Even if you’ve done everything right up to this point, there’s one obstacle that if overlooked will bring your transition to a halt — your salespeople. I’ll never forget what former Gartner VP and distinguished analyst Tiffani Bova said to a packed audience of IT solution providers at the 2014 Ingram Micro Cloud Summit: “If you want to make the transition to selling cloud and managed services, fire your sales force.” While she may have said this partly for effect, Gartner’s research shows that only one-third of a VAR’s existing sales force will be able to make the transition. Regardless of whether your sales team affirms or disproves Gartner’s stats, here’s three aspects of selling managed services you’ll need to focus on.
Need to Hire More Salespeople? Start Here.
For many service providers, hiring employees is a daunting process — in addition to being a significant time drain trying to find the right talent. I spoke with Marshall Decker, CEO of managed services provider Decker Wright, a company that made the transition a few years ago, and he shared some valuable tips he learned from his training with master MSP CharTec as well as from business leadership author and consultant David Russell, creator of the MANAGEtoWIN program.
One of the first things Decker does to prescreen potential candidates is to have them follow a two-step process when responding to his online job ad. For example, he may ask interested candidates to email him with a copy of their resume attached as a PDF, Word document, or in a rich text format and then to click a link to take a 10-question survey. What percent of sales candidates do you think could follow those two steps? Only 50%!
Once he gets closer to identifying a potential hire, he’s discovered another invaluable test to use is the DISC profile. “I’ve been amazed at how accurate this simple test is at matching candidates to specific job roles,” he says. “For example, we know that a good salesperson will score high in ‘D’ [dominant] and ‘I’ [influential], whereas when hiring a technician, we want someone who’s high in the ‘S’ [steadiness] and ‘C’ [conscientiousness] categories.”
Decker also admits that anytime he’s short-circuited the process either by ignoring test results or skipping a step, it’s always come back to bite him. I recently attended a break-out session on hiring at RSPA’s 2018 RetailNOW event, and here are some highlights from Chelsey Paulson, director of human resources at North Country Business Products’ session, “The Solutions for Your Issue with Recruiting/Selecting Sales Reps.”
You Can’t Compensate Your Salespeople The Same Way You’ve Done Before
Making the transition to managed services requires salespeople to change their approach from product-focused selling to solution-oriented sales, which requires a consultative approach. Salespeople who only want to live in the world of speeds and feeds will struggle the most with managed services sales.
However, the failure to sell managed services isn’t only related to the salesperson’s ability; the VAR’s/MSP’s compensation model plays an essential role, too. If, for example, salespeople constantly find themselves in the position of choosing between earning a 10% commission on a $10,000 traditional sale vs. a 10% commission on a $1,000-per-month subscription, you should expect that your managed services program won’t get off the ground.
Fortunately, there is a way to solve this problem, and it’s pretty straightforward: Instead of paying your salespeople $100 per month, pay them 12 months’ worth of commissions upfront (and do not pay them on the annuity). Now, the salesperson earns 12 months of $100 commission checks upfront, so the managed services version allows them to earn $1,200 instead of $1,000. Sales incentive problem solved!
But, what about cash flow for your business? How can you afford to pay upfront on profit that you haven’t recognized yet? Here are a few ideas you can use to offset your cash flow burden:
- Add professional services to your offering. If you’re migrating a customer’s legacy email to Office 365, for example, you can charge for implementation and data migration. You can also charge to wipe and recycle their old email server that has been decommissioned. These high margin services are typically paid up-front and other managed services have similar add-on service opportunities that also are paid up-front.
- Bundle additional support services with your offering. If you’re selling a POS terminal and software via a subscription model, why not add additional managed services such as help desk and remote infrastructure management to the project? Your customer will be better protected, and you’ll create additional profit streams.
- Balance your subscription and traditional sales. Not everything is moving to the cloud or has to be sold as a subscription all at once. Find out how many subscription-based sales you can accommodate on a monthly/quarterly basis so you can maintain a sustainable cash flow while you’re building up your recurring revenue business.
Remember the commission example earlier? There’s more than $1,500 in additional profits at stake here over the course of a three-year period that your business stands to gain if you’re willing to change your sales compensation model and align it with the typical salesperson’s motivation. That’s just one customer and one small example. If you multiply it by 50 customers, the numbers really start to get exciting. It might seem like you’re giving up too much to make this switch, but if you really think about it and examine the math, not making this switch is a mistake you’re going to seriously regret down the road.
For more insights on creating a winning sales compensation model, check out Mike Monocello’s article, “MSP Compensation Models.” The article includes insights on several specific metrics MSPs need to address, such as target compensation, base salary, gross revenue, P&L and more.
3 Tips for Training Salespeople To Become Solution Sellers
To make the transition to solution selling, you must take the time to train your salespeople and ensure these three areas are attended to:
- Identify the right decision makers. Harvard Business Review reports that the number of people involved in B2B solutions purchases has climbed from an average of 5.4 two years ago to 6.8 today. Also noteworthy is that the majority of decision makers for managed services offerings are now the business leaders in the front offices, not the IT people in the back. Your salespeople need to learn how to build new relationships and adjust their strategies and pitches to influence these new decision makers.
- Explain the solution. One of the most important messages you can instill into your sales force is to minimize the focus on any one particular product (i.e. servers, routers, switches, IP video cameras), and focus on bigger-picture business benefits instead, such as improving your customer’s business continuity and operational efficiency. Even though salespeople should keep the techno-speak to a minimum when engaging prospects, they still need to be able to explain how a solution works and articulate the important details regarding how it will be provisioned and any significant changes required by the client. In some cases, it may be necessary to bring in an operations person to help with demonstrations and answering onboarding-related questions.
- Schedule regular follow-ups. One of the biggest mistakes that salespeople make when selling managed services solutions is that they lose contact with a client after the initial implementation. The most successful MSPs schedule QBRs (quarterly business reviews), which allow them to keep in regular contact with all the decision makers and make sure things are running smoothly with the technology and the billing. QBRs are also a great way to uncover upsell opportunities with your client.
Despite some analysts’ warnings about salespeople not being able to make the transition to selling managed services the fact is that you’re not going to know until you have viable compensation and training plans in place. With any new process or program, there will always be those who aren’t ready to embrace it. Maybe they can be moved into a different role — or maybe not. In today’s fast-past and eever-evolvingbusiness climate, it’s becoming well-known that the only constant is change and you can’t expect to make it if you’re stuck in old ways of doing things.