16 Mar Building A Sales Engine: An Interview with Steve Riat
Editor’s Note: Steve Riat, Director of Sales at Nex-Tech, shares his insights for MSPs looking to build a successful and scalable sales team. During this episode, Riat touches on the importance of keeping the sales process and compensation plans simple, some interesting marketing tips and the benefits of farming your existing client base.
Ted Hulsy: Steve, welcome!
Steve Riat: Glad to be here Ted.
Ted Hulsy: Okay, so, one of things we always do just to kick things is off is we ask our specialty guest to talk a little bit about the firm they work for, you know, most of the time, we’re talking to MSP business owners or leaders. Tell us a little bit about Nex-Tech.
Steve Riat: Yeah, we’re located here in Hays, Kansas, which most people have no idea where that’s at, so if you drew a line about halfway between Denver and Kansas City, that’s where we would be—in a town of about 20,000. We do cover most of the state of Kansas outside of the metropolitan areas. So, as a strange business strategy, we kind of stick to our rural communities. We have 21 offices here in Kansas, and pretty much from north to south and east to west, and really focus on small/medium businesses, a few large businesses, but most small/medium. Then, in addition to our MSP side, we do have an Internet and telephone side of our business, so we can kind of serve customers from several different arenas, I guess.
Ted Hulsy: Okay, and you’re a sales leader there. Talk to us a little bit about your organization and kind of your mission at Nex-Tech.
Steve Riat: Yeah, absolutely. Being in rural community, one of our primary goals is to serve the small and rural communities to bring the best of technology out to our communities to help them thrive and as you may or may not know, the rural communities are seeing a little bit of a brain drain, and we’re seeing the youth leave, and we want to provide the best of technology to allow people to work remotely or to grow their businesses in these rural communities.
Ted Hulsy: Okay, and is the sales function at Nex-Tech—what does that look like? How many folks are on your team and how are you guys organized? How do you go about winning new accounts and serving your existing clients?
Steve Riat: Sure. From a sales standpoint, we have 21 folks that work kind of directly with sales. We have me that kind of runs all of the outside business sales side. Underneath me, I have Mark and Olga. They are sales supervisors, so each one of them have about 10 folks that are responsible for calling on our business customers. Really, everything from the Telco side of things to the MSP side. We do have one rep that’s responsible for small business communications, so she focuses on…when I say small business, I mean five users and under, so really small business. Then we have two SEs that work on providing all the technical know how we need to the sales team to configuring the larger solutions.
Ted Hulsy: Okay, well great. You’ve spent a lot of time and built quite a reputation in the IT channel as an expert in sales and marketing and really being out there helping other MSP business owners develop the sales and marketing capability. What do you see as the biggest challenge for most MSPs in kind of really building out their sales and marketing capability?
Steve Riat: Yeah, probably the biggest obstacle I see is as a lot of the smaller MSPs are looking to grow from owner led owner sales to more of a sales strategy is you know, the owner kind of has walked out in the field and sold stuff and then they walk into their technical delivery team and say, ‘Here, go make this work.’ The issue is that as they bring in a new sales rep, say the first sales rep, that sales rep doesn’t have that same authority to wield across that team, and so they can’t just say, ‘Deliver what I told you to do because I said so.’ So, they haven’t built a lot of process around their sales strategy and their delivery strategy so that when they hire that first salesperson, it’s like, ‘Here’s what we sell, go out and repeat this ten times.’ They’ve created a bunch of snowflakes that are all different and again, part of our strategy is to make sure we’re building Legos and they stack very cleanly and they’re very consistent in how we deploy them, how we service them, and of course, how we sell them.
Ted Hulsy: So, where do they begin? I mean, is it starting with documenting everything? Constraining the buttons and knobs and options that the client can have? I mean, how does the…I mean, I think what you’re describing intuitively sounds absolutely correct. It’s like, if you’re the business owner, it’s easy for you to close business because you can say yes to the client on virtually anything and then you go back and figure it out. A sales pro nearly always needs to operate within the parameters of, you know, yes, we do support that feature, we do support capability or we do support that service delivery level. So, how does an MSP business owner really get their house in order so that they are ready for that first sales hire?
Steve Riat: Sure. For us, it started many, many years ago. We started packaging our solutions into very specific offerings around, say, back-up or security or monitoring and management, and we had very simple documents that said, ‘Here’s our offer. Here’s what included. Here’s three potential things that you can add on to that offer, scaled by some particular size metric depending on what it is either by storage or on site/off site, those kind of things.’ It was a very specific document, very one page, very simple for everybody to understand, both salespeople and technical people to know what we’re delivering. Then we started selling it. The key factor that we did is it wasn’t, you know, the sales team didn’t really have a lot of flexibility in pricing. It’s, ‘Here’s what we sell and here’s the price.’ It was, ‘These are the ways that we bundle it. It’s got three different versions and we only install three different versions.’ Then we repeated it about one hundred times each. Now, over the years, of course it has to change—either size or scale or whatever it is based on as the technology changes, but you know, the KISS theory applies here was, ‘Keep It Simple Stupid.’ Well, that’s where I start because, you know, I’m a simple sales guy and I don’t want it to be complicated, and the simpler we could make it, the more repetitive we could make it, and of course the more profitable it would be.
Ted Hulsy: But what you’re really describing there is kind of, it’s both an art and a science. That’s really what we call a larger organization’s product management, you know, really defining what is the offering in fact, what are its boundaries, what are its features, you know, what are its service levels and capabilities, and what does it not do, you know. That requires a lot of training. That’s kind of another area that’s quite immature in a lot of IT service organizations, and there’s kind of this idea that everything wants to be in a number bundle, which is probably an additional complicating factor I think for a lot of business owners.
Steve Riat: Yeah, yeah, I agree, you know, you start really simple and then you start messing with it and it gets more complicated and that’s the key factor is try to just go back to that simple step. Also, a lot of times, our companies are driven by technical minded people, and we think that everything has to be rocket engineering here, so we really need to go back to, you know, maybe we can bundle in more things in each of the three packages, but don’t change the three packages. This is what we provide. This is how we provide it. We don’t stray far from that. Some of our buddies over at Service Leadership, you know, they talk about operational maturity level, and the more strategy can bring around simplification and consistency, higher your operational maturity level and that’s very key to becoming a very profitable business.
Ted Hulsy: Yeah, and part of being a higher, so called OML company, is standardizing on things and having standards, especially in terms of your vendor relationships. What firewall you’re going to put in place. What backup and recovery solution you’ll put in place and to now really let, you know, one off client decisions distract you from that. That’s certainly another part of having a, you know, productizing things. It means you also, the inputs you’re bringing in from a vendor perspective or from a product perspective, you need to also constrain those.
Steve Riat: Absolutely and the next step of that, that we’ve found is if we’re looking for a new solution in a particular area because the needs of our customers changed, I want to go back to those vendor relations and ask them if they have something in that arena that I can use from a current, you know, manufacture or distributor, and that takes priority over finding something shiny that I don’t have a relationship with because if they already have it, I probably share a common dashboard. My sales people know how to work with them. The technical people have already worked with the technical people on the manufacturers end. It keeps the whole thing simple. Sometimes we have to maybe not have the ideal solution to the customer’s problem, but we’ve covered 95% of their need, but it’s with a current provider. That’s a better choice than getting 100% solution, but creating a whole new vendor relationship with a whole new set of relationships I have to manage, and a whole new set of, you know, quotas and all these other things, so absolutely standardizing on who you use as your key vendor partners is very key to the high OML.
Ted Hulsy: So, let’s say somebody is, you know, they’ve productized the offerings. They’ve standardized their vendor, their suite of vendors. They’re going to partner with…they’ve documented everything, and then they haven’t hired that first new salesperson. Where should they begin? Do you start with somebody to farm the base or somebody to go out and hunt new?
Steve Riat: Yeah, well, I would think you’d want a farm the base. There’s a lot of argument going back and forth on this and the reality of it is that for me, an existing customer is an easier customer to deal with than trying to find a net new logo, kind of how we describe it, so starting there. A lot of times, what I find is when people hire their first salesperson or new salesperson, they’re like, ‘Go find new stuff. I’ve already got these people.’ Well, you know, it’s not quite that easy. You’ve got to give them a little bit of maybe fifty-fifty, right. Here’s the set-up house accounts that we already have, go farm them from new, and then go find me fifty percent new business or add a new logo every month or somehow just strategically grow the business. So, for me, you know, you have to start in your known and work your way up because how difficult would it be if you’re a brand-new salesperson into an MSP and say, ‘Here, just go sell to new people.’ Based on what relationship? Based on what knowledge of you? Based on, you know, they don’t know anything about this MSP and you’re going to be successful? I rarely doubt it, so you’ve got to help them out with a starting place somewhere.
Ted Hulsy: Right, and I often thing that while a lot of MSP business owners think they’ve got a really good handle on kind of the quality of their relationships they have with their clients, it’s often they underappreciate how, hmm, let’s say how much dissatisfaction there might be, how many stones have gone unturned because there just haven’t been enough attention on the installed base. I think there’s so many kind of service add-ons and additional value that MSPs can bring to their existing clients, so many additional projects, if they just had somebody actually focusing on the base and engaging with them.
Steve Riat: Yeah, totally true, and it’s amazing, you know, people think they’ve captured all the business in their area. You know, Ted, here I sit in a town of 20,000 people and I really feel like that we have not fully penetrated the possible customers in our own territory of 20,000 people in just this local market that I sit in here. Nonetheless, the entire side of western Kansas, yet, I’ve spoken with MSPs sitting in New York City or you know, San Francisco or some of these areas where they probably have more business opportunity in one block than I do in 50 square miles. They are like, ‘Yeah, I’ve got all the business already…I’ve got to expand into another market.’ I’m like, ‘Really? Wow, okay.’
Ted Hulsy: Right, so there’s always kind of an overestimation in terms of like how complete the sales effort has been done, but if they…you know, I think what I’ve seen with a lot of very successful partners in HTG and you’re in HTG, eFolder as a vendor, we’ve engaged at HTG for years, but in looking at a lot of partners that have really cracked the code on sales, and companies that I’ve known, say before they even had their first quota caring salesperson, they really mastered it by mastering farming first. You know, they get one, two, or three account managers farming their base before they actually move on to adding a hunter. That’s at least what I’ve found with a lot of very successful companies that have kind of cracked the code.
Steve Riat: Yeah, absolutely. The next step that I would put Ted too, is a lot of people are like, ‘You know, I’m going to hire me a salesperson and in three to six months, they are going to be killing it. They are going to be making me a million dollars, that’s great.’ That expectation just isn’t real. You know, from what I’ve seen, really in my own career, is it probably takes six months to kind of understand our business and get, not to say you can’t be closing deals. You absolutely can be, but to be paying for yourself in six months, I think is probably very reasonable, but it takes three years to be great. A lot of people are like, ‘Look, I’m at month nine and they’ve sold six deals.’ I’m like, ‘That’s pretty good depending on the size of the deal, right.” The final piece of that is a lot of times because the owner was doing the owner-led sales, they didn’t invest the time personally to go into the field with the sales rep and coach them, you know, sit in a call, have a conversation, you know, maybe the first couple of calls, the owner leads the sale with the potential client. Then maybe in the middle of the next couple of calls, they do a 50/50 deal, right, where the owner does about half the talking, maybe they are the technical resource on the sales call, and then the sales person runs the relationship side. Maybe the final piece, you know some of the things that I like to do is I’ll introduce myself as more of a technical resource because I’m pretty technical or maybe as a secondary person to be on the call or a trainee even and let the salesperson run the call, but when we’re done, you know, here we get a lot of drive time in Kansas, we debrief after the call and say, ‘How did that go? What could have went better? What could have went worse?’ They do it for me, meaning if I led the sales call, they are telling me what went well. What did they see that I didn’t see, so that we can have that two-way communication to grow a salesperson and just understand it does take a little bit of patience and if you look back on your career maybe as an entrepreneur, you know, that first six months, you’re like trying to pay the bills, right? You know, you weren’t really good at it, you were just breaking even, maybe even losing a little money. Maybe after the first year, you were making a little bit of money, but just scraping by and by year three, hopefully, you were starting to scale, starting to see some growth and really be good at what you’re providing your customers.
Ted Hulsy: So, you now, hiring, you know, having the right product, having the right product portfolio is not enough. You’ve got to dedicate the time to coach and go out in the field and you know, ramp the person up over a reasonable amount of time. What about comp plans? What kind of mistakes do you see people make in terms of designing comp plans for their initial set of sales pros?
Steve Riat: Yeah, number one—too complicated. I always have my mom test. If I can’t explain it to my mother, then it’s too complicated. So, it has to be simple and the sales rep needs to be able to very quickly understand how this call is going to directly relate to my pocketbook, and if they can’t do that or for that sake, if you can’t do that, the plan is too complicated. The second thing is making sure that the comp plan aligns with your business directives, so if you want to sell more managed services or MRR (monthly recurring revenue), then making sure that you’re comp plan pays more on monthly recurring revenue than it does on say project work. So, but if, on the opposite side of that, if you know, if your comp plan compensates more for project work and you’re trying to drive that MRR, you’re not going to see alignment and you’re going to have a problem from that standpoint. The third thing that I see is a lot of times, you know, a comp plan hasn’t been thought about on scale. Therefore, you know, year one, everything is great. Year two, the salesperson knocks it out of the park or has a very good year and you’ve paid them a substantial amount of money and you’re just not willing to pay it, now you’re having to have a very difficult conversation that was a successful salesperson and you’re cutting their pay. Typically, that ends poorly, either both culturally or you lose an employee that was very productive. So, understand the scale and for me, the simple factor of scale is, and this back to a service leadership quota, is a salesperson should be returning 5x their W2 to 8x their W2. So, if you use some of those matrix to look at a compensation plan, if you’ve built that, then you should know…you should be okay, and of course, the good news is as they scale higher in revenue production, the percent of the deal that you’re paying—because you’ve already covered their base—actually goes down, but they make more money. So, that’s good alignment with your company goals.
Ted Hulsy: So, when you say 5-8x their W2, is that revenue or gross margin dollars?
Steve Riat: Yeah, gross margin dollars. Good point Ted. Definitely gross margin. So, what your gross profit is on a deal, not a top line revenue. That’s not a good measurement.
Ted Hulsy: Gotcha. Okay, so, if you master the comp plan, you kind of move from farming to hunting. You’re out there coaching them. When is the right time to start really investing in marketing?
Steve Riat: You know, there’s a lot of argument on there, and I would say that you invest in marketing before you invest in sales. Caveat, unless you don’t have a way to respond to leads. Meaning, to my point earlier where I said, you know, if you’re having a salesperson call on markets and nobody knows who you are, that’s a pretty steep learning curve. If you at least have even the most basic marketing going, you know webinars, a newsletter, maybe some materials for them to drop off about the company, then at least the salesperson has a warm lead to follow-up on, even a semi-cold lead would be better than no leads at all. They can give a common look and feel, which makes them feel like they’re doing business with a real company that helps. You know, everything from logoed shirt, that’s marketing, right? Logo cars if you own company cards. All of those basics, but you know, your competitor has some of those things, at least big competitors will, and if you don’t have it, it becomes obvious. The question a customer would have is, ‘Really, are you a serious business if you don’t even have a logoed shirt or consistent look and feel across your marketing or a webpage that speaks to your business model?’ Making sure those things are in alignment, and I don’t know, it seems like what I see is people kind of invest a little bit in marketing and they’re like, ‘Well, I didn’t get leads, month one.’ You’re like, ‘Well, you probably weren’t going to get leads months one.’ This is a process, just like sales is a process, so you want to find your process in marketing, stick with it, and then layer sales on top of it so that you can be successful as a team. In my opinion, those go hand in hand.
Ted Hulsy: And where, I mean, have you…where would you direct an MSP business owner to, if they really didn’t know much about marketing, where would you send them? Either a book or a seminar, workshop? Who to watch in the industry?
Steve Riat: Wow, I’ve got to give props out to my friend Robin Robins, you know, if you want to be in the MSP space and you want to have somebody that probably understands the things you should be doing, if nothing else, go out and sign up for a newsletter and you’ll get good ideas. So, that’s one complete picture, but you know, marketing is more than just one source anymore, you know. It’s everything from Facebook to you know, Google Ad works, to all of this stuff. I don’t have a single place. I’m very blessed here at Nex-Tech to have a whole team of marketing and media specialists that kind of keep my ear to the ground on this stuff. What I like to do is I follow a lot of people, you know, hey, following eFolder on this webcast. There’s a great idea, right? Make sure you’re following their information and follow what they are doing in your own business and maybe reproduce it in your own way for your own MSP because companies like eFolder are a leader in the industry. They are doing these things because they work and they’ve got folks like, you know Ted out there, that quite frankly, Ted, that’s your job, right? To keep an eye on this industry and that’s one of the great news is that you get to focus on this every day; whereas, an MSP leader or owner is going to have to do technical time and product time and all these other things. So, using resources with your manufacturers, like eFolder, to pay attention to what they’re doing, replicate the things that you see the highest value, ask the leaders in the industry what they see as highest value. The biggest failure that I see is not doing anything or going out and doing one lunch and learn, and you’re like, ‘Wow, I got a lead and I closed it. Great.’ Then they didn’t do another lunch and learn for like six months. You’re like, ‘Really?’ Consistency. Build it as a process. Execute consistently.
Ted Hulsy: Yeah, and I think in my…I always say kind of varieties is your enemy, yeah, at some level, because I think too often people try to…they get kind of overwhelmed with all the options they have, so they are kind of like a kid in the candy store and they are just going from one thing to the next, and you’ve really…it takes, just like with any discipline, you’ve got to repeatedly do it and practice, and stumble and get better and you know, learn the lessons and to really turn it into what Robin Robins calls an oil well. You have to have certain oil wells in your marketing program that are just consistent producers and if you just put the drill bit in and you only go halfway, it’s not going to be an oil well. You’ve got to go the whole way, and then you’ve got to pump, and then you’ve got to like let it go and run, and you have to give it time. So, you know, I think it’s…in my experience, it’s really important to kind of place your bets, you know, pick a color, like two or three things, and really master them, and after you’ve given them a sufficient run, if they’re not working, certainly cut your losses and move on to the next tactic, but you know, just trying something once…I always say, for instance on webinars, webinars are the easiest thing to do once. It’s really super-duper hard to do it twice, but if you do it twice, a third time, probably in no time, you’re going to have some sort of webinar cadence when you’re doing two a month or you’re doing one a month and you’ve been doing it for three years, and that’s now an oil well in your business.
Steve Riat: Yeah, and that’s exactly what we see on our end. Webinars are a good example Ted. We started doing webinars, I don’t know, three, four, five years ago, and the first time we did it, we took ConnectWise, we dumped the e-mail addresses out of ConnectWise into a database and I think with Constant Contact, and we send it out and said, ‘We’re going to have a webinar.’ I think we had like two people show up, but we got a lead. I’m like, ‘Alright, we’re going to do this next month.’ So, we did another webinar and I think we got like five people that showed up. You’re like, ‘Alright, maybe we didn’t get a lead.’ Then every month we kept doing it, meanwhile, we’re focusing on adding e-mail addresses to our contact database. We’re posting those webinars out on the media chains. We’re reusing them. We’re linking to them in our webpage. We’re getting hundreds of views after the contents already been produced. Now, it’s just part of our cycle. In fact, I could probably come up with twenty webinar topics right now of just things I talk to customers on a day-to-day basis that they just wish they knew more about.
Ted Hulsy: Well, and I think that, I mean, so great story about the power of persistence and how you have to be somewhat humble in the beginning and kind of realistic in your expectations and patient. It’s a very satisfying experience and I’ve had this same sort of dynamic go on in things, oils wells, that I’ve built in my career, and it’s really rewarding to look back and go, ‘Holy cow, that was really hairy in the beginning when we had that webinar with two people show up.’ You really have to have that patience, but I think you just said something that to me is so important, and this is something that so many MSP business owners just need to understand is that marketing…if you’re educating clients and prospects—you’re just educating people about all the stuff you know—give them the genius that you have already built up through your whole career. Share that with them in a generous sort of way and educate them. That’s your marketing. All that marketing is finding different venues to do that, sitting down over a steak lunch, standing in a trade show booth at an industry conference that that vertical may go to, doing a webinar, putting out a newsletter, having blog posts. It’s so much people shouldn’t underestimate the power of education as, you know, the touch stone of everything you do.
Steve Riat: Absolutely, and really what we’re looking to do, is we want to be positioned as the technology expert in our area. So, some of our most popular webinars, quite frankly, have nothing to buy almost. How to give a great presentation, that’s one of them that we did, you know, tips and tricks within PowerPoint. How to make your graphics look better. Those kinds of little tricky, little things, but you know, next thing you know, somebody calls us and is like, ‘Hey, I want to do…I need to set up my conference room so that I can give these presentations, can I get that equipment from you?’ ‘Well, absolutely, I sell that. Let me help you with it.’ Those kinds of things, but was I specifically out to sell my customer a product? Not really, other than I want to position myself as an expert in the field. I want to them to see my face when they think about technology, and next thing you know, customers start coming to me because they’ve just seen me out and about and being a leader in the industry and then they really want to continue doing business with the people that are the leaders in the industry.
Ted Hulsy: Well, very well put, and I think we’ll leave it with that, so tons of great insights today on how to organize your sales effort, how to package your product offerings so you’re ready to sell, and then once you’ve got those sales folks on your staff, how to build a marketing machine that can feed leads into the organization. So, Steve, again, great insights. Thank you very much for always being out there in the industry sharing your knowledge with your peers.
Steve Riat: Thank you very much, Ted. I had a great time.