Because of the Covid 19 slowdown, many VARs are exploring new opportunities to grow their business.
It’s time to look beyond your bread and butter business.
How can value-added resellers adapt and thrive?
Read about 6 VAR ideas and tactics for 2022 and beyond.
- Build An Online Store
- Build A Niche
- Embrace Recurring Monthly Revenue (MRR)
- Tighten Up Processes To Eliminate Waste
- Monitor Your KPIs
- Partner With A Managed Service Provider (MSP)
- Beat Your Own VAR Path
#1. Build an Online Store
One of the opportunities for VARs is an online store. But this has too many challenges. So tread carefully.
VARs can't easily go online due to their large and complex catalogues.
Many IT VARs have thousands of products, and it's difficult to find a cheap ecommerce platform that can handle them all.
Popular ecommerce platforms don't accommodate IT resellers' complicated business and catalogue needs.
Managing all important business operations with one solution is difficult.
The solution must integrate with all systems and ecommerce.
Time-consuming implementation may require developers, adding to your expense.
The better thing to do here is to sell just fast moving and a manageable set of items.
This way you will get an experience with e-commerce before you set off into building something too bloated.
#2. Build A Niche
Many of the most successful IT resellers specialise in a niche (also known as a vertical).
By starting with specialisation and expanding, your company can build a strong reputation for its best work.
This will help you win new business when you add new services or expand to nearby areas.
Your niche could be any combination of the following:
- Location [local to your office area, city]
- Company size [1-10, 11-50, 51-200 employees, etc]
- Market segment [SaaS Companies, Manufacturing, Healthcare, etc]
- Price [low entry price, laddered pricing, bundled pricing, etc]
If you can match your team's skills and capabilities to client needs, you'll be successful.
You could identify an emerging threat or opportunity in SMB IT and commit to being a ground-floor solution for fast-growing clients.
#3. Embrace Recurring Monthly Revenue (MRR)
Adding monthly recurring revenue (MRR) is a reliable way to reduce the risks of relying on upfront sales to maintain cash flow.
Monthly recurring fees allow you to:
- Develop a reliable revenue stream
- Define your ideal customer through long-term relationship
- Upsell or cross-sell to sell more products and services.
- Determine your firm’s value because of stable metrics
- MRR can help you sell or spin off your VAR business.
Potential buyers prefer recurring-revenue companies.
M&A expert Linda Rose says buyers prefer solution providers with 50% recurring revenues.
If your company hasn't embraced recurring revenue, identify clients who will pay for your services regularly and pitch Managed IT Services.
MSPs can offer discounts for annual contracts instead of intermittent purchases to encourage commitment.
Many SaaS companies use the MRR model successfully, but VARs can too.
For IT Resellers, many opportunities for MRR exist
- Manage Internet Domains and TLS
- Sell software such as Microsoft 365, antivirus/antispam, or Adobe
- Offer cloud management and monitoring of MS365, G Suite, Microsoft Azure, AWS and more
- Deliver backup and disaster recovery (BDR) solutions
- Monitor security
# 4. Tighten Up Processes To Eliminate Waste
Getting rid of inefficiencies may seem obvious, but managers are often surprised to find them in a seemingly well-run operation.
IDC research shows that inefficiencies can cost companies 20 to 30% of their annual revenue. Many of these costs go unnoticed.
Because your technicians' efficiency affects company profitability, optimise and automate their work processes.
Outsource or automate repetitive or routine tasks (eg. patching, network scans, agent deployment) so that your staff can focus on revenue-generating activities. A PSA solution can help.
This should be applied to all the departments.
Your sales team updating spreadsheets for activity tracking, forecasting, and pipeline management is an inefficient and expensive use of resources.
Streamlining these processes with a sales and marketing CRM will save time and increase conversions. Your team can then focus on new business.
#5. Monitor Your KPIs
As a VAR, your MSP business could track thousands of metrics.
To maintain profitability and promote growth, focus on a carefully chosen set of KPIs related to your bottom line.
Use these KPIs:
- Service-offering margin
VARs must know which services have high margins and which are loss leaders.
Margin by service offering is a KPI.
This KPI shows how much profit your business makes on each service, allowing you to make strategic decisions about which services to offer, where to expand, and where to cut back.
Calculate your service margin:
(Revenue - Cost of Service) x 100 = Service Margin Percentage
- Customer rating
Certain customers take more time than others, and the squeaky wheel gets the grease.
(Total Customer Services Revenue/Dedicated Hours) = Customer Effective Rate
- Offering margin
Similar to margin by service offering, margin by product offering reveals profitable products. This KPI helps VARs optimise product strategy.
Calculate margin by product offering:
([Revenue-Product Cost]/Revenue) x 100 = Product Margin Percentage
#6. Partner With A Managed Service Provider (MSP)
Many VARs are looking for ways to boost their bottom line as pricing becomes more competitive in value-added reselling.
MSPs provide ongoing, proactive IT monitoring and management, resulting in stable MRR streams for your company.
Considering the numbers (especially for traditional VARs), partnering with an MSP, makes a lot of sense.
A reseller selling 90% hardware and 10% services may have a 6% profit margin.
An MSP earns a 15% profit margin.
Long-term client relationships are another benefit of the MSP business model.
Unlike VARs, MSPs can become their clients' trusted IT advisors.
Trust increases customer loyalty and retention.
#7. Beat Your Own VAR Path
Some may be pessimistic about value-added reselling in 2022, but there are more ways than ever to refine your strategy and increase profits.
Adding recurring revenue streams, automating tasks, and evolving your business model are ways to outperform the competition.
Are you ready to choose your own adventure?
While IT Resellers do face a lot of challenges.
From setting up an online store to focusing on a niche, many are embracing MRR opportunities, using a variety of new offerings and partnerships.
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