolish thinking.

Once identified, we were able to come up with twenty ways to stop the leak.  Not all 20 will prove to be do-able or realistic short term fixes, but 4 or 5 of them stood out clearly as ways to multiply bottom line profits over the next several months.

Isn’t it worth taking some time out of the field to study the business model, identify the levers that multiply the business, and formulate a strategy to get them in motion?  This is what it means to work on the business rather than always working in the business.

© 2011, David Stelzl