Andrew Watson isn’t building white boxes any more.
The president of Kamloops, B.C.-based Voda Computer Systems Ltd., which has offices in three other B.C. towns, made the decision recently because with the price of OEM PCs continually dropping, his systems can’t compete.
“The time it takes to build basically an appliance today doesn’t make sense any more,” said Watson. For $700 he can sell a brand-name desktop and make his money back through a three-year warranty.
Instead, he’s shifting to creating standard images on PCs with solutions for small and medium businesses, with the hardware ready to go.
“When our sales guys go out they’re really only going to be quoting a couple of solutions, so they’re not going to be wasting a lot of time trying to find things,” Watson said.
In addition, Voda is going to start charging for the hour it takes to create desktop images with the latest Windows updates on OEM machines, a service that a number of solution providers give away.
These are the kinds of hardnosed moves resellers have to make to survive, says Bruce Stuart, president of Vancouver’s ChannelCorp. Management Consultants.
Stuart, who advises VARs and vendors, offered resellers the following advice in an interview:
–Cash is king, so resolve to isolate which operations and people are generating and which are consuming money.
“People in this business don’t die because they run out of revenue,” Stuart said. “They die because they run out of cash.”
It’s easy to identify and drop products and services you aren’t selling, but doing something about people who aren’t selling is harder. Stuart advises transforming all internal payments to be cash-receipt triggered – in other words, the sales force gets paid only when invoices are paid. That may give them an incentive to sell products such as leases, which speed up the cash cycle.
–Growth is gold, so grow your business., but in a smart way.
First, sell to your base. Second, sell to someone new within your base – find a new buyer for a product within an organization you already sell to. Once you’ve canvassed those opportunities, look for ones within the market you sell to. Only then, Stuart emphasized, should you look at moving into a new market, and only if you have positive cash flow.
–Before moving into a new market or selling a new product, ask yourself the following questions:
How much money will you have to invest? (Vendors, Stuart said, should be able to help answer that question.) How long will it take for the incremental growth margin to pay that back? (Stuart suggests 12 to18 months should be the target.) What is the return on assets deployed? (Stuart suggests three to five times the prime rate.)
Channel managers can help make partners’ lives easier, too, said Stuart:
–Recognize which products and programs consume a VAR’s cash or will generate it, so you don’t push partners with cash flow problems the wrong way. “Don’t predicate making your numbers on things that aren’t going to happen,” he warned.
“As a channel manager, your fight in 2007 will not be market share,” said Stuart, “it will be an investment share or share of wallet fight. You don’t grow your business with a channel partner unless you grow the amount of investment the partner makes in your business.”
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