Making Money From IT Providers

Before I get out of here for my summer vacation I’ve spent quite a bit of time on the phone with my partners and we’re chatting about the usual stuff that’s required for growth. If you’d like to chat please call me – if you’re waiting for me to call that’s a 5 figure queue and my schedule gets set by demand… unless you’ve got something fun going on then I’m there.

Making money from IT Solution Providers

I should first offer a disclaimer that the word VAR is a four letter word in my business. So for the purposes of this discussion (and our business model in general) the following doesn’t include businesses that aren’t first and foremost about service.

There are four successful business models for making money off SPs:

1. Overpriced, high touch, we-do-it-all solution.

2. Free solution that sells something else on the side.

3. Reasonably priced but widely distributed thing everyone buys.

If you are considering going into a business that provides any sort of a solution to the SP base you need to pick a horse and stick with it. Here are brief descriptions:

Overpriced, high touch, we-do-it-all solution. This works if your solution requires quite a bit of skill to put together and maintain. Here you’re actually providing more of a service and consulting/implementation than an actual product. Think of it like Mark Zuck – “If they were going to build Facebook, they would have built Facebook” – if your solution was both easy and simple most companies that have a lot of money would have already built it – so good luck trying to sell them something if they already have middleware in place. Ditto on the low end, they want it but can’t afford it and you’re not going to make money by selling things at a loss.

Free solution that sells something else on the side. If you don’t have a large sales force and a support team then you likely also have a weak marketing budget – good luck getting in front of the client and harassing them into buying your stuff. But if they are already using some of your stuff it’s infinitely easier to get them to pay a little for some other stuff. And eventually they’ll end up in the product #1 where they are actually paying a lot for something very personalized and custom. Yes, Shockey Monkey.

Reasonably priced but widely distributed thing everyone buys. Think things like antivirus and backup software – expensive to develop, expensive to support, difficult to build out, requires track record and increasingly higher costs as audits and certifications are required for even the most elementary stuff.

Game Plan

Pick one and stick with it. As every failed IT business will tell you, once you give into the temptation of a “big client” that soon becomes a major part of your revenue and then bends your profit margins over.. it’s far less risky to get a ton of clients that contribute a little than to kill yourself over that “whale” client. But that requires hard work and vision and strategy and…

Service business is about relationships. But what do relationships look like when you’re likely never going to meet most of your clients in person? The key is availability and responsibility. I wish I had a dollar for every time an existing client has told me that I come off like a total dick on my blog and Facebook. No shit, why do you think you’re reading this horseshit in the first place? When you’re actually working with us things are obviously quite a bit different – and the persona that you will play on the Internet to people that will never see you better make it seem like they can approach you and rip you a new one when you fail. Your clients need to know that they can come to you at any time, for any reason and that someone will take care of them.

Long term strategy. Some stuff will work and some stuff will not, that’s the nature of business. But working with solution providers isn’t like working a transactional retail cash business – solution providers will see you as a part of their business. When you do good, they don’t notice. When you mess up, you make them look bad. It’s the instant Office Space moment where you get to be kicked by their client, their clients rep, their low end IT guy that took abuse on the ticket and likely the manager/owner that now has to apologize for you. So if you don’t have the mindset of “I will not fuck up” then this is a non-starter. When you sell them something don’t ever expect them to cancel. Communicate as such, lead up as such, explain as such.

Beware of hobbyists. This is the most important thing and most valuable piece of advice I can give you: Money talks. If your client comes to you with more problems, questions, inquiries and requests they are likely very diligent and thoughtful people. And in my experience, they don’t have a lot of clients that will make this a good business venture for you both because they spend more time tinkering than selling and managing. Unfortunately for me, I was that fucker that spend most time trying to make things perfect early in my career and I advise you to avoid that type of a person like a plague. Ditto for coaches (I still get daily emails and calls from one expert after another promising to bring me business if I hire them on to help my clients with business, newsletters, web sites, sales strategies, marketing, cold calling, etc), ditto for prominent personalities that you can’t pinpoint a revenue stream (professional conference attendees, vendor shills), people you can’t reach on the phone (if you can’t get to them how do their clients?), professional networkers and dealers (we can connect you with a person that can connect you with 5,000 leads) and other common sense scum of every business line.

Finally

If you build it… they will come. But will they come in an adequate volume to make you profitable? Remember that folks that have a lot of money to spend may already have some sort of a solution in place and those less fortunate probably don’t have the time, resources or willingness to put the solution in so you’ll have to do it for them. Whatever you do, be nimble and test multiple models until you start building up a base from which you can hire, replicate and grow your enterprise.