Though many in business have resisted uttering the dreaded “recession” word, there is no disputing the general direction the economy has been heading—down. And with that decline comes apprehension for many small and medium-size solution provider businesses, particularly those with tenuous cash flow that might need access to credit. Yet some argue tight times might actually favor the solution provider community because of the natural advantages of temporary projects and outsourced budgets. And they’d be correct in many cases. The question is how best to take advantage of those opportunities and possibly parlay them into real growth?

1. Tips For Steering the Ship Through Troubled Times
November 2008
Tips for Steering the Ship
Through Troubled Times
everythingchannel.com www.iped.com

2. Tips For Steering the Ship Through Troubled Times
Tips For Steering The Ship Through Troubled Times
Though many in business have resisted uttering the dreaded “recession” word, there is
no disputing the general direction the economy has been heading—down. And with
that decline comes apprehension for many small and medium-size solution provider
businesses, particularly those with tenuous cash flow that might need access to credit.
Yet some argue tight times might actually favor the solution provider community
because of the natural advantages of temporary projects and outsourced budgets. And
they’d be correct in many cases. The question is how best to take advantage of those
opportunities and possibly parlay them into real growth?
The key to managing your business during tough times comes down to setting realistic
goals, shoring up sound business fundamentals and implementing best practices. But
Fast Fact: this is not just any downturn; in many respects this is one of the most unpredictable
The key to managing shakeups in the global economy. The mortgage crisis, resulting bank failures,
unprecedented government bailouts have kicked up enough uncertainty that what
your buisness during
worked in past financial crunches might not work this time.
tough times comes
down to setting realistic First, let’s list some basic facts of solution provider business life. Research tells us the
following:
goals, shoring up sound
business fundementals • Profit: 53% of Solution Providers Operate At or Below 5% Net Income (so there’s
and implementing best plenty of room for improvement)
practices. • IPED Solution Provider Competency & Profitability Benchmark Study
• Growth: Less than 10% of All Companies Can Maintain Above-Market Growth Rates
for Longer than 5 Years
• Multiple Academic / Economic Studies (i.e. McKinsey 2006, etc.)
• Lifespan: Average Age of a Systems Integrator Company is 7.4 Years … and Lower
Each Year (Younger companies tend to be in more aggressive growth modes)
• VARBusiness State of the Market Research
Nevertheless, there remain ways for solution providers to manage their businesses
through such tough times, including the following tips:
1. Because of the credit crunch, it’s a good idea for solution providers to get their
accounts receivables and credit lines in order now so they don’t get caught short of
cash should their end customers experience financial trouble. The No. 1 reason that
solution providers are not able to grow their businesses is insufficient cash flow.
Couple that with tightened lending and you have a prescription for going out of
business.
2. Discover markets and solutions that will sell based on real value or cost savings to
the customer. Virtualization solutions, in particular, are hot given that the emphasis
on green IT is not only growing, but in the case of governments and municipalities is
mandated. Products and solutions that drive those initiatives have budget allocated
to them, and solution providers should be able to make a compelling sales case
around cost savings, energy savings and consolidated infrastructure.
3 Do not depend exclusively on products for profits. Solution providers who sell
effectively during difficult financial times demonstrate business acumen; they sell
on value, not price, and play a consulting role that shows a keen understanding of
the customer’s business. They can prove how certain solutions will help customers
reduce operational costs and drive business objectives forward so they are well-
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3. Tips For Steering the Ship Through Troubled Times
positioned to come out of the downturn. Services revenue before and after the
transaction is where solution providers can increase their overall deal size and
margin.
4. Sell solutions with short-term ROI. In this economy, customers are unlikely to spend
on solutions that won’t show a return for an extended period of time. Focus on
projects with one-year ROI or less.
5. Partner with other solution providers and don’t overlook available resources from
distributors and vendor partners. It’s critical in a downturn to reach out for help
where it’s needed. Solution providers should size up what their primary skill set
is, then look outside for other partners to shore up any holes. Why turn down a
customer transaction because one aspect of it is not something you specialize in?
6. Spend on marketing. Solution providers must engage in marketing activities to
find new customers. Without new customers, they cannot meet growth objectives
and keep up with competition—especially in down times. IPED research proves
demonstrably that the most successful solution providers do not scrimp on
marketing, investing at least 10 percent of annual revenues into those initiatives.
7. Leverage supplier programs that protect margins. Supplier deal registration
programs are critical tools for solution providers to demonstrate and protect their
value. And there is no better time than a tough economy to make sure that at least
one person on staff is trained to track every certification, rebate and spif that is
available to them.
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4. Tips For Steering the Ship Through Troubled Times
ABOUT EVERYTHING CHANNEL
Everything Channel, formerly CMP Channel, is the one-stop-shop for
accessing, enabling and accelerating technology sales channels. From
branding and recruiting to marketing and sales, Everything Channel offers
technology marketers the unmatched breadth and depth of global brands
and market intelligence combined with an unparallel audience loyalty and
credibility serving all technology sales channels. Through innovative sales
and marketing solutions, Everything Channel arms the sellers of technology
with the resources they need to achieve measurable and significant results.
Everything Channel is a subsidiary of United Business Media (http://www.
unitedbusinessmedia.com/), a global provider of news distribution and
specialist information services with a market capitalization of more than
$2.5 billion.
ABOUT IPED
The Institute for Partner Education & Development (IPED) is the profes-
sional services division of Everything Channel. IPED applies proven best
practices to deliver customized recommendations that accelerate channel
revenue through access to exclusive data and expert analysis.
With over 20 years of institutional knowledge, IPED is the only profes-
sional services organization that can leverage the resources of Everything
Channel, the unrivaled leading provider of information and access to the
Channel. We empower solution provider firms to understand and react to
the motivators and business value propositions that matter most to their
business.
IPED’s proven methodologies helps technology vendors support to their
Solution Provider partners and present their portfolio of technology and
business solutions for a mutually beneficial business relationship.
For more information on IPED, visit www.IPED.com.
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