Local Marketing – Seminar Promotion is a Goldmine

You Don't Have to Hold a Seminar for it to be Profitable

- Lessons Learned, episode 65

by Karl W. Palachuk

 

When I started consulting fulltime, it never occurred to me that I’d be holding marketing events such as seminars and “tech days.” But sometimes, timing is everything. There are three ways that I used local seminars to attract new clients. I’ll cover one of those in this installment and the other two in the next two installments of “Lessons Learned.”

Y2K Seminars. In 1998-1999, the world was getting ready for the big Y2K rollover with the fear that the world would come to an end, or something akin to that. Today many people call this a fear-based “nothing” event. In reality, it was one of the first big examples of IT consultants saving their clients so successfully that there were no big disasters.

Having recently left the world of “big iron” mainframes, reel-to-reel tapes, and Cobol programming, I assure you that big companies spent billions of dollars fixing legitimate problems before the old code caused major problems. And that was back when a billion dollars was a lot of money. 😊

For smaller businesses, built primarily on old Novell networks and newer Windows-based networks, there were only two big things to worry about. First, old hardware simply had no way to store four-digit years at the CMOS level. Second, really old programs, often ported over from Cobol-era programming, did not account for four-digit years. These were generally easy to find so business owners could address the problem.

We made a lot of money running very simple software that detected 99.44% of these problems and generated a nice report that could be presented to a business owner. The easiest (and only permanent long-term) solution for the hardware was to simply replace it. So we made a lot of money selling new hardware, primarily desktop machines.

Software issues needed some coding attention, which could be quite expensive. Business owners often felt obligated to do this. Luckily for some, newer software and off-the-shelf software updates fixed a lot of problems. Again, we made a lot of money.

When it became obvious that we would be busy with these fixes, I decided to hold Y2K preparation seminars. I had a very good but unexpected response: Several business owners contacted me to tell me they were too busy to attend the seminar, but wanted me to come by and evaluate their preparedness. They assumed I was the one to call since I was putting on seminars for this stuff.

By the time 2000 rolled around, we had added several new clients to our “as needed” client list and a few signed contracts because we promoted our Y2K seminars. And we never actually held a seminar. We would have held them, but no one signed up. They just hired us!

 

The primary lesson I learned from this is that you can always position yourself effectively if you are willing to take on a new challenge and offer to address the big problems. People will assume you are competent until you prove otherwise. And somewhat related to that: If you offer to stand up in front of a room and teach people about something, they will assume you are the expert who knows about this stuff.

I cannot say it was my strategy to not hold these seminars. I fully intended to, and had prepared materials and handouts. And I was surprised but pleased when the first business owner asked me to just do the work rather than make him sit through a seminar. Overall, it was a great lesson about positioning my expertise.

It also solidified something I already believed: Business owners value their time more than anything else. If you can solve a problem so that they can confidently just turn it over to you and spend zero time worrying about it, they will happily pay for that.

 

In the next installment, I learn some lessons from being part of someone else’s seminars. Stay tuned for that.

 

Feedback always welcome.

-- -- --

This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page. 

Leave comments and questions below. And join me for the next installation, right here.

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Karl W. Palachuk is an executive coach and author of several books, including Managed Services in a Month and Relax Focus Succeed. He has built, bought, and sold several businesses, including two successful managed service businesses in Sacramento, CA. He advocates a holistic view of business, viewing the company as a system. You can find him at karlpalachuk.com or on LinkedIn. No artificial intelligence apps were used in the writing of this post.

:-)

What Happened to Long Term Vision?

One of the most famous research projects is known simply as the Stanford Experiment. You've probably heard of it as the Marshmallow Test or something like that.

Here's the simple experiment: Put a kid alone in a room with one marshmallow. The rules are:

1. You can eat the marshmallow anytime you want.

2. We're going to leave you in the room for fifteen minutes.

3. If you do not eat the marshmallow during that time, we will give you a second marshmallow.

The goal was to learn about delayed gratification in preschoolers. This research has been repeated many, many times and with dozens of variations. In addition, there have been follow-up studies to track the effect of delayed gratification on future performance.

One of the key findings in the studies is that delaying gratification is highly corrollated with long-term success. But even in the short-term, the truth is pretty obvious: You can have a small treat immediately, and a larger treat if you are able to wait a little while.

And that brings us to a number of the large vendors in our industry today. More and more, the largest vendors seem incapable of delaying gratification at all. They eat every marshmallow as fast as they can.

As you probably know, most of these vendors are funded by private equity companies. These companies sometimes claim that they're long-term investors. But, realistically, the folks who fund these investments have only a four or five year commitment. In that time, they want high profits and all of their original investment back . . . so they can move on the next adventure. Their idea of "recurring revenue" is to get huge payouts in short order.

The best the investment fund can hope for is that a big investor with a three or four year timeline will renew their commitment for another three or four years. If "long-term" means ten or twenty or thirty years, then there are no long-term investors. 

Anything and everything they can do to increase short-term profit is done in service of these payouts. Actions frequently include cutting staff, increasing prices, and cutting development programs. In other words, what "investors" want is revenue extraction.

A secondary objective is to increase the appearance of guaranteed long-term income. This results in three year contracts (absolutely a horrible expectation in a high-tech industry unless you're selling hardware), unfriendly pricing models, and extreme difficulty in getting out of a contract or even reducing your license commitment. In other words, things that are bad for the customer (in this case, reseller/partner/MSP) increase the perceived long-term value of the organization.

Why do they want this perception of increased future revenue? Because it allows them to get another round of "funding" from new investors. Sometimes, this comes from bank loans. More often, it comes from investors who have been over-promised results. Those investors have a four or five year timeline to get back all their money and a lot of profit.

It's not quite a Ponzi scheme, but if you were to imagine an increasing pyramid of debt, commitments, and promises that seem to grow until they collapse in on themselves, you would be forgiven. 

Missing from this equation, of course, are the end user client, the success of the resellers and MSPs, customer service, innovation, good governance, fiscal responsibility, and a healthy business model.

Eat the marshmallow. There may never be another one!

In my January State of the Nation Address for SMB IT, I said that I think the clock is ticking. I believe we have five years or less before there's a major economic catastrophe for one of these mega vendors. Well, we're about six months into that five years. So far, I have no reason to reconsider that projection.

If your primary vendors have unsustainable business models, this could be a major problem for your company. There is an intoxication with revenue extraction that is hard to resist. But there has to be a limit. If all a company does is extract money from the industry, something has to collapse.

The good news is very good. If YOU have a good, sustainable business model that can last for twenty years, then you can survive anything. You will need to partner with great vendor partners who also have sustainable business models. And you'll need to put a lot of attention on great service and great employees. Those are very manageable if you've got a great business model.

Wait for it. With a little delayed gratification, the treat will be bigger in the long run.

Profitable Is Enough

The most important data point in managed services right now comes from Service Leadership — the largest database of MSP financial performance, covering 15,000 to 20,000 IT services companies quarterly. It's owned by ConnectWise, so this isn't a vendor's marketing estimate. It's the closest thing the channel has to ground truth.

The number: roughly one in three MSPs is break-even or losing money every quarter.

That's not the uncomfortable part. The uncomfortable part is that you can't tell which ones by looking. They're at the same conferences, talking the same talk, selling the same stack. The MSP channel has no licensing, no registration, no financial transparency requirements. There's more regulation on the person who cuts your hair than on the company backing up your clients' data. Anyone can declare themselves an MSP — and plenty do, right up until the moment they can't make payroll.

The Question Nobody Asks Out Loud

Here's what doesn't get said enough: profitable is enough.

The channel has a growth fetish. Revenue targets. Headcount milestones. Acquisition multiples. Embedded in all of it is an implicit judgment about what a successful MSP looks like. It's the wrong frame for most operators.

A business that clears a consistent profitability floor, pays its people well, serves its clients reliably, and gives its owner control over their time — that is a successful business. It may not generate keynote material. But it's what most people who started an MSP actually wanted when they started it.

The channel's conventional wisdom isn't built around that goal. And that misalignment has real financial consequences.

The Revenue Mix Myth

For years, the conventional wisdom has been that 80% recurring revenue is the target. Maximize MRR, minimize project work, optimize for predictability. It sounds like financial discipline. Service Leadership data says otherwise.

A healthier mix is closer to 60% managed services and 40% professional services — because professional services drives growth. Project work brings in new clients, expands scope inside existing accounts, and funds capacity for more recurring work. MSPs who chase 80% MRR often do it by cutting the very work that would have made them more profitable.

The 80% number gets repeated often enough that it starts to feel like settled science. It isn't. It's a benchmark that got detached from the context that made it meaningful, and it's been doing quiet damage ever since.

What Operational Health Actually Looks Like

Revenue mix matters. So does the discipline underneath it.

Watch your collection cycle. An MSP consistently collecting on Net 15 terms in under two weeks — year after year — is one where financial discipline is built into the culture, not bolted on in a bad quarter. That consistency is the result of treating cash flow as seriously as ticket closure rates.

The profitability floor is related. It's not just a financial target — it's a forcing function. When you've set the minimum return below which you won't operate, it changes how you price, how you scope, and which clients you keep. That's one of the clearest lines between MSPs who are building something durable and MSPs who are just busy.

The Real Separator: What You're Selling

The gap between the profitable third and the losing third isn't primarily a pricing or toolset problem. It's a positioning problem.

Two MSPs can offer identical services. One says: I'll make sure your computers are working, flat monthly rate. The other says: I'm going to use technology to help your business grow, and you'll measure my value against that outcome. Same service. Completely different financial trajectory.

The first gets measured on cost. Every ticket is evidence for or against renewal. The second gets measured on outcomes — loyalty and pricing power, simultaneously.

Most MSPs know this. Most still sell on features and uptime. The gap between knowing it and doing it is where the bottom third lives.

The Bottom Line

81% of MSPs do less than $10 million in revenue. 67% do less than $5 million. At that scale there's no bench, no finance function, no one running a cash flow model. The owner is doing the work, selling the work, and trying to make sense of the financials on a Sunday night.

This is why the bottom third is so persistent — not incompetence, but structure. Financial discipline is hard to sustain without intention when there's always something more urgent in front of you.

The answer is to treat profitability as a non-negotiable from the start. Not a reward you'll get to once growth is solved. A floor you set and defend. Know your revenue mix. Track your receivables. Have a number below which you won't operate.

One in three MSPs isn't making money. The dominant narrative is about growth — who's acquiring, who's scaling, who's hitting what multiple. But underneath it is a simpler idea: a profitable business, run well, on your own terms, is the point. Not a stepping stone. Not a consolation prize. The point.

The data exists to know where you stand. The question is whether you're treating profitability as the goal — or as something you'll get around to after you're done chasing the wrong target.

Do You Have a "Relationship" with Suppliers or Vendors?

This question popped into my head because I've had a few irritating interactions recently. One was simply adding yet another impossible-to-change-licensing vendor to a growing list (most recently, Egnyte). Another was an online software/service that cannot seem to get the folks in tech support to talk to the folks who run the repetitive and useless forums to talk to each other. One team can't fix it, the other says there's no problem. I'd go into details, but everyone reading this has had similar problems. 

Forever.  

One of the challenges of technology is that we're always working with evolving systems. Stability is always in question. New development can't break anything. Promises are made. Everything changes. 

In such environments, developing relationships with software suppliers and vendors is difficult. Add a number of economic variables, the vast differences in company size, and the growing trend to extract money first and worry about the future someday, and ongoing relationships become nearly impossible. 

As humans, we crave a certain level of certainty. Yes, everything changes all the time, but it would be nice to know which products and services I'll be selling tomorrow. The same is true with the software and services we use internally. And that brings us to the real question about relationships. 

Relationships have good days and bad days. Ups and downs. And sometimes friends grow apart. 

For the "small and medium" business market, we often project a relationship when none exists. The size difference and business model difference between HUGE vendors and tiny consultants is impossible to overcome. If a company is worth a billion dollars, or a trillion dollars, or even three trillion dollars, they don't know you exist. They do not and cannot care about you. The value of the paperclips they accidently sweep into the garbage each year exceeds your net worth. 

To these mega corporations, any relationship they have with "customers" is simply a mathematical extraction. It's a bit like quantum mechanics. You don't exist in reality. And, in fact, your company's effect on their finances is so small that it cannot be measured in a meaningful way. You exist (if you exist) as a mathematical probability. Nothing personal. 

Very often, we trick ourselves into thinking that we have a relationship with these companies when we do not. I say we because I certainly include myself. Over the years, I have fooled myself into thinking I had relationships with Microsoft, HP, Intel, and others. But when we took their logos off our business cards and off our web site, they didn't notice. They didn't care. Who is there to care? 

Remember: You should never have more loyalty to a vendor than they have for you.  

When vendors are small, you CAN and should have a relationship with them. You can meet the leadership. And they might well remember your name, and even your loyalty. But never forget that they are on a path.  

When they're small, you are a "partner" who can help them along the way. But their ultimate goals and business model may not include you. If they're successful, they'll grow too large to focus on tiny partners. And if they're successful, they'll get "funding" that removes the people you know from direct contact with users. Eventually, they will be gone altogether. 

As a business owner, you need to remember that suppliers and tool makers are not your partners. We use that term, but they are business associates. They have goals, and a relationship with you plays a role in their business model. And your relationship with them should play a role in your business model. 

So keep in mind: Is this vendor or suppliers playing the role *I* need them to play? Am I getting what I need for my company's long-term success? Remove the emotions and ask yourself, "If I were choosing vendors today, is this someone I would choose?" And keep in mind that relationships change. The answer could have been yes five years ago. But that doesn't mean the answer is still yes today. -- -- --  

Personally, I don't like to change vendors, suppliers, or tools very often. I know some people always seem to be trying the security product of the week, or the new RMM of the month. In a perfect world, I will keep a relationship like this for about five years and then decide to go another five years. But sometimes, enough is enough. 

Also, don't waste a lot of time after you've made the decision. Especially with mega corporations: They won't even know you're gone. 

Comments welcome.

Private Equity Is Not Your Business Advisor

There's a lot of noise right now about private equity in the MSP space. Acquisitions, roll-ups, platform plays, revenue multiples. It can feel like the whole industry is being reshaped by people with very large checkbooks.

Maybe it is. But here's what I keep coming back to: none of that changes what makes a small business healthy.

I've watched vendor after vendor enter the MSP market with serious capital behind them and get absolutely humbled by it. The SMB market doesn't care how much money you raised. It has its own rhythm — high volume, relationship-driven, with a sales and support cycle that looks nothing like enterprise. The clients are smaller, the margins are tighter, the relationships are more personal, and the tolerance for getting it wrong is lower. You either learn that or you pay for it. A lot of well-funded companies have paid for it.

PE investors are smart people. They do serious research. But there's a meaningful difference between understanding a market well enough to place a bet on it and actually knowing how to run a business inside it. One is pattern recognition at scale. The other is knowing what to do when a key tech leaves on a Friday afternoon and three clients are down. Those are not the same skill set, and confusing them is an easy mistake to make when you're looking at the industry from the outside.

Here's where I think the PE-influenced narrative has done real damage to small MSPs: the push toward 80% recurring managed services revenue as the gold standard. It sounds right. Recurring revenue is predictable, it models cleanly, and it tells a good story in an acquisition conversation. If you're building a business to sell, it's a reasonable thing to optimize for.

But most MSPs aren't building to sell. They're building to run. And Service Leadership data shows that the healthiest, fastest-growing MSPs tend to run closer to 60% managed services and 40% professional services. The professional services work isn't a problem to be solved — it's often what funds growth, deepens client relationships, and keeps the business financially flexible. A well-timed project can do things for your P&L that a managed services contract simply can't.

The 80/20 target wasn't designed for operators. It was designed for deal sheets. That's not a criticism — it's just worth knowing whose interests a given piece of advice is actually serving.

And that's the core issue. When you optimize your business for how it looks to an outside buyer rather than how it actually runs, you can make decisions that quietly hurt you. You might under-invest in project work that your clients actually need. You might chase a revenue structure that sounds sophisticated but doesn't fit your market, your team, or your clients. You might spend energy on the wrong things while the basics quietly slip.

The fundamentals don't care about any of this. A clean balance sheet matters. A well-managed P&L matters. Knowing your margins, controlling your costs, understanding which clients are actually profitable and which ones are quietly draining you — that's the work. It was the work before PE started buying up MSPs and it will be the work long after the current wave of consolidation settles out.

Thirty percent of MSPs are running at break-even or losing money. That's not a PE problem or an AI problem or a competitive landscape problem. That's a business fundamentals problem. And no amount of industry narrative about multiples and recurring revenue ratios fixes it. The only thing that fixes it is doing the unglamorous work of understanding your own numbers and managing to them.

That's not exciting advice. There's no acquisition story attached to it. But the MSPs I've seen build something durable over time — something that actually serves their clients and supports their own lives — are almost always the ones who never stopped paying attention to the basics. Clean books. Managed costs. Profitable clients. A P&L that tells the truth.

If your books are clean and your business is profitable, you're in a stronger position than most — regardless of what's happening at the top of the market. If they're not, that's the thing worth fixing first. Not your revenue mix ratio. Not your acquisition readiness. Your books.

The noise will keep coming. The fundamentals will keep being the fundamentals.

Inspiration Everywhere

 When you're in the mood to learn, there's inspiration everywhere. One of my favorite examples goes back thirty years. When I was getting ready to convert a house to rental property, I picked up a book on how to be a successful landlord.

I was surprised and pleased that the book started out with an impassioned chapter on running a small business. After all, rental property involves income, expenses, marketing, sales, maintenance, taxes, record keeping, and sometimes outsourced labor. In the end, the chapter was all about doing things the right way and taking your business seriously. 

As I cruise YouTube and blogs for tips on making small projects, I came across a video that started with four full minutes of inspiration along the lines of, "Lots of people have done this, and you can, too. Whatever your excuse, someone else has a better one. So get started!" 

Maybe it's just serendipity, but I find inspiration wherever I look. And, in particular, in everything I read. I know for a fact that I find ideas because I am always open to ideas. And that's related to another bit of found wisdom that applies to almost everything in life:

 It's not a race. Slow down. Take your time. Do it right. 

What do YOU read for inspiration? (Or watch. Or listen to. Or ...?) 

[ If you haven't read my posts on the reticular activating system, today's a good day to do that. See https://relaxfocussucceed.com/2018/07/priming-your-brain-part-1/ ]

Marketing is . . . Everything You Do

There are three things that I find myself referring to as "everything" in your business: Branding, Marketing , and Processes. As a big advocate of standard operating procedures, it makes sense to say that everything in your business comes down to processes. But what about branding and marketing? 

Well, since I take a very wholistic* view of the world, I believe that every single thing you do contributes to your brand. Take hiring as an example. If the way your people treat your clients is part of your brand (which it is), then training, onboarding, who you hire, how you hire, and even how you advertise for new employees are all part of the chain that results in your employees, and how they treat your clients. 

Marketing is very similar. While marketing is primarily about how you show up publicly (to your prospects), it also touches pretty much every part of your business. This obviously includes your advertising, web site, and employees. But it also reaches into your invoicing, ticket management, and more. Taken to its logical conclusion . . . Marketing is everything you do! 

I am reminded of this perspective frequently when I listen to my weekend podcasts. That's my catchup time. Whether I'm cleaning the house, puttering in the garage, or gardening, I listen to audio books and podcasts. It's the closest I get to multi-tasking. My pod-catcher of choice these days is iHeart Radio.

A truly GREAT example of how you can use the marketing eye to view every aspect of your managed service business is Paul Green's MSP Marketing Podcast. Available on all devices. In addition to "obvious" marketing topics, recent podcasts have addressed hiring technicians, work/life balance, and how owner model behavior for you employees. If you haven't checked out Paul's podcast, today's a good day to give it a listen. 

I particularly like podcasts because, as I finish each episode, it automatically transitions to the previous episode. This makes it easy to just keep listening until I hear something I've heard before. At that point, I'm all caught up and I can move on to the next podcast. 

What are your favorite podcasts (and habits around listening)? I'd love to hear. Drop me a line.

The Contract Isn't the Win. Adoption Is.

You closed the deal. The client signed. Your team moved on to the next prospect. But three months later, licenses are sitting unused, alerts are going unreviewed, and at renewal they're asking why they're paying for this. Here's what went wrong.

The Trap Every MSP Falls Into

There's a moment in every MSP's sales cycle that feels like victory: the signed contract. A new managed security client. A Microsoft 365 migration agreement. The revenue hits your MRR, and the team moves on.

But here's the structural problem: your team gets compensated at signature. Not at adoption. Not at renewal. At signature.

That incentive shapes behavior in ways that are easy to miss. Sales closes and hands off. The technical team installs and configures. Someone sends a welcome email. And then everyone moves to the next deal — while the new client is left to figure out how to actually use what they just bought. That's not a win. It's a delayed churn event.

What SaaS Vendors Learned the Hard Way

SaaS companies drew a hard line between onboarding and deployment. Onboarding gets the customer into the system. Deployment means they're actually operating inside it — policies configured, workflows running, users engaged. When customers can cancel monthly, the difference between those two things shows up immediately in revenue.

MSPs sell recurring services under the same economics. The difference is that annual contracts give you more time to ignore the problem — and most do, until renewal.

What Adoption Failure Actually Looks Like

Adoption failure has specific, observable signatures.

For a Microsoft 365 engagement: licenses assigned but unused. Teams installed, never opened. Users still emailing attachments instead of sharing links. No one has touched the admin portal since deployment day.

For a managed security service: EDR deployed but alert thresholds never tuned to the client's environment. Monthly threat reports sent, never opened. No one at the client can name what an incident response looks like or who to call.

These aren't edge cases. They're the default outcome when deployment is treated as a technical checklist rather than a business outcome.

Ownership Is the Missing Piece

Adoption fails because ownership is diffuse — sales thinks the tech team has it, the tech team thinks onboarding is done, and no one is tracking whether the client is actually getting value. This is the organizational expression of the same incentive problem: nobody is compensated to care what happens after the handoff.

High-retention MSPs fix this by assigning a named role — service owner, customer success lead, vCIO — explicitly accountable for client outcomes. That person owns a 90-day deployment cadence:

• Day 30: Is the tooling live and correctly configured? Are there unused licenses or untuned policies?
• Day 60: Has the client engaged with at least one report or review? Do their key contacts understand what the service covers?
• Day 90: Can the client articulate one specific thing your service has done for them? If not, you have an adoption problem — and you still have time to fix it before it becomes a retention problem.

That 90-day window is your best opportunity. After it closes, disengaged clients rarely re-engage on their own.

Make Value Visible

Clients don't renew services they can't see working. A monthly summary of alerts investigated, threats blocked, or hours saved isn't a nice-to-have — it's the mechanism by which the client experiences value. Without it, they're paying for something invisible, and invisible services get cut when budgets tighten.

This is especially true in managed security, where the value proposition is often "nothing bad happened." That's a hard case to make at renewal if you've never shown them what you stopped.

The Retention Math

Every churned client represents the full cost of that sale — presales time, onboarding resources, technical ramp — written off with nothing to show for it. MSPs running at thin margins don't have room to absorb that quietly. Fixing adoption isn't a customer success initiative. It's a margin protection strategy.

The Takeaway

Recurring revenue requires recurring value delivery. That starts with being honest about the incentive misalignment baked into most MSP compensation structures — and deliberately designing processes that correct for it. If nobody on your team is accountable for what happens after the handoff, that's a design problem.

Audit your active clients. For each one, ask: are they deployed, or just onboarded? If you find unused licenses, unreviewed reports, and untuned policies, you have your answer. Doing it now is far cheaper than losing them at renewal.

Comments always welcome.

My First Sales Person - A Very Expensive Lesson

 My First Sales Person - A Very Expensive Lesson

  - Lessons Learned, episode 64

 For some reason, business owners assume they need to hire a sales person. And maybe someday you’ll need one. But most of us, including myself, hired a sales person too soon. Here’s what I did and, more importantly, what I did wrong.

What I did: I researched the topic of small business sales. I even took several classes on it. Read some books. And then I put together my job description and posted an ad.

What I did right: Educating yourself is always good. Writing a job description before a job ad is good. The best thing I did was to set down very specific target sales and target dates for those sales.

Sounds wonderful, right?

With all that, I hired an  experienced sales pro who know something about technology but was certainly not an expert on managed services. That’s fine. Your sales person does not have to be a subject matter expert when they start.

What I did wrong: I am a good manager. That does not make me a good sales manager. That’s a very different skillset. And here’s why it matters. (This exact experience has been replicated with many business owners over the years.)

In the first month, the goal was come up to speed on what we do, who we serve, and the products and services we offered. In his spare time, the sales guy used this information to start building lists of prospects and dialing in our “ideal” client archetype.

The second month, we bought a good size list so we could do postal and email campaigns. The sales guy spent a lot of time cleaning these lists, preparing sales materials and getting everything “just right.” He did not spend time walking the business parks or calling prospects.

Then we put together printed materials, brochures, and great letters to go out. We did a bulk mailing. All of this needed to be finely tuned by the sales guy so it would be just right. He didn’t want to be held responsible if it wasn’t correct. That would eventually one of the reasons he didn’t make sales.

By the end of the third month he had still not made any sales.

We were getting some nibbles from the direct mail campaign, and appointments were set. I “went along” with him on these. We had a decent close rate, which is always the case once you sit across the table from someone who has invited you into their office. I like to say we made sales, but it was really me making the sales while he watched.

Month four: The sales person had not made any sales. But in month five I sent him out on his own. He knew our pitch. He knew our managed service bundles. He knew the kind of clients we want. And he knew how to put it all together. Still, he didn’t do any additional prospecting, he didn’t go door to door, and he didn’t make outbound calls.

By the end of month five we had exhausted the list we bought, added some names to our email list, and *I* had made some sales. Now, the funnel was empty. It felt very much like starting over, because the sales guy hadn’t done anything to cultivate more leads, fill the funnel, improve the offer, improve his pitch, and turn even a few cold leads into warm leads. He spent his time on tuning up the letters and the handouts. He didn’t go out and ask people for their business.

Finally, in month six I told him we had to pull the plug. I gave him a few weeks to sign one managed service deal. He didn’t and we parted ways.

All of this – 100% of this – was my fault. I was paying him a small “salary” plus commission. He could apparently get by on the meager guaranteed amount even though he was the lowest-paid person in the office. My commission was 25% of the profit (roughly 10% of the gross sale). So he could easily be the highest-paid person in the office if he just made sales.

Here’s why this was all my fault. Remember those targets and dates. We obviously missed all sales targets.

There were no negative consequences for missing the target (for not making sales). When I said I’m not a good sales manager, that’s the crux of it. Missing those targets took money directly out of my pocket.

A sales manager has to draw a very clear line and the consequences of missing a target should be clear and agreed to in advance. It doesn’t matter if you’re friends with the sales person or not. If they don’t make sales, they have to go somewhere else.

-- -- --

I had some other lessons with sales people. Ultimately, I did the math and realized that a small business owner needs to do all the sales until the company is making at least $1 million in top line revenue and can grow the company very fast.

Let’s say your new sales person need to earn $100,000. That’s fine if they’re paying for themselves. Well, if that’s about ten percent of the gross sales, they need to sell $1,000,000 worth of products and services in a year. That’s about $83,000 per month of new revenue. And it represents doubling the size of your business in one year!

All of that’s possible, of course, if you have the right plan in place.  But chances are excellent that you won’t be able to achieve that right away.

My lesson is that the owner has to be the only sales person for a very long time, and the primary sales person for a long time after that. And that’s actually a natural progression. Owners tend to move “up” into managing their companies and out of the actual service delivery. That gives them more time to warm up those leads and make those sales.

When a company grows large enough, hiring a dedicated sales person will make perfect sense. But you have to put hard targets in place and get rid of sales people who don’t perform up to spec.

This can be a very expensive lesson.

 

Feedback always welcome.

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This Episode is part of the ongoing Lessons Learned series. For all the information, and an index of Lessons Learned episodes, go to the Lessons Learned Page. 

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Karl W. Palachuk is an executive coach and author of several books, including Managed Services in a Month and Relax Focus Succeed. He has built, bought, and sold several businesses, including two successful managed service businesses in Sacramento, CA. He advocates a holistic view of business, viewing the company as a system. You can find him at karlpalachuk.com or on LinkedIn. No artificial intelligence apps were used in the writing of this post.

:-)

How do You Feel When Someone Leads with Price?

 We all want to save money. No one wants to waste it. But when someone's only appeal is, "We cost less," I am turned off. This is especially true of services.

I was really struck with the current Turbo Tax advertisement that is all about being less expensive. It's just blatant, "We'll beat the price" advertising.

Um. I don't want the cheaper tax preparer. Or the cheaper surgeon. Or the cheaper cybersecurity consultant.

If a monitor or printer is cheaper on Amazon than at my distributor (and I am very sure it's the exact same thing), then I'm likely to buy on Amazon. But services are another matter. One of the absolute truths about service delivery is: Service costs money. Better service costs more money to delivery.

You can still deliver better service at a lower price, but that just means you make less profit. Is that what's going on here? Or is the price cheaper because some service is missing? If you don't want to spend more to deliver the same service, then maintaining profit means the service has to be cut somewhere.

With tax prep, I don't really want to cut corners. I use an enrolled agent and can point to very specific advice that saved me tens of thousands of dollars - because my EA was looking at my business as a whole, not just the one tax return in front of them.

Now consider IT services. What do clients think if you lead with price? Do they say, "Oh goody. I can get platinum level service for the price of silver. It's all the same, so it doesn't matter which one I buy."? If they do say that, that's your fault for not showing them the value of your services.

Part of building your long-term client relationships is keeping them informed about you and your company. You have to change with the times. You literally have to respond to evolving technology all the time. You need to make sure your clients know you're keeping up and offering the new stuff. A monthly newsletter is a great tool for that ongoing education. So are quarterly roadmap meetings.

In the "Picture of the Day", I talk about my relationship with the UPS Store. Imagine the changes they've had to go through in recent years. Their total refresh has to consider increased traffic from Amazon, including massive no-questions-asked returns. They also have a newer clientele that may not own a printer, so they need to scan screenshots on phones.

On top of all that, there are new payment methods, new government requirements, postal regulations, and competition from both their "parent" partner (UPS) and their largest client (Amazon). But the store is the client interface for everything.

This is such a great example that branding is NOT your logo or your color scheme. Branding is every single thing you do. Taken together, your "everything" becomes the experience clients and prospects have.

Oh - and did you notice that the UPS store does not compete on price? They have a 100% markup on postage stamps. You can literally buy them almost everywhere for face value. But add some convenience and voila! the price goes up. With over 5,000 franchise stores, the UPS Stores are going strong. And their visible updates will keep them responsive to the times and profitable.

What do you think about competing on price and maintaining the perception of value?