Tuesday, November 16, 2010

Mr. MSP, COS, what it is, why you should care and 5 steps to fix it.

COS, COS, COS (Cost of Sales)…..if I had a dime for every time I’ve heard COS in board meetings over the years. With that said, it’s 2010, soon to be 2011, and COS is where’s it’s at. I won’t get into my rant that the recession is not a recession, but a correction, and the 90’s sales world is never coming back. What I will stress is “He who manages a low COS wins the game” So what is COS? Ask 10 CEO’s (God forbid 10 VC’s) and I bet you get 10 different, but similar answers. Net-net: It’s your total cost of your sales and marketing efforts to bring in revenue.
So why should you care? No-brainer: If it’s too high you have a non-scalable business?
What can you do about it?
1. Hone the hell out of your value prop.
I’ll say this again “Your value prop is like an arrow. The sharper (eg more compelling) your vale prop is, the further it will go and the deeper it will penetrate into your customers”. Your value prop must = business value! The more compelling your value prop is, the shorter your sales cycle, the higher your sales process conversion rates and the lower your COS. If you don’t have a compelling business-value, value prop, go no further.
2. Focus on CTM (Customers-that-Matter).
CTM are your target markets. Focus on three target markets and dominate. I don’t care who they are just draw a direct line between your value prop and the needs of your CTM. Driving in a straight line is much more efficient. Your CTM all think they all have vastly different requirements. Tell them you agree and you can meet those requirements, but at the end of the day, they’re not all that different, so you have economies of scale on your side.
3. Create a smooth sales process.
You’re driving from Boston to San Francisco and you want to get there as quickly, as predictably, and as efficiently as possible. You’re probably going to drive a high MPG car, one that’s dependable, one with a GPS and don’t stop at tourist traps. Your sales process is the same. Use efficient and dependable resources (properly compensated and motivated people) take it step by step, measure the success of each step, don’t let the customer veer you off in the wrong direction (you should lead the sales process), don’t you go astray and always add value along the way.
4. Smart comp plans.
Comp plans must be designed to drive behavior and reward for success. Comp plans also, obviously, must match your business model. First, never, ever let a slick sales guy talk you into a. high base salary b. a draw on commission.  These will kill your COS. Comp plans should be 50/50 (base salary/commission), tiered quotas and percentages (make smaller percentages lower in the quota and higher percentages higher up the quota scale), pay overachievement bonuses (preferably quarterly) and pay out commission as revenue comes in the door.
5. Measure everything (like science).
Sales is not an art! Get that out of your head! Executed properly you’ll realize that sales is as much as a science as writing code.  Measure the quantity and quality (yes quality can be measured) of every aspect of your sales and marketing: lead gen program success, leads converting to appointments, appointments, appointments converted to the opportunity pipeline, pipeline, opportunities maturing through the pipeline, pipeline conversion rates, POC conversion rates, ASPs, close rates etc……………… The more efficient you get (yes you can do this) the lower your COS (and higher your profitability).  No, you do not need an elaborate CRM yet, get this done first then worry about automation.

Friday, November 12, 2010

The cloud is here: the 5 steps you need to do to survive and thrive.

The cloud is coming, the cloud is coming!!! Well guess what, if it’s not here now, it’s damn close. And if you think you can avoid it or beat it you’re dead wrong. As they say, if you can’t beat ‘em join ‘em. So what can you do?
1. Accept it. The 90’s economy is gone. No we aren’t in a recession, we’re in a correction, and the cloud is a perfect example of that. Technology has become dramatically less expensive, the internet works flawlessly, and hot stuff - productivity enhancing technology that was only enjoyed by the F500 -  is now utilized by the SMB. And, it’s going to be delivered by the cloud. It all started with VARs becoming MSPs providing network management and services remotely, now it’s the technology delivered remotely. No-brainer.
2. Look in the mirror. What do you see? First, please don’t sell yourself short. Don’t tell yourself you are simply a VAR providing technology to the SMB or you’re an MSP providing technical Remote Performance Management. As critically important as these “technologies” are to your customer, you do more than that. You are the trusted advisor to your customers helping their business stay afloat and thrive. You have expertise they don’t have, but need, and you do have. It’s that simple. Translating your IP (Intellectual Property) to their business needs is the key. So what is your organization’s true, true value, your true core competency, the “something” that you provide your customers no one else can do as well as you can. In the cloud world you’ll need to learn how to compete like never before, sell and market like never before, deliver value like never before and exceed customers expectations like never before. To do all that need you to learn your organizations strengths and weaknesses like never before and capitalize on those strengths; turn those weaknesses into more strengths. It all starts in the mirror.
3. Adjust your business model. You will never see a more business model changing event in your life (than what?). Big ticket items, perpetual licenses, 18% maintenance, etc., poof! --“eventually” they all go away. Your new business model will be recurring revenue based and you’ll need to morph/adjust virtually every aspect of your business, from your cost structure, to your sales and marketing model including your COS (cost of sales), to your staff, and your accounting practices etc. But, it’s not a light switch, this must all be done in a dimmer switch approach.
4. Protect your customers. At all cost, protect your customers! If you’re a VAR with no or limited recurring revenue managed services, get into the MSP game ASAP, and start signing up your installed base to some form of multi-year managed services.
If you are an MSP, load up every customer with any and all managed services that are available. As soon as your competitor comes in and signs up one of your customers with even minimal managed services, their foot print can spread like wildfire and next thing you know, you’re out!
5. Transform your sales and marketing from an art to a science. The 90’s was nice wasn’t it? Back then you could be completely sales and marketing illiterate and still blow the cover off revenue ball. Now? Well that’s a different story. You need to create a very low COS sales and marketing machine, starting with a tip-of-the-arrow value prop that keeps your COS low, pricing and packing that promotes value, target your scarce resources on selected target markets you know extremely well, a sales and marketing team whose middle name is “accountability”, create a lead generation process that drives a quantity of high quality leads, and a self-qualifying sales process managed by simple MTM (Metrics-that-Matter) and RTM (Reports-that-Matter).