As 2012 races to a close, vendors and solution providers are tallying up the sum of their efforts. For many, this year will end in the black, with some companies growing 25 percent or more in gross sales and profits. Relatively few solution providers will sink into the red.
Going forward into 2013, solution providers tell Channelnomics they have high hopes for growing their businesses and increasing profitability — and they have good reason for the optimism. The economic indicators are pointing in the right direction; businesses are hiring, which will lead to more IT work to support new workers and business activity.
In good times, growth comes easier as business needs translate into more opportunities and faster sales cycles. Solution providers need to avoid mistaking increased activity driven by an improving economy as sustainable success. Growth that comes with an economic upswing is more serendipity than strategy, and it can just as easily evaporate.
Sustained success comes with planning, and business planning is in short supply in the channel. According to The 2112 Group’s 2012 Business Acumen Report, 25 percent of the channel does not have a formal business plan. Worse, 40 percent of solution providers are not setting sales goals, conducting regular business performance reviews or executing a long-term strategic plan. Most concerning: Only one-third of the channel has a business development plan.
The majority — 69 percent — of solution providers participating in the 2112 study recognize the need for formal business planning and strategy development. However, only 53 percent say they have a growth strategy.
Successful business managers and entrepreneurs often say that growth is not a choice. Through growth, businesses generate profit, which is used to fuel future expansion for current operations and investments in future growth and transformation. Moreover, growth is what provides the capital and equity to fend off competitive pressure and offset costs in economic downturns.
In other words, growth — not revenue or profit — defines a business’s viability.
In this context, growth may not be a choice, but it’s not something that just happens. Growth is something that smart businesses plan. It’s a reflection of setting a strategic direction supported by tactical instruments (products and services), identifying ongoing and incremental revenue sources (sales), establishing sales and performance targets (goals), focusing on execution (accountability) and measuring performance (metrics).
What passes for business planning in the channel is actually luck and happenstance. Too many solution providers are operating their businesses against general ideas on the assumption that their skills will propel their value and revenue forward. They’re often validated early in the year by rapid sales and growth. Their businesses stall about midyear because sales resources are refocused on fulfillment, and no new activity comes in. It’s a reflection of a lack of balance that is kept in check by the constructs of a business plan.
Conversely, solution providers with well-defined business plans know their customers and target markets, products and services, and sales targets. They know with near certainty how much money they have coming in the door, how much the need to make and whether they are above or below expectations. Most importantly, they’re steady and consistent in their performance. Anything that comes in extra is treated as incremental to plan; or an added benefit that only improves business health.
Solution providers — no matter their size, location or discipline — should resolve themselves to setting and sticking to business plans and goals in the coming year. A formal business plan, regardless of its quality, helps keep management, sales and operations on track. With stability and consistency come better performance, and that can only help as the economy comes out of the doldrums.
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