7-it-sales-secrets.pdf

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7 IT Sales Secretsfor AttractingHigh-Lifetime-Value Clients

www.SPHomeRun.com


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7 IT Sales Secrets

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Contents

Jump-Starting Small Business IT Services Sales to High-Lifetime-Value Customers and

Clients ......................... ......................... .......................... ...................... ......................... ............. 31. How do I close a sale or a contract with a potential customer?.................... ...................... 32. What are some of the best ways to bring in a steady cash flow? ....................................... 53. What should I charge in todays economy? ........................ ......................... ...................... .. 64. What are some of the ways to collect my accounts receivables? ................ ...................... 85. How can I limit losing sales to people who under-bid me? ......................... ...................... 106. How do I get customers to value my service enough to make my target income? .......... 117. How can I start selling recurring revenue-based services? ........................................... ... 12Action Items ............................................................................................................................ 14Additional Recommended Reading ........................ ......................... ...................... ................. 16


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Jump-Starting SmallBusiness IT ServicesSales to High-Lifetime-Value Customers andClients

Do you need more high-lifetime-value

customers and clients? Do you own acomputer consulting business, VARcompany, network integrator firm, ITsolution provider organization, MSPbusiness, or computer repair business?

If so, theres an excellent chance yourcompany needs a sales boost.

In this white paper, youll learn 7 field-tested and proven IT sales secrets that

jump-start services sales, including:

how to close a sale or a contractwith a potential customer

the best ways to bring in a steadycash flow

what to charge in todayseconomy

effective ways to collect accountsreceivables without alienatingclients

how you can limit losing sales topeople under-bidding you

how to get customers to valueyour service enough so you canmake your target income

how you can start sellingrecurring revenue-based services.

If youve ever wondered what makes anIT business successful from a salesstandpoint, this white paper will not onlygive you the what but also the crucialhow-to advice so that you canimplement and apply these strategies toyour business and take it to the next

level.

As you read and begin applying thesestrategies, this white paper can serve as ayardstick to see where your businessmeasures up, and where changes can bemade to your approach, so that you canestablish good relationships with yourprospects, customers, clients, and peers.

These practical steps ensure that you not

only make sales but, more importantly,do business with the right people, at theright time, under the right mutually-beneficial terms.

Now, since you can't have an ITbusiness without clients, lets start withthe most important questions first.

1. How do I close a sale

or a contract with apotential customer?

First, you have to differentiate the twoparts of this question. There is adifference between closing a sale andclosing a contract.


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In this paper, the term sale meansthe initial transaction with a newcustomer.

A contract is a long-term deal,generally a support or serviceagreement that lasts for at leastone year.

Unless you have the luxury of working

for an IT business with a pre-existingclient base, there is a pretty good chancethat you are going to have to make theinitial sale. Relationships and credibilityneed to be established with customersbefore you can make repeat sales andthen ultimately transition thoserelationships into long-term supportcontracts.

The biggest mistake technology

providers make is trying to close a long-term, very high-value sale to aprospective customer with whom theyhave never done business. This will havethe following negative consequences:

It lets prospective customersknow that you care more aboutyour own immediate financialinterests than the long-termrelationship.

It lengthens the sales cycleunnecessarily because of the riskperception on the part of theprospective customers.

You may inadvertently commityour company to toxic,distracting, money-losing

relationships. In other words,without first taking on smallinitial projects, how do you knowthat you actually want thesecustomers long-term business?

To shorten the sales cycle for your ITbusiness and establish healthy customeror client relationships, consider thefollowing best practices:

Use highly targeted marketingactivities and lead generation toensure that prospects arequalified to become long-termclients on your companyssupport agreements.

Develop efficient and consistentlead qualification criteria, suchas:

o Number of employeeso Number of locationso Number of workstationso Number of serverso Dominant

platform/OS/NOS

o Methods of receiving ITservice/support in the pasto Who currently supplies

IT service/support

o Whether theyre used topaying for a professionalIT service/support


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Focus on selling a small, initial,low-risk, proving-ground projectthat can be accomplished in oneor two visits.

Bring a letter of engagement withyou for the initial proving-groundproject.

Make sure that you havetestimonial letters, videos, andcase studies, your third-partycredibility builders, from similarlocal small businesses.

Guarantee your findings. As a way to accelerate the

closing of the sale, offer to applythe cost of the proving-groundproject to any follow-up work

committed to within 30 days ofthe initial proving-ground projectbeing completed.

2. What are some of thebest ways to bring in asteady cash flow?

Before we can zero in on the best waysto ensure steady cash flow, lets first

discuss some of the most dangerousthreats to steady cash flow. Topping thelist one-shot-deal customers.

Wasting time with one-shot-dealcustomers is a resource drain and thebiggest distraction that you can possiblyhave in your IT business.

Consider residential users and home-based businesses that promise you themoon but then call you once and nevercontact you again. Don't waste precioussales resources, or even marketingresources for that matter, on customersthat dont have long-term potential.

Similarly, putting yourself in hyper-competitive bidding situations will

completely destroy your profit margins.This means no chasing after mostgovernment contracts, which are usuallynot a great fit for small IT businessesthat cater to other small businesses.Thats all well and good because its alandmine thats easy to identify. Alongthe same lines, avoid hidden but relateddangers as well: when small businessowners act like government purchasingagents and attempt to screen their IT

providers through a competitive biddingprocess.

Keeping these two warnings in mind, tobring in a steady cash flow, you need tobe reaching your prospects much earlierin the sales cycle. For this to beeffective, you need to establishawareness and build up credibility foryour business. There are a few ways todo this:

Publish white papers. Write articles for the local

newspaper or newsletters.

Do speaking engagements forlocal groups of small businessowners and managers.


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Sponsor your own seminars. Participate meaningfully in

select, targeted trade shows.

Use targeted direct-responsemarketing efforts (where aresponse can be measured).

Build relationships with trustedlocal business advisors in yourcommunity.

In addition, make sure that all of yourmarketing and promotional efforts aredirected at targeted small businessowners and managers rather thanmarketing to everyone, includingresidential computer users. In otherwords, your marketing resources need tobe dedicated to prospective clients that

are the right size to be candidates foryour ongoing support agreements.

Once you have identified thosesegments, it is much easier to come upwith an offer and marketing pieces thatresonate with your target audience.

Furthermore, by building relationshipswith trusted business advisors in yourlocal business community, you canleverage sales from their existing

business relationships. Just be aware thatin order for these relationships toprosper, your networking contacts willsooner or later expect you to reciprocateby sending some referrals their way aswell.

In summary, to bring in steady cashflow, make sure you focus on the righttarget audience. And one of the fastestways to reach that target audience is tobuild relationships with like-minded,trusted business advisors in yourcommunity who already have pre-existing relationships with your targetaudience.

3. What should I chargein todays economy?

How you market your business will havea big impact on what hourly billing ratesyour company can command and thedegree of sales resistance that youexperience.

Many technology providers

inadvertently impair their ability tocommand top hourly rates because theyengage in outdated advertisingtechniques, which might include phonebook advertisements, newspaper displayads, and even coupon packs. Why arethese popular promotional avenuesharming pricing power? There are tworeasons. First, in most cases, theyusually provide no strong call to action.Second, even when theres a call to

action, it is almost always based onprice.

While these approaches work just finewhen youre selling a commodity, ITservices generally should not bepositioned as commodities.


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Someone who goes to the phone bookand randomly calls ten technologyproviders (sometimes even throwingdarts at the pages) generally wants to seewho answers the phone and whos thecheapest. That is the mindset of manynon-technical small business owners ormanagers who have not been educatedon what they need to be looking forwhen it comes to finding and hiring a

technology provider.

Therefore, it's essential to reach yourprospective customers much earlier inthe sales cycle, so they never feel theneed to become price shoppers. This canbe done in the following ways:

Get involved in a meaningfulway with three to five business-related organizations.

Participate in theseorganizations business-to-business (B2B) trade shows andexpos.

Give talks and be part of paneldiscussions at events that yourtarget prospects attend.

Sponsor or co-sponsor seminarswith those who have their ownclient base.

Plan very targeted direct mail,one niche at a time, with anurgent soft offer that promotesyour expertise.

Use highly targeted direct mail toyour in-house list, making anurgent offer.

To ensure your companys survival,make sure your prevailing current hourlyrates are bringing you a profit. Andmake sure you dont become one ofthose reactive, box-pushing hardwaretechs who are stuck in the $25- to $50-

an-hour billing range (or your localcurrency equivalent), and are runningfaster and faster just to keep theircompany afloat.

On the other hand, technology providerswho are more proactive and a lot moredeliberate about going after the targetmarkets that they want are consistentlycommanding $75 to $150 an hour (ortheir local currency equivalent),

depending on the scarcity of their skill-set and their local area's cost of living,which is essentially the cost of doingbusiness.

The technology providers whoconsistently command top hourly billingrates do this by making sure that thesmall businesses with whom they workare the right size, that there is a goodplatform match, that there is a good

industry match, and that these companieshave paid for professional IT support inthe past.

Look, if you do not have a marketingplan, you are going to get a defaultmarketing plan assigned to you by themarketplace. Its kind of like the defaultconfiguration that you get by blindly


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clicking Next, Next, Next, Apply, OK.Sometimes it works out OK. A lot oftimes, the default marketing plan justisnt optimal. After all, who wants tospecialize in cheapskates, ingrates,software pirates, and control freaks?Certainly, its not a fun place to be.

If you do not want to settle for thedefault marketing plan, your call to

action is to be much more proactiveabout what you do with your marketing,targeted lead generation, and salesprocess, with big emphasis on the wordtargeted.

4. What are some of theways to collect myaccounts receivables?

There are three kinds of transactions thathappen on a regular basis with IT serviceproviders:

IT services transactions with newcustomers for proving-groundprojects

Product reselling transactions(mainly hardware, software,network equipment, and

peripherals)

IT services transactions withexisting clients for major projectsand annual service agreements.

Lets look at each of these threecategories in turn.

Transactions with new customers

A new customer does not have any kindof credit history with you, and it is anenormous risk to provide the unprovencustomer with credit. Generally, the bestway to approach these kinds of situationsis to give them the following:

A letter of engagement A credit card authorization form.

While some might argue that you shouldnot give 3 to 4% of your earnings to thebank so you can accept credit cards,consider that getting paid 97% of theinvoice amount three business days fromnow is much better than begging foryour money or taking a write-off 60 daysdown the line. It makes sense to spend a

nominal amount now so you can acceptcredit cards. If this concept is new toyou, shop for a credit card merchantaccount. Pay attention to monthlyrecurring fees, per-transaction fees, andpercent of transaction fees.

Product reselling transactions

If you are involved in product reselling,you cannot grant your customers credit.

Well, let me rephrase that and say youcan do anything you want. After all, itsyour business. But similar to the sayingfriends dont let friends drive drunk,friends shouldnt let friends extendcredit terms on low- to no-marginproduct reselling.


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Even with well-established clients, youshould deal with product reselling in thesame way that you would with a newcustomer. You need to have a purchaseauthorization form or something similarthat has a credit card authorization on it,so you're not carrying the credit risk of ahigh-ticket item with no profit margin.Bear in mind, many IT companiesmistakenly believe they actually have a

profit margin on product reselling.However when considering all the softcosts, especially the less-obviousoverhead costs associated with productreselling, it is rarely a break-evenactivity.

Get involved in product reselling onlyfor clients that you see on a regular basisand preferably those with whom youhave service agreements. In other words,

these clients have made a commitment toyou, so you can deal with the low- to no-margin product reselling as a loss leader.These same clients also recognize thatthey are saving time and avoiding riskby consolidating their product purchaseswith your company. As a result, most ofyour steady clients will be willing to paya slight to moderate price premium forsuch a service.

Net Credit Terms

Allowing a client to pay a substantialamount of the bill after the work hasbeen performed, often called net creditterms, should be reserved for those whohave ongoing annual service agreementswith your company.

Generally, these annual serviceagreement clients will be with you forthe long term, so its worth your while toprocess a credit application, check theircredit references, and grant them anominal credit line to start the ballrolling.

At the inception of major projects orservice agreements, you should require a

good faith deposit. Depending on thenature of your business, it could beanywhere from 10% at the absoluteminimum, to as much as 33% of theproject cost or annual service agreementminimum billing commitment. At thesame time, you should establishgraduated milestone progress paymentsthat are due as the project progresses.

Generally, the good faith act of a small

business CEO or CFO completing yourcredit application shows you that theyare above board. Certainly, its not 100%reliable, but completing the paperwork isgenerally an indicator of good faith.

Now, if you are truly proactive abouthow you manage your outsourced virtualIT business, you really should be seeingyour clients at least once a month. Youcould visit your larger clients once a

week, sometimes even daily whenworking on a major project untilinstallation is completed.

Typically, the reason that most smallbusiness clients do not pay is that theyare massively dissatisfied with therelationship. If that's the case, thensomething about the way you were


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dealing with your clients and managingtheir expectations was broken long ago.In other words, its not an accountsreceivable problem. Its an accountmanagement, project management, orcustomer service problem.

There will be times when clients arecompletely thrilled with your work, butthey are just plain broke.

More often than not, good outsourced ITcompanies have such great relationshipswith their clients that they becomepreferred vendors. Many technologyproviders have such great relationshipswith their clients, and their outsourcedIT services are so critical to making theirclients businesses tick that when pushcomes to shove, the clients first take careof their rent and their payroll and then

take care of their technology providers.It might not be 100% legal, but when therelationship is healthy and on solidground, clients are going to bend overbackwards to keep their technologyproviders happy. Smart small businessclients know the impact and implicationsof something going wrong with theirmission-critical systems and how easytheir technology providers managementor staff can use caller ID when the

deadbeat client calls and let it go tovoice mail.

This may not necessarily be the bestcustomer service approach, but this isusually their fear. Therefore, most ofyour small business clients will pay ontime and regularly, even when things gettight financially.

5. How can I limit losingsales to people whounder-bid me?

You really need major economies ofscale to be able to run a bid-based ITservices business.

Essentially, when you focus on winning

projects because you are the lowest-costqualified bidder, you are in thecommodities business acting morelike a commodities broker than atechnologist.

Unless you have tons of capital and areready to scale up to or already have atleast 5 or 10 full-time technicalemployees, plus a few employeesdedicated to business development and

project management, chances are abusiness based on bidding is just not foryou.

For smaller IT businesses, especially 1-or 2-person consultancies, there aremuch better ways to market yourbusiness than chasing after RFPs(requests for proposals) and makingbids.

With a proactive marketing plan andwell-tuned sales funnel, youll be in amuch better position to command thehourly billing rates and financialarrangements that make sense for yourbusiness. Lets face it. Any client whowants to bleed you dry is a leech, not aclient. Hit and run just doesnt worklong-term.


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Regardless of whether you consider yourfirm a computer consulting business, aVAR, a network integrator, an ITsolution provider, an MSP, or acomputer repair business, there is noroom for bloodsuckers or parasites inyour business model.

Now, what can you do to close moresales and build your client base?

Become more proactive in yourmarketing. Always bepromoting, so you do not end updesperate and succumbing to thebidding mentality.

Get selective about leadqualification. Who is worthy ofentering your sales funnel?

Promote your expertise andyour value proposition and notjust the products you install andsupport. Do not become thatcirca-1990s era box pusher orcommodities broker.

Position your company as yourclients outsourced virtual IT

department and your leadtechnologist as their outsourcedvirtual CIO or virtual ITmanager.

Focus on selling ROI-basedsolutions, not products. If yourproposed solution will pay foritself within 4 months ofinstallation, shout that valueproposition from the rooftops.

(Well, you dont have to go allBeatles or U2 on your clients, butyou should very enthusiasticallyconvey this message, and supportyour proven rapid paybackassertions with case studies andtestimonials throughout yoursales process.)

6. How do I getcustomers to value myservice enough to makemy target income?

Value is in the eye of the beholder, and itcan be a pretty subjective concept.

However, there are a couple of bestpractices to ensure that you are able to

clearly and effectively explain yourvalue proposition to your prospectivecustomers and clients.

The goal is to build up your valueproposition high enough so that you cancommand the highest possible hourlybilling rates with much less salesresistance. When you take those twovariables and multiply them, it can makean enormous impact on the profitability

and growth rate of your business.

Again, it all starts with the right targetedmarketing and well-oiled sales funnelthat is appropriate for your IT business.

But remember, unsophisticated, non-technical decision makers do not knowanything until you educate them and


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train them that you are the only qualifiedsolution once they know what they'relooking for.

In order for this to take place, considerthe following proven best practices:

Qualify vigorously. The size ofthe small business isextraordinarily important. Home-

based businesses will rarelyspend even $500 a month (oryour local currency equivalent)on a support agreement. Focus onthose small businesses with atleast five workstations,preferably 10. Make sureprospective clients fall into thecorrect size category. Typically,prospective clients need to be bigenough to be able to pay for

professional IT services but notso large that they have a big in-house IT department.

Sell the initial proving-groundproject. This way, you at leastget a foot in the door with a newpaying customer. As a result,youre in a much better positionto start building a long-term,mutually beneficial client

relationship.

Focus on selling ROI-basedsolutions, not products.

Stop giving away the store. Nocustomer is ever going to tell youthat you ought to charge themmore. Charge too little, and it's

nearly impossible to recoverwithout having to rebuild yourclient list from scratch. Not a funplace to be. So get it right thefirst time. Remember, its abusiness, not a charity. If youwant to donate your services, doso knowingly to those you feelare worthy. If you want to start anon-profit organization, thats

one thing, but most IT businessesneed to turn a profit, so they canafford to stay in business andtake care of their small businessclients that depend on them themost.

7. How can I start sellingrecurring revenue-based

services?The answer to this is pretty simple, butthere is a big difference betweenknowing what to do and actuallyfollowing through and doing it.

Selling recurring revenue-based servicesmeans having a solid, proactivemarketing plan in place, coupled with awell-thought-out sales process.

A lot of IT business owners naivelythink that selling recurring revenue-based services will just magically andautomatically happen. But building asolid client list and a recurring revenue-based business takes work, and it takestime.


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There is definitely a sales cycleinvolved, and it usually comes down tothe following:

Know exactly who your targetmarket is with a bullet-pointdescription concise enough to fiton a cocktail napkin.

Map out a strong proactivemarketing plan to reach thattarget market.

Execute that marketing planconsistently, taking great painsto track whats working andwhats not.

Qualify your leads using criteriathat are simple enough to fit ontoyour cocktail napkin checklist.

Dont waste time on wild goosechases or scavenger hunts withunqualified prospects.

Your sales presentation should focus onselling your companys valueproposition and what you bring to thetable, not just buzz words, certifications,and authorizations. Talk up yourproblem-solving skills, your successstories, and your ability to deliver ROI-

focused solutions.

Once your company has completed afew projects for new customers, they areno longer transaction-based customersbut have become relationship-focusedclients. This is a huge difference inmindset that really needs to come before

any discussion of ongoing supportagreement arrangements.

Once new customers are delighted withthe results of your initial proving-groundproject, there will almost always besome follow-up projects, or someupgrades, or some remediation work, orclean-up jobs. When discussing thesemore substantial projects, you should

ask, Have you given much thought tohow youd like this all supported onceeverythings installed?

Clients who are thinking long term wantto make sure that the relationship worksboth ways.

If new customers have a hit-and-runmentality, they are definitely not worththe time of day for you. They are the

opposite of what you are looking for ifyou want to be selling more recurringrevenue-based services.

Of course, if you back yourself into acorner by charging too little (again, thisis one of the biggest rookie mistakes), itcan be very difficult to recover. If you'recurrently in that kind of bind, get intouch with us, using the contactinformation at the end of this white

paper. It's not easy, but there are ways torepair these oversights.

Ultimately, if you want to sell morerecurring revenue-based services, youneed a decent proactive marketing planin place, you need good leadqualification, you need a good step-by-step sales sequence, and you want to


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make sure that you are focusing onclients who are going to be with you forthe long haul.

Action Items

In this white paper, weve looked at howyou can get more high-lifetime-valuecustomers and clients by focusing on

some of the easier IT services sales tolocal small businesses.

As you apply this advice in the field withyour prospects, customers, and clients,be sure to keep the following in mind:

Never try to make a huge salethe first time around. Focus onselling a small, initial, provingground project, so you can

establish a new customerrelationship. From there, you canboth decide whether the match issuitable to become a long-termengagement. Don't elope on thefirst date. Take it slow.

Make sure that you have aproactive, targeted marketing

plan in place. While itstempting to be lazy and accept

the marketplaces default plan(i.e., roll the dice and donothing), most IT businessowners really dont want tospecialize in cheapskates,ingrates, software pirates, orcontrol freaks. Remember, if youdo not have a marketing plan, a

default plan will be assigned toyou by the market.

Execute your marketing planand track results. The besttargeted marketing plan in theworld cant help you if itscollecting dust. Therefore, starttaking action, a little bit eachweek, and be sure to note which

campaigns are working andwhich arent, so you can dumpthe losers and repeat thesuccesses.

Build your network of trustedbusiness advisors. Networkingis critical in your IT business.Nurturing relationships with like-minded accountants, attorneys,management consultants, graphic

designers, and niche developersgives you a great network ofpeers to bring in on yourprojects. From an IT salesperspective, youd be hardpressed to find a lower-cost,more logical source of super highquality leads. Make sure you takea few hours each month to gettogether for coffee, do lunch, orgo out for drinks. Its like having

your own little mini channelprogram of enthusiasticsupporters referring their clientsto your IT company.

Stop wasting your time withone-shot-deal customers. Itsjust not a cost-effective use of


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your companys most scarceresource: your time.

Never put your company insituations where the lowest bid

wins. Dont become acommodity broker when yourereally trying to build anoutsourced virtual CIO business.

Let your biggest fan club singyour praises. Make sure that youhave your testimonial letters,videos, and case studies with youwhen you make your sales calls.These third-party credibilitydemonstrations really dostrengthen your sales pitchtremendously. If your proof ofexpertise is strong enough, yourfan club basically closes the sale

for you.

As with most things in life, its not onlyabout having the information. At the endof the day, what matters most is whatyou do with these proven IT salesstrategies.

Remember, if you are not motivated togo out there and make a difference toyour business, nobody is going to do this

for you. Even those that you compensatevery highly for this purpose will moreoften than not be building their clientlist, not yours.

Remember, you don't need to tackleeverything at once. Give yourself aweekly IT sales task to focus on. Put thatIT sales task on your calendar. Print it on

a big piece of paper tacked to the wall byyour desk.

Rome was not built in a day. So dontstress out about taking a little time tobuild your IT companys client list.

In the end, scaling your companysclient base the right way will be veryworthwhile, so you can have a stable,

profitable business with high-lifetime-value customers and clients signingongoing service agreements.

Copyright 2012, SP Home Run Inc.

SP Home Run is a trademark ofSP Home Run Inc.

All Worldwide Rights Reserved.


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Additional RecommendedReading

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Each week, youll learn about new tools,

tips, resources, events, and specials thatcan help you get clients, build recurringrevenue, and grow your business.

Topics include:

IT Marketing and LeadGeneration: so can you attractgreat new prospective clients

Selling IT and Lead Nurturing:so you can sign up new clients

IT Service Contracts: so youcan get recurring revenue

Starting Up a New IT Business:so you can jump start your newbusiness, if youre just gettingstarted or even re-started

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