7 Profitable Practices: A Look Inside Successful VARs
The technology market is constantly evolving, as manufacturers keep streamlining products and releasing ever-changing IT solutions. Whereas the role of the value added reseller (VAR) used to be a little more cut and dry, keeping one of these companies relevant today is much more difficult and requires creative thinking and quite a bit of foresight. Here are some of the practices most often implemented by many of the world’s most profitable resellers, which you can use to improve your business plan for achieving long-term success.
1) Cautiously Branch Out Into Services
If your prospective customers are primarily focused on the bottom line, it’s going to be difficult for you to compete with manufacturers when it comes to prices on hardware and software. Many successful VARs are overcoming this potential roadblock, however, by instead focusing on the types of services they can provide to customers as part of a package. As you draw up plans for the services you can offer, cost analysis needs to be a major part of your research so that you can be sure that your ROI will actually make you profitable. Calculating your margins relies on a close look at both your capital expenses and your ongoing costs.
2) Calculating Costs Correctly
It’s important to remember that managed services you provide, such as hosting and cloud computing, have ongoing costs beyond the initial capital investment. Labor is the number one expense that you need to work into your budget because your data centers need to be adequately manned and maintained for proper functionality. Don’t underestimate upfront asset costs either, which include setting up a network operations center, training staff, and more. If you can repurpose some existing real estate and/or retrain staff to focus on the new services your VAR is going to start providing, then you may be able to reduce your initial investment by taking advantage of your existing assets.
3) Maximize the Value of Your Staff
One of the easiest ways for a VAR to bleed money is to make mistakes when it comes to allocating labor. Automation tools like scheduling software are key investments, therefore, because they help ensure that your staff is being used as efficiently as possible. Another way to maximize profitability is by making sure that you aren’t putting too many resources toward non-billable overhead, and are focusing most of your manpower on billable services instead.
4) Stay Ahead of the Market
One of the best ways that resellers can ensure long-term success is by figuring out how to stay ahead of market demand. Today’s most profitable VARs are those that began venturing into cloud storage and virtualization early on–before there was much competition in the channel. Occasionally, trying to predict trends is risky business because you can’t be completely sure that the market will go in the direction that you anticipate. Unless you are willing to take a few risks with your company’s model, however, you are likely to fall behind when new trends emerge. Partnering with an analyst who specializes in staying ahead of forthcoming government mandates can be an especially worthwhile decision if government agencies are among your most valued customers.
5) Be Ready for New Technology
The vendors you work with might release hundreds of new products each year, which means that you can’t afford for there to be a learning curve when it comes to fully understanding and being able to sell new technology. One of the best ways to stay ahead of the game is to nurture partnerships with vendors so that you are kept in the loop regarding upcoming releases. Opting to partner with certain vendors (and even with other resellers) may also help save you money on upfront capital investments.
6) Gauge the Market and Set Prices Accordingly
Pricing doesn’t have to be set in stone–in fact, it should continue to be fluid throughout the life of your company. Initially, you’ll likely need to gauge market demand and set your prices based on what you need to charge to be competitive. It’s important to remember, however, that the market will continue to adjust your prices for you down the line, so you need to consider long-term pricing that may deflate in the future while your expenses remain the same. Continuing to add more services (especially those that are just starting to see an increase in demand) allows you to raise your prices without much backlash, because customers will see the value in your products and be willing to pay more accordingly.
7) Making a Profit
While many different factors influence your profitability as a reseller, the calculation as to whether your company has the potential to make money is actually a relatively simple one. By figuring out your upfront investment, ongoing costs, and expected profitability, you can calculate how long it will take before you start turning a profit (and how big your margins will be once you do). By constantly looking at your business based on its place in the overall market and by analyzing the steps you can take to increase customer satisfaction, you can make your VAR as successful as possible.