By Brian Laufer, QuoteWerks
Sales are the engine that fuels business success. That philosophy helps focus entrepreneurs and managers on the processes that most impact their profit/loss statements and critical activities for scaling their operations. Steady and strong growth is an imperative strategic objective, especially in the IT services industry, where scale drives efficiency, so a continual commitment to the sales process is mission critical.
With the cost of demand generation and client acquisition skyrocketing, MSPs must generate maximum revenue streams from each new prospective customer. Growing “wallet share” should be a top priority for sales teams and account managers. When VARs and MSPs provide more products and services to clients, they are more likely to receive a higher return on their investments, increase profit margins, and raise customer retention rates.
Landing and onboarding new clients typically involve a lot of resources. Generating leads and closing new business requires time, handholding, and patience for what may seem like an endless string of communications. That latter piece can be difficult, especially when the process involves intricate or complicated projects requiring up-to-the-minute prices and product availability information. Coordinating and managing all that information in a timely and efficient manner is no easy feat.
That’s why it’s so important to streamline the communications processes between IT services firms, distributors, vendors, and their prospective clients. With the right tools and best practices, VARs and MSPs can quickly and effectively request, receive and share pricing and inventory information with all the relevant parties. Those real-time data exchanges allow prospects to make faster decisions and give providers an edge over their competition.
Follow The Metrics
Measuring communications is a nearly impossible task. However, like a science experiment, owners and managers can study various business metrics to evaluate how new tools and processes affect their bottom lines and operations. Sales are the perfect example. Most successful MSPs regularly review their strategies and individual tactics with team members, using metrics to gauge individual performances and adjust methodologies.
IT services companies should be watching KPIs like monthly recurring revenue (MRR), cost of goods sold (COGS), and earnings before interest, taxes, depreciation, and amortization (EBITDA). However, those metrics better reflect the health of the company, not the development and success of individual sales professionals. To measure those results, MSPs typically focus on these KPIs:
- Time to close − From proposal to signed order or contract, how long does it take to complete a deal? This key metric helps MSPs assess the performance differences between sales team members and evaluate the firm’s proposal, pricing, and bundling strategies. Effective communications typically increase the speed of the negotiations process and reduce the time frame for closing new business.
- Close rate – How many prospect appointments end up in a successful sale? This metric helps IT firms assess the quality of their leads and the effectiveness of their individual team members. A respectable close rate for an MSP is typically between 25-50% depending on factors such as the size of the prospects’ businesses, number of decision makers, industry, and other variables.
- Average deal size – The goal for any salesperson is to optimize the size of each proposal. MSPs are no different, aiming to grow “wallet share” with current clients and land larger prospects. Effective communications are critical, allowing sales professionals to pitch ideas quickly, recommend complementary technology options, and share promotions with prospective and current clients. The only true way to connect “value-add” with customer needs is through real-time systems that move information back and forth without delay.
Look Beyond The Numbers
Metrics are critical, but they only tell one side of the story. Lead generation is not a science, and some prospects are more ready to purchase than others, so judging individual sales team members on short-term results might not be fair or accurate. The same philosophy applies to account managers. It is much more difficult to increase revenue percentages (wallet share) for long-time clients utilizing an MSP’s full portfolio than for a new client using a handful of basic solutions. The former builds off a larger base with fewer potential new sales opportunities.
IT business leaders need to focus on the metrics and the story behind those numbers. How can the sales and account management teams boost incremental revenue with every client? What’s a realistic objective for each representative based on their book of customers and prospects?
Setting those targets is never easy. However, MSPs can capture more potential revenue with the right portfolio of products and services and an effective toolset. Sales and account management teams need systems to coordinate, streamline, and speed up the lines of communication with prospects and clients, vendors, distributors, and those who help finance new purchases. The faster and stronger the communications between those groups, especially the decision makers, the quicker IT services firms can close deals and increase their cash flow.
Modern Day Systems Solve Current And Future Problems
Quoting tools that can link multiple suppliers and integrate with MSP-specific applications are invaluable today. The ability to track, manage and complete RFQs in real-time allows sales and account management teams to close new business quickly. IT services management portals like the new VendorRFQ for QuoteWerks allow MSPs to instantly locate and follow emails trails and review pricing and availability options. Two-way communications inside a quoting tool help speed up negotiations and the procurement and logistics processes.
Those last steps are a differentiator for MSPs. With the COVID-19 pandemic affecting global supply chains, IT services firms have had a more difficult time securing equipment promptly. Between the rising costs of hardware and issues with delivery, MSPs are collaborating even closer with vendors and distributors today than in previous times. Systems that speed up those communications and provide additional information-sharing capabilities can increase sales and customer satisfaction levels.
Strong management oversight and effective processes for tracking RFQs also help bolster deal closing rates and other key metrics. Implementing new quoting and sales automation tools makes life easier for everyone in the supply chain and can drive revenue and profits much higher for MSPs and other IT services businesses.
About The Author
Brian Laufer is Vice President at QuoteWerks.