Compensation


If you are with a reseller, you’ve probably heard the dire warnings about the impact of “the cloud” on resellers. Among the warnings are:

  • Look out. Everything is moving to the cloud.
  • If your business is just selling products, your business is going away.
  • If you don’t have a cloud strategy, your business is going away.

Resellers are getting plenty of advice on how to transform their businesses to a recurring-revenue model. Here’s a recent sampling:

Last summer, I had breakfast with a friend; someone I have known for more than 20 years.  When we first met in the 90s, she was with one of the big systems companies, and I was manager of IT Procurement at State Street Bank. Now she is with one of that same systems company’s direct VARs.  For our breakfast, she arranged to have two people from a cloud-gateway company join us.  The company, apparently, had been pitching her current company on the benefits of reselling their gateway to the storage cloud, and she wanted my opinion regarding their technology.

As it turns out, nothing about the company’s technology really mattered. The technology could have been the greatest thing ever to hit the technology road, but she wasn’t going to sell it. What mattered was how she got paid. She had a sales number, and that number wasn’t based upon closing recurring-revenue opportunities. Selling a gateway plus a service was going to get her maybe 1/4 of what she would have gotten staying on her current path of telling customers that “the cloud is unproven and too risky.”

Cycle forward another nine months, and I just met with a local reseller. I was exploring opportunities for one of my clients that offers a software solution to a vexing problem of delivering affordable, highly-available applications in an environment that lacks on-site IT resources. After listening politely, this reseller told me, “Yours would be the last solution I would sell.” Again, it had nothing to do with the quality of the product, but rather, how he got paid. Turns out that he got better revenue and quota retirement for selling a service, than he did for selling a product. Management at this particular reseller was very focused on covering operating costs with recurring revenue streams.

This takes me, now, to a friend, who quotes this Bahamian saying:

Never mind the noise in the market.
Pay attention to the price of the fish.

The channel equivalent of this is:

Never mind the noise in the market.
Pay attention to how the sales reps get paid.

 

I once visited a very successful technology integrator just outside of Boston.  Every Wednesday, the mother of the founder, who was Italian, would cook for the entire company.  At the time, they had more than one hundred employees.  What a feast!

If you want to launch a startup, and you want to recruit and retain high-quality, highly-motivated members for your team, it’s imperative that you take care of them.  Cash conservation is important, but food, really good food, can go a long way to keeping a team motivated.  After all, it can’t all be about the distant and potentially huge payoff.  Employees can’t eat options.  There’s got to be something it in for them today.  Which brings me to today’s post.  A friend directed me to their son’s blog: One Food GuyThere are enough restaurant and recipe suggestions to keep an entire team of entrepreneurs motivated.   Check out the Andalusian crepes.  Hmm.  Is that my stomache growling?

When my partner and I founded our company, we wanted to ensure that our interests were aligned with that of our clients.  That drove several decisions in terms of our business model and fee structure.  On the one hand, we needed enough revenue to keep the lights on.  That’s in our clients’ interest and in ours. But, we intentionally kept our costs extremely low, taking the minimum office space that is necessary to operate the business and only spending money on those things absolutely  required to operate the business.   There’s no “flash” when you come to visit.  The chairs, the desks, the filing cabinets, and the computers have all been around the block more than once.   That allows us to keep our retainer fees comparitively low.  Again, that’s in our clients’ interest and in ours.  

On the other hand, we expect to be compensated fairly and proportionally, if we help our clients grow their revenue and increase the value of their businesses.  If we drive a million dollars in sales, we’ve increased revenue, but we’ve also increased the value of the business, and we expect to participate in that increased value.  That notion is difficult for some, who are used to a commission-only, a fee-for-service, or an hourly-rate model. 

In keeping with our aligned-interest model, if we work with one company, we don’t work with their direct competitors.  That might seem patently obvious to some, but probe a bit on the companies offering to make introductions or help promote your company, and you may be surprised at how many of those offering to work with you also work with your direct competitors.  (more…)

The last two weeks have been a bit overwhelming.  As some of you know, I recently made the decision to leave IDC, after 11 very good years.  I gave my notice about six weeks ago, but kept it quiet for two weeks, so that the really-senior management team could work on transition and communication plans.  The announcement went out on Valentine’s Day, and since then, things have been rather frenetic. 

Since I haven’t had a chance to speak with everyone individually, I thought I should take the time in this first blog entry to answer the frequently asked questions.  This will be like the time I tripped over my cat and broke my toe, and the doctor decided that in order to preserve my avocation in hiking, he should cast my foot up to my knee.  Who knew? After repeating the broken-toe story 10 times, I thought it would be easier and I would get more work done, if I just typed up and passed out the answers to the frequently asked questions.  So that’s what I did.

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