Ten years ago, channel fortunes were so bad that veteran reseller Sydney Borg told his daughter, who was about to start university, to major in a subject that had nothing to do with IT reselling.
“Twenty years ago, I thought there wasn’t more than one to two years in this business and 10 years ago I thought the same thing,” says Borg, chief executive of PCS Australia. “I couldn't build a five-year business plan because I couldn't see five years in it.”
His daughter, Lauren Kaye-Smith, took his advice and studied a bachelor of sports science and medicine.
It’s a testament to Borg’s acumen that Lauren now manages PCS Australia’s high-growth education portfolio. Borg proved growth is possible even in a down market, and he has lifted revenues year after year.
One secret of his success has been the kind of radical restructure few resellers would consider – drastically trimming the workforce and hiring people back as outside contractors. By doing this, PCS Australia’s revenue per employee rose from $1.27 million in 2009, the first year the company appeared on the Fast50 list, to $8.62 million last year. And while he halved staff to six employees over that time, revenue also trebled from $15.2 million to $51.7 million.
PCS Australia is one of just six companies in the elite Fast50 All Stars club – resellers that have appeared on the annual list five or more times. The others Perth’s Leap Consulting, Sydney’s Commulynx, Brisbane-headquartered Comscentre and two Melbourne-based companies, Blue Apache and Advent One, both of which have appeared on all six Fast50 lists.
Borg’s radical restructure was a lesson he had learned early on: when he took over Photoset Computer Services from Kerry Packer in 1985, Borg soon had to cut the $20 million-a-year company with 64 staff to a $4 million-a-year company with far fewer workers as he divested business units.
“I saw the recession coming 18 months before it arrived; we scaled down very quickly. [Divestment] reduced my payroll, guaranteed me more management control and quality. That made a huge difference.”
Borg has stood the test of time by following a strict cash flow discipline. This is how PCS has avoided becoming on of the “horrifying number of resellers going to the wall”, he says.
“You can’t survive by saying you have $20 million deals and then when you get cash in the business you strip it out. You can’t hope you can live on the next month’s worth of trade to pay last month’s – you’re tricking yourself.”
Next: How Advent One tripled in size to $27.4 million in six years
Melbourne reseller Advent One, which has appeared in every Fast50 since inception, has also seen benefits from greater efficiency – it more than doubled revenue per employee from $314,356 to $668,795. Advent One turned over $9.4 million in 2009; last year, the number was $27.4 million.
Meanwhile, its IBM solutions have evolved, says managing director Graeme Clark. For instance, IBM divesting its x86 server business means Advent One is now a Lenovo dealer. But the biggest changes were from the shift to services, he says.
“Services have become a more significant part of our business,” Clark says. “Clients have moved from mostly buying products six to seven years ago; now they're mostly looking for outcomes.”
But Advent One also benefits as IBM cuts its sales force. “They're doing less business direct so that’s supported some growth and that adds product and services revenue as well.”
Capitalising on such changes and the foot faults of competitors saw Advent One rise from the pack to No.1 IBM reseller spot, Clark says. And although managed services open opportunities, Clark eyes the trend of applications software makers “getting back into infrastructure”.
“End-customer workloads that were opportunities to provide infrastructure won’t exist any more.”
Over in Perth, there’s Leap Consulting, which appeared in five of the six CRN Fast50 awards. The company saw revenue more than double from $2.02 million in 2009 to more than $4.5 million in the 2013 financial year, but not without growing pains, says operations manager Neil Smith.
“Growth was based on being in a good vertical and a lot of word of mouth but we got to a point where that dried up and we had to learn how to sell,” Smith says.
Leap spent the past two years teaching staff how to sell. Content marketing now plays a big role as Leap deploys HubSpot for its thought leadership and lead-generation platform. “When the referrals dried up we realised we had no idea how to sell. We thought the sales guys weren’t achieving goals and then I and the two business owners went out and we didn’t succeed, either.”
Transforming from “order takers” to a sales-led organisation enforced a new discipline; Leap now has a sales funnel to qualify and track leads. “Now it’s down to scripting the entire sales process. We used to shoot the breeze [with customers] and now it’s very structured.”
Leap is “just starting to see the benefit” as the number of closed deals improves to one in two starts, he says.
And as Leap moves from hardware to services such as cloud migration, margins are also improving. “It’s about having the right type of revenue and clients. We've become more selective especially at the bottom end; we’ve turned business away that we would have previously taken.”
Leap now charges for its upfront consulting, cutting tyre kickers and improving deal flow. And as the deals proceed, Leap now provides a forward view of a customer’s likely spending to remove sticker shock down the road.
Clients don’t like unplanned spending; they need budgets for the next year.”
The CRN Fast50 All Stars: Secrets to their success
Improve your business sustainability by following these simple principles:
Master cash flow discipline: The business isn’t your personal ATM. Retain profits to ride through tough cycles guaranteed every seven to 10 years and to fund expansion in the good years.
Beef up process: Managed services require systems that replicate like templates to keep down costs and maintain consistent service levels.
Watch your main vendor(s): Relatively small changes in the strategy of your chief suppliers can have outsized impacts on your business.
Learn to sell: Order-taking and good word of mouth supports growth for only so long; to blast through revenue ceilings ensure your sales funnel is structured and content marketing is attracting the right type of clients.
Fatten margins: Ensuring you have the right mix of margins in your sales portfolio will boost revenue growth in the long term.
Value what you sell: Start charging for what you once gave away for free and encourage clients to see your unique value.
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