While we frequently tout the upside and all the opportunities available in the IT channel, sometimes it’s good to put on a different hat and take the opposite perspective. Many solution provider businesses fail. Not everyone is cut out to run a business. While someone may be highly skilled IT professional, his or her skills may be lacking when it comes to selling managed services or managing others.
Many, quite simply, will fail. Not always for a lack of effort or interest. With few exceptions, it takes tremendous planning skills and a whole lot of hard work to build and maintain a highly successful services organization. Focus is crucial, as is follow through.
Over the past 14 years, I’ve worked with some of the brightest minds in the IT industry. Most are not top executives of Fortune 500 companies, but, in most cases, they built successful organizations from the ground up by following a few basic rules. More often than not, the entrepreneurs whose goals went unrealized simply ignored some of the most basic IT services business guidelines.
Failure is always an option. No matter how hard some people try or how many resources they allocate to their endeavors, there is always a certain amount of risk that can’t be accounted for. Some factors, such as natural disasters and sudden rules changes, can’t be controlled. That’s a simple fact of business.
Even if you were to complete every single step on the proverbial “entrepreneurial best practices checklist,” there would still be no guarantee that your business would be profitable or remain open a year from now. There are a few common errors and missteps that contribute significantly to the demise of a solutions provider organization, including:
- Failure to build a viable (if any) business plan
With so many services needed and options available for an IT services company to do, focus is crucial to success. Distractions are plentiful, especially to those without a commitment to their long-term strategy. Start with a SWOT (strengths, weaknesses, opportunities, threats) analysis of the prospective business, and then determine which objectives make the most sense for the organization. Each step in the building process should be included in the plan, with a timeline and list of responsibilities and the individuals/groups assigned to those tasks. With a solid strategy in place, few obstacles should prevent the firm from accomplishing its goals. CompTIA offers several resources to help IT firms build an effective business plan.
- Inability to execute the business plan
The devil is often in the details. One of the biggest challenges for new solution providers is setting aside time to ensure all their employees are completing their assigned tasks on time ─ including themselves. Are they sticking to the building plan? Are timelines getting pushed back or activities they deemed critical earlier becoming less important as the business grows? It’s easy to lose focus on the company’s long-term strategy when money starts coming in. Business plans need to be visited regularly and should only be changed when the strategic opportunities shift. The management team has to keep focus on its future for the organization to succeed.
- Lack of capital
Unless you pick all the right numbers on a big Powerball draw, or inherit a major fortune from a close relative, gaining access to the money needed to build (or expand) an MSP or VAR organization can be complicated. Ever since the banking crisis, credit options for new businesses have been quite limited. Entrepreneurs have to either use more of their own money (or personal equity) or build the organization slowly, leveraging cash flow to fund their expansion. Consult with a financial advisor or accounting professional before starting a new business to ensure you have the capital needed to pay the bills and support the company’s growth objectives. And be sure to visit the CompTIA Financial Resource center for IT-specific best practices and insight.
- Lack of talent
A well-managed MSP can drive $100k+ in revenue per employee each year. I use that figure to illustrate the value of finding, hiring and retaining the right people. Of course, the opposite applies as well. If you have the wrong person in a key position, it is a real liability. It’s the rare employer who enjoys firing anyone, but there are situations where it needs to happen for the organization to prosper ─ or simply survive.
Technical talent recruitment should be an ongoing process. You may have to screen dozens of applicants to identify those with the mix of personality, drive and skills your business needs. Work with local trade schools and colleges to find good interns when possible. Follow a similar path with sales and marketing employee recruitment, keeping an eye out for raw talent that can be molded into the organization’s future leaders and doers. CompTIA offers a number of IT workforce and HR materials to help solution providers and vendors improve their expertise in these areas.
Of course, there are many more than four reasons an IT services company can fail, but the typically fall into at least one of the buckets identified in this post. With a little support and education, such as the many channel training and business enhancement resources available through CompTIA, you can avoid the pitfalls that commonly affect VARs and MSPs.
Brian Shermanis Chief Content Officer at GetChanneled, a channel business development and marketing firm. He served previously as chief editor at Business Solutions magazine and senior director of industry alliances with Autotask. Contact Brian at Bsherman@getchanneled.com.
