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7 IT Sales Secrets for Attracting High-Lifetime-Value Clients

7 IT Sales Secrets

Contents
Jump-Starting Small Business IT Services Sales to High-Lifetime-Value Customers and Clients ........................................................................................................................................ 3 1. How do I close a sale or a contract with a potential customer?.......................................... 3 2. What are some of the best ways to bring in a steady cash flow? ....................................... 5 3. What should I charge in todays economy? ......................................................................... 6 4. What are some of the ways to collect my accounts receivables? ...................................... 8 5. How can I limit losing sales to people who under-bid me? ............................................... 10 6. How do I get customers to value my service enough to make my target income? .......... 11 7. How can I start selling recurring revenue-based services? .............................................. 12 Action Items ............................................................................................................................ 14 Additional Recommended Reading ........................................................................................ 16

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7 IT Sales Secrets

Jump-Starting Small Business IT Services Sales to High-LifetimeValue Customers and Clients


Do you need more high-lifetime-value customers and clients? Do you own a computer consulting business, VAR company, network integrator firm, IT solution provider organization, MSP business, or computer repair business? If so, theres an excellent chance your company needs a sales boost. In this white paper, youll learn 7 fieldtested and proven IT sales secrets that jump-start services sales, including: how to close a sale or a contract with a potential customer the best ways to bring in a steady cash flow what to charge in todays economy effective ways to collect accounts receivables without alienating clients how you can limit losing sales to people under-bidding you how to get customers to value your service enough so you can make your target income
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how you can start selling recurring revenue-based services. If youve ever wondered what makes an IT business successful from a sales standpoint, this white paper will not only give you the what but also the crucial how-to advice so that you can implement and apply these strategies to your business and take it to the next level. As you read and begin applying these strategies, this white paper can serve as a yardstick to see where your business measures up, and where changes can be made to your approach, so that you can establish good relationships with your prospects, customers, clients, and peers. These practical steps ensure that you not only make sales but, more importantly, do business with the right people, at the right time, under the right mutuallybeneficial terms. Now, since you can't have an IT business without clients, lets start with the most important questions first.

1. How do I close a sale or a contract with a potential customer?


First, you have to differentiate the two parts of this question. There is a difference between closing a sale and closing a contract.

7 IT Sales Secrets

In this paper, the term sale means the initial transaction with a new customer. A contract is a long-term deal, generally a support or service agreement that lasts for at least one year. Unless you have the luxury of working for an IT business with a pre-existing client base, there is a pretty good chance that you are going to have to make the initial sale. Relationships and credibility need to be established with customers before you can make repeat sales and then ultimately transition those relationships into long-term support contracts. The biggest mistake technology providers make is trying to close a longterm, very high-value sale to a prospective customer with whom they have never done business. This will have the following negative consequences: It lets prospective customers know that you care more about your own immediate financial interests than the long-term relationship. It lengthens the sales cycle unnecessarily because of the risk perception on the part of the prospective customers. You may inadvertently commit your company to toxic, distracting, money-losing
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relationships. In other words, without first taking on small initial projects, how do you know that you actually want these customers long-term business? To shorten the sales cycle for your IT business and establish healthy customer or client relationships, consider the following best practices: Use highly targeted marketing activities and lead generation to ensure that prospects are qualified to become long-term clients on your companys support agreements. Develop efficient and consistent lead qualification criteria, such as: o Number of employees o Number of locations o Number of workstations o Number of servers o Dominant platform/OS/NOS o Methods of receiving IT service/support in the past o Who currently supplies IT service/support o Whether theyre used to paying for a professional IT service/support
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Focus on selling a small, initial, low-risk, proving-ground project that can be accomplished in one or two visits. Bring a letter of engagement with you for the initial proving-ground project. Make sure that you have testimonial letters, videos, and case studies, your third-party credibility builders, from similar local small businesses. Guarantee your findings. As a way to accelerate the closing of the sale, offer to apply the cost of the proving-ground project to any follow-up work committed to within 30 days of the initial proving-ground project being completed.

Consider residential users and homebased businesses that promise you the moon but then call you once and never contact you again. Don't waste precious sales resources, or even marketing resources for that matter, on customers that dont have long-term potential. Similarly, putting yourself in hypercompetitive bidding situations will completely destroy your profit margins. This means no chasing after most government contracts, which are usually not a great fit for small IT businesses that cater to other small businesses. Thats all well and good because its a landmine thats easy to identify. Along the same lines, avoid hidden but related dangers as well: when small business owners act like government purchasing agents and attempt to screen their IT providers through a competitive bidding process. Keeping these two warnings in mind, to bring in a steady cash flow, you need to be reaching your prospects much earlier in the sales cycle. For this to be effective, you need to establish awareness and build up credibility for your business. There are a few ways to do this: Publish white papers. Write articles for the local newspaper or newsletters. Do speaking engagements for local groups of small business owners and managers.
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2. What are some of the best ways to bring in a steady cash flow?
Before we can zero in on the best ways to ensure steady cash flow, lets first discuss some of the most dangerous threats to steady cash flow. Topping the list one-shot-deal customers. Wasting time with one-shot-deal customers is a resource drain and the biggest distraction that you can possibly have in your IT business.
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7 IT Sales Secrets

Sponsor your own seminars. Participate meaningfully in select, targeted trade shows. Use targeted direct-response marketing efforts (where a response can be measured). Build relationships with trusted local business advisors in your community. In addition, make sure that all of your marketing and promotional efforts are directed at targeted small business owners and managers rather than marketing to everyone, including residential computer users. In other words, your marketing resources need to be dedicated to prospective clients that are the right size to be candidates for your ongoing support agreements. Once you have identified those segments, it is much easier to come up with an offer and marketing pieces that resonate with your target audience. Furthermore, by building relationships with trusted business advisors in your local business community, you can leverage sales from their existing business relationships. Just be aware that in order for these relationships to prosper, your networking contacts will sooner or later expect you to reciprocate by sending some referrals their way as well.

In summary, to bring in steady cash flow, make sure you focus on the right target audience. And one of the fastest ways to reach that target audience is to build relationships with like-minded, trusted business advisors in your community who already have preexisting relationships with your target audience.

3. What should I charge in todays economy?


How you market your business will have a big impact on what hourly billing rates your company can command and the degree of sales resistance that you experience. Many technology providers inadvertently impair their ability to command top hourly rates because they engage in outdated advertising techniques, which might include phone book advertisements, newspaper display ads, and even coupon packs. Why are these popular promotional avenues harming pricing power? There are two reasons. First, in most cases, they usually provide no strong call to action. Second, even when theres a call to action, it is almost always based on price. While these approaches work just fine when youre selling a commodity, IT services generally should not be positioned as commodities.

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7 IT Sales Secrets

Someone who goes to the phone book and randomly calls ten technology providers (sometimes even throwing darts at the pages) generally wants to see who answers the phone and whos the cheapest. That is the mindset of many non-technical small business owners or managers who have not been educated on what they need to be looking for when it comes to finding and hiring a technology provider. Therefore, it's essential to reach your prospective customers much earlier in the sales cycle, so they never feel the need to become price shoppers. This can be done in the following ways: Get involved in a meaningful way with three to five businessrelated organizations. Participate in these organizations business-tobusiness (B2B) trade shows and expos. Give talks and be part of panel discussions at events that your target prospects attend. Sponsor or co-sponsor seminars with those who have their own client base. Plan very targeted direct mail, one niche at a time, with an urgent soft offer that promotes your expertise.

Use highly targeted direct mail to your in-house list, making an urgent offer. To ensure your companys survival, make sure your prevailing current hourly rates are bringing you a profit. And make sure you dont become one of those reactive, box-pushing hardware techs who are stuck in the $25- to $50an-hour billing range (or your local currency equivalent), and are running faster and faster just to keep their company afloat. On the other hand, technology providers who are more proactive and a lot more deliberate about going after the target markets that they want are consistently commanding $75 to $150 an hour (or their local currency equivalent), depending on the scarcity of their skillset and their local area's cost of living, which is essentially the cost of doing business. The technology providers who consistently command top hourly billing rates do this by making sure that the small businesses with whom they work are the right size, that there is a good platform match, that there is a good industry match, and that these companies have paid for professional IT support in the past. Look, if you do not have a marketing plan, you are going to get a default marketing plan assigned to you by the marketplace. Its kind of like the default configuration that you get by blindly
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7 IT Sales Secrets

clicking Next, Next, Next, Apply, OK. Sometimes it works out OK. A lot of times, the default marketing plan just isnt optimal. After all, who wants to specialize in cheapskates, ingrates, software pirates, and control freaks? Certainly, its not a fun place to be. If you do not want to settle for the default marketing plan, your call to action is to be much more proactive about what you do with your marketing, targeted lead generation, and sales process, with big emphasis on the word targeted.

Transactions with new customers A new customer does not have any kind of credit history with you, and it is an enormous risk to provide the unproven customer with credit. Generally, the best way to approach these kinds of situations is to give them the following: A letter of engagement A credit card authorization form. While some might argue that you should not give 3 to 4% of your earnings to the bank so you can accept credit cards, consider that getting paid 97% of the invoice amount three business days from now is much better than begging for your money or taking a write-off 60 days down the line. It makes sense to spend a nominal amount now so you can accept credit cards. If this concept is new to you, shop for a credit card merchant account. Pay attention to monthly recurring fees, per-transaction fees, and percent 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 you can do anything you want. After all, its your business. But similar to the saying friends dont let friends drive drunk, friends shouldnt let friends extend credit terms on low- to no-margin product reselling.

4. What are some of the ways to collect my accounts receivables?


There are three kinds of transactions that happen on a regular basis with IT service providers: IT services transactions with new customers for proving-ground projects Product reselling transactions (mainly hardware, software, network equipment, and peripherals) IT services transactions with existing clients for major projects and annual service agreements. Lets look at each of these three categories in turn.
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7 IT Sales Secrets

Even with well-established clients, you should deal with product reselling in the same way that you would with a new customer. You need to have a purchase authorization form or something similar that has a credit card authorization on it, so you're not carrying the credit risk of a high-ticket item with no profit margin. Bear in mind, many IT companies mistakenly believe they actually have a profit margin on product reselling. However when considering all the soft costs, especially the less-obvious overhead costs associated with product reselling, it is rarely a break-even activity. Get involved in product reselling only for clients that you see on a regular basis and preferably those with whom you have service agreements. In other words, these clients have made a commitment to you, so you can deal with the low- to nomargin product reselling as a loss leader. These same clients also recognize that they are saving time and avoiding risk by consolidating their product purchases with your company. As a result, most of your steady clients will be willing to pay a slight to moderate price premium for such a service. Net Credit Terms Allowing a client to pay a substantial amount of the bill after the work has been performed, often called net credit terms, should be reserved for those who have ongoing annual service agreements with your company.
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Generally, these annual service agreement clients will be with you for the long term, so its worth your while to process a credit application, check their credit references, and grant them a nominal credit line to start the ball rolling. At the inception of major projects or service agreements, you should require a good faith deposit. Depending on the nature of your business, it could be anywhere from 10% at the absolute minimum, to as much as 33% of the project cost or annual service agreement minimum billing commitment. At the same time, you should establish graduated milestone progress payments that are due as the project progresses. Generally, the good faith act of a small business CEO or CFO completing your credit application shows you that they are above board. Certainly, its not 100% reliable, but completing the paperwork is generally an indicator of good faith. Now, if you are truly proactive about how you manage your outsourced virtual IT business, you really should be seeing your clients at least once a month. You could visit your larger clients once a week, sometimes even daily when working on a major project until installation is completed. Typically, the reason that most small business clients do not pay is that they are massively dissatisfied with the relationship. If that's the case, then something about the way you were
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dealing with your clients and managing their expectations was broken long ago. In other words, its not an accounts receivable problem. Its an account management, project management, or customer service problem. There will be times when clients are completely thrilled with your work, but they are just plain broke. More often than not, good outsourced IT companies have such great relationships with their clients that they become preferred vendors. Many technology providers have such great relationships with their clients, and their outsourced IT services are so critical to making their clients businesses tick that when push comes to shove, the clients first take care of their rent and their payroll and then take care of their technology providers. It might not be 100% legal, but when the relationship is healthy and on solid ground, clients are going to bend over backwards to keep their technology providers happy. Smart small business clients know the impact and implications of something going wrong with their mission-critical systems and how easy their technology providers management or staff can use caller ID when the deadbeat client calls and let it go to voice mail. This may not necessarily be the best customer service approach, but this is usually their fear. Therefore, most of your small business clients will pay on time and regularly, even when things get tight financially.
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5. How can I limit losing sales to people who under-bid me?


You really need major economies of scale to be able to run a bid-based IT services business. Essentially, when you focus on winning projects because you are the lowest-cost qualified bidder, you are in the commodities business acting more like a commodities broker than a technologist. Unless you have tons of capital and are ready to scale up to or already have at least 5 or 10 full-time technical employees, plus a few employees dedicated to business development and project management, chances are a business based on bidding is just not for you. For smaller IT businesses, especially 1or 2-person consultancies, there are much better ways to market your business than chasing after RFPs (requests for proposals) and making bids. With a proactive marketing plan and well-tuned sales funnel, youll be in a much better position to command the hourly billing rates and financial arrangements that make sense for your business. Lets face it. Any client who wants to bleed you dry is a leech, not a client. Hit and run just doesnt work long-term.
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Regardless of whether you consider your firm a computer consulting business, a VAR, a network integrator, an IT solution provider, an MSP, or a computer repair business, there is no room for bloodsuckers or parasites in your business model. Now, what can you do to close more sales and build your client base? Become more proactive in your marketing. Always be promoting, so you do not end up desperate and succumbing to the bidding mentality. Get selective about lead qualification. Who is worthy of entering your sales funnel? Promote your expertise and your value proposition and not just the products you install and support. Do not become that circa-1990s era box pusher or commodities broker. Position your company as your clients outsourced virtual IT department and your lead technologist as their outsourced virtual CIO or virtual IT manager. Focus on selling ROI-based solutions, not products. If your proposed solution will pay for itself within 4 months of installation, shout that value proposition from the rooftops.
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(Well, you dont have to go all Beatles or U2 on your clients, but you should very enthusiastically convey this message, and support your proven rapid payback assertions with case studies and testimonials throughout your sales process.)

6. How do I get customers to value my service enough to make my target income?


Value is in the eye of the beholder, and it can be a pretty subjective concept. However, there are a couple of best practices to ensure that you are able to clearly and effectively explain your value proposition to your prospective customers and clients. The goal is to build up your value proposition high enough so that you can command the highest possible hourly billing rates with much less sales resistance. When you take those two variables and multiply them, it can make an enormous impact on the profitability and growth rate of your business. Again, it all starts with the right targeted marketing and well-oiled sales funnel that is appropriate for your IT business. But remember, unsophisticated, nontechnical decision makers do not know anything until you educate them and
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train them that you are the only qualified solution once they know what they're looking for. In order for this to take place, consider the following proven best practices: Qualify vigorously. The size of the small business is extraordinarily important. Homebased businesses will rarely spend even $500 a month (or your local currency equivalent) on a support agreement. Focus on those small businesses with at least five workstations, preferably 10. Make sure prospective clients fall into the correct size category. Typically, prospective clients need to be big enough to be able to pay for professional IT services but not so large that they have a big inhouse IT department. Sell the initial proving-ground project. This way, you at least get a foot in the door with a new paying customer. As a result, youre in a much better position to start building a long-term, mutually beneficial client relationship. Focus on selling ROI-based solutions, not products. Stop giving away the store. No customer is ever going to tell you that you ought to charge them more. Charge too little, and it's
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nearly impossible to recover without having to rebuild your client list from scratch. Not a fun place to be. So get it right the first time. Remember, its a business, not a charity. If you want to donate your services, do so knowingly to those you feel are worthy. If you want to start a non-profit organization, thats one thing, but most IT businesses need to turn a profit, so they can afford to stay in business and take care of their small business clients that depend on them the most.

7. How can I start selling recurring revenue-based services?


The answer to this is pretty simple, but there is a big difference between knowing what to do and actually following through and doing it. Selling recurring revenue-based services means having a solid, proactive marketing plan in place, coupled with a well-thought-out sales process. A lot of IT business owners naively think that selling recurring revenuebased services will just magically and automatically happen. But building a solid client list and a recurring revenuebased business takes work, and it takes time.

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There is definitely a sales cycle involved, and it usually comes down to the following: Know exactly who your target market is with a bullet-point description concise enough to fit on a cocktail napkin. Map out a strong proactive marketing plan to reach that target market. Execute that marketing plan consistently, taking great pains to track whats working and whats not. Qualify your leads using criteria that are simple enough to fit onto your cocktail napkin checklist. Dont waste time on wild goose chases or scavenger hunts with unqualified prospects. Your sales presentation should focus on selling your companys value proposition and what you bring to the table, not just buzz words, certifications, and authorizations. Talk up your problem-solving skills, your success stories, and your ability to deliver ROIfocused solutions. Once your company has completed a few projects for new customers, they are no longer transaction-based customers but have become relationship-focused clients. This is a huge difference in mindset that really needs to come before
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any discussion of ongoing support agreement arrangements. Once new customers are delighted with the results of your initial proving-ground project, there will almost always be some follow-up projects, or some upgrades, or some remediation work, or clean-up jobs. When discussing these more substantial projects, you should ask, Have you given much thought to how youd like this all supported once everythings installed? Clients who are thinking long term want to make sure that the relationship works both ways. If new customers have a hit-and-run mentality, they are definitely not worth the time of day for you. They are the opposite of what you are looking for if you want to be selling more recurring revenue-based services. Of course, if you back yourself into a corner by charging too little (again, this is one of the biggest rookie mistakes), it can be very difficult to recover. If you're currently in that kind of bind, get in touch with us, using the contact information at the end of this white paper. It's not easy, but there are ways to repair these oversights. Ultimately, if you want to sell more recurring revenue-based services, you need a decent proactive marketing plan in place, you need good lead qualification, you need a good step-bystep sales sequence, and you want to
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make sure that you are focusing on clients who are going to be with you for the long haul.

default plan will be assigned to you by the market. Execute your marketing plan and track results. The best targeted marketing plan in the world cant help you if its collecting dust. Therefore, start taking action, a little bit each week, and be sure to note which campaigns are working and which arent, so you can dump the losers and repeat the successes. Build your network of trusted business advisors. Networking is critical in your IT business. Nurturing relationships with likeminded accountants, attorneys, management consultants, graphic designers, and niche developers gives you a great network of peers to bring in on your projects. From an IT sales perspective, youd be hard pressed to find a lower-cost, more logical source of super high quality leads. Make sure you take a few hours each month to get together for coffee, do lunch, or go out for drinks. Its like having your own little mini channel program of enthusiastic supporters referring their clients to your IT company. Stop wasting your time with one-shot-deal customers. Its just not a cost-effective use of

Action Items
In this white paper, weve looked at how you can get more high-lifetime-value customers and clients by focusing on some of the easier IT services sales to local small businesses. As you apply this advice in the field with your prospects, customers, and clients, be sure to keep the following in mind: Never try to make a huge sale the first time around. Focus on selling a small, initial, proving ground project, so you can establish a new customer relationship. From there, you can both decide whether the match is suitable to become a long-term engagement. Don't elope on the first date. Take it slow. Make sure that you have a proactive, targeted marketing plan in place. While its tempting to be lazy and accept the marketplaces default plan (i.e., roll the dice and do nothing), most IT business owners really dont want to specialize in cheapskates, ingrates, software pirates, or control freaks. Remember, if you do not have a marketing plan, a

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7 IT Sales Secrets

your companys most scarce resource: your time. Never put your company in situations where the lowest bid wins. Dont become a commodity broker when youre really trying to build an outsourced virtual CIO business. Let your biggest fan club sing your praises. Make sure that you have your testimonial letters, videos, and case studies with you when you make your sales calls. These third-party credibility demonstrations really do strengthen your sales pitch tremendously. If your proof of expertise is strong enough, your fan club basically closes the sale for you. As with most things in life, its not only about having the information. At the end of the day, what matters most is what you do with these proven IT sales strategies. Remember, if you are not motivated to go out there and make a difference to your business, nobody is going to do this for you. Even those that you compensate very highly for this purpose will more often than not be building their client list, not yours. Remember, you don't need to tackle everything at once. Give yourself a weekly IT sales task to focus on. Put that IT sales task on your calendar. Print it on
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a big piece of paper tacked to the wall by your desk. Rome was not built in a day. So dont stress out about taking a little time to build your IT companys client list. In the end, scaling your companys client base the right way will be very worthwhile, so you can have a stable, profitable business with high-lifetimevalue customers and clients signing ongoing service agreements.

Copyright 2012, SP Home Run Inc. SP Home Run is a trademark of SP Home Run Inc. All Worldwide Rights Reserved.

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7 IT Sales Secrets

Additional Recommended Reading


Sign up now for your free subscription to the SP Home Run Weekly Update Newsletter. Each week, youll learn about new tools, tips, resources, events, and specials that can help you get clients, build recurring revenue, and grow your business. Topics include: IT Marketing and Lead Generation: so can you attract great new prospective clients Selling IT and Lead Nurturing: so you can sign up new clients IT Service Contracts: so you can get recurring revenue Starting Up a New IT Business: so you can jump start your new business, if youre just getting started or even re-started IT Channel and Small Business Technology: so you can deliver soup-to-nuts, outsourced virtual IT solutions

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