Ancillary services: the key to a profitable business

Ancillary services: the key to a profitable business

New Zealand resellers have a couple of options. They can try to sell more kit, which means they either have to expand their product portfolio or find more customers for the products they already offer. Or they can try to minimise costs by reducing stock or working longer hours.

These options are stopgap measures at best, and they won’t solve the long-term softness in the reseller market. However, there’s another strategy many resellers have successfully adopted to help them through lean times.

Ancillary services can provide a regular income stream if you have the right skills inhouse and a set of clients to purchase them. Some services, such as providing security audits and plugging holes in your client’s defences, take very well-trained technical staff and could be out of reach for non-specialist resellers.

Other services, such as basic PC installation and minor repairs, are the bread and butter of many resellers but again they are predicated on hardware sales and hard to predict with any certainty. The challenge for resellers is to build a balance of hardware, software and services that provides a steady stream of income without having to reinvent their business.

Layers of trust and expertise

Services have long been the mainstay of larger systems integrators, such as Eagle Technology Group, Gen-i and Axon. But it has taken years of hard work to build up that level of trust and expertise. For smaller resellers to emulate that business model requires planning, an understanding of the market and a service mentality. “We saw services as the way to differentiate ourselves in our market,” says Angelica Mayo, managing director of Queenstown-based reseller Digital 7. “If we had just focused on hardware and software, then the only difference between us and others would be price and nobody wins in those situations. Our background is in services – the other director and I worked for Datacraft overseas – and we understood that clients will support a business that makes customer service a priority.”

But starting a service-orientated business, especially in a smaller market, can be problematic. “We opened our retail showroom with a very small staff and started slowly,” says Mayo. “While we wanted to concentrate on services, we needed to establish credibility and build a client base. The showroom gave us visibility in the community. As we sold more hardware, the services followed. We now have three full-time technicians and are looking to expand, either with a larger shop here in Queenstown or a second showroom in the rapidly-expanding Frankton industrial area where a lot of our customers are located.”

A major factor in Digital 7’s success is that the technical staff are sales orientated as well as technologically skilled. “We don’t have a sales staff per se,” says Mayo, “but that hasn’t been an obstacle, as our technical people are very proactive when they go onsite for a service job. They’ve built up a good rapport and credibility with our customers, so when they recommend an upgrade or enhancement a sale usually follows. We have a set of procedures that we follow on site visits and this standard methodology builds confidence on the part of the customer.”

Even though Digital 7 has been successful, relying on services means that there is inevitable downtime for the technicians. “We use any spare time to upskill ourselves with new products and techniques,” says Mayo. “Not only does this give us greater flexibility in what we can sell, but it also keeps our team happy as they’re constantly learning.”

Locking in your services

While Digital 7 had a service emphasis from the start, some resellers have to shift gears in order to become more service-focused. Distributors are not oblivious to the difficulties their resellers face and have to be imaginative to support them. “We’re only as good as our channel, “says Paul Leslie, business development manager at distributor Soft Solutions, “so we’re always looking for products that can be mutually beneficial for ourselves, our resellers and their clients. And we’re seeing more products coming onto the market that fit that model.”

One example of an offering with the potential for a good return is ShadowProtect IT Edition from StorageCraft, says Leslie. “ShadowProtect is perfect for those resellers who want to offer additional services to their clients without having to invest too much resource into training and support. Basically, ShadowProtect is a disaster recovery product that you license from StorageCraft. You license it on a per-technician basis and you can use it on an unlimited number of workstations or servers to back up your client’s entire system. You can send out your technicians to client sites on a regular basis to perform these backups. Not only does this give you a regular income but, once your technicians are onsite, they can keep their eyes open for other opportunities.”

Another advantage of products like ShadowsProtect IT Edition is that they have been designed from the bottom-up with service provision in mind, says Leslie. “It takes bugger-all to learn how to operate the software, so the reseller’s investment in training is extremely modest. Plus, the vendor, StorageCraft, is set up to help resellers promote the product to the channel with co-op funding, marketing collateral and a pro-active presence here for joint presentations and any technical support. While we’ve seen other service-orientated products on the market, the people from StorageCraft seem to have gotten it right.”

Providing services, if done correctly, can give resellers a distinct advantage in a tight market. Customers like the ‘one-stop-shop’ approach and sending technicians on-site is a powerful sales tactic. But you have to have enough business to keep staff billable. And you have to have the right people who can complete the job the first time in order to build trust. If, however, you can get the basics right, providing services will give you the repeat business that is essential for you to be successful.

Successful service provision with MYOB

Services make up approximately 85 percent of revenue for Hamilton-based MYOB reseller JK Business Systems. “The sales of MYOB software are actually a minor component of our revenue stream,” says Jennie Kingma, director of JK Business Systems. “Most of our income comes from setting up MYOB for clients, training them on the system and then supporting them thereafter. In fact, we’re not really too worried if they have purchased MYOB from a retail outlet — we’ll still help them get the most out of their system regardless of where they bought it.”

“Our ideal customer is one who plans their programme from the start,” says Kingma. “This way, they can get set up correctly, get the right training and implement procedures that work. We’ve found that if you get the basics right from the start, the whole process works very well. The tricky ones are the customers who might buy MYOB off the shelf and try to install and set it up themselves. More often than not, we have to undo everything first before we can make any progress.”

Offering MYOB services has been a smart move for JK Business Systems. “We have a customer list of probably close to 500 customers, about half of whom are active,” says Kingma. “Most of our work comes from word of mouth and advertising, as well as referrals from the MYOB website. Our customers range from those who buy the product, get a minimum of advice and that’s the last we hear of them, to those who seem to be on the phone for advice every other day. Both types are equally important to our business.”

In addition to installation, training and technical support, JK Business Systems also offers additional services. “We have a full-time MYOB consultant who works closely with customers in helping them process their data,” says Kingma. “I’m a qualified bookkeeper and that background comes in very handy as we help clients set up their procedures and processes. We’re very focussed on customer service and really enjoy helping people get the most out of their investment.”

JK Business Systems works with other Hamilton-area MYOB resellers to offer complementary services. “We have informal relationships with other resellers, such as RFMS Consulting for specialised help with RetailManager and Office Works who specialise in Aurora, and they come to us for training in payroll,” says Kingma. “It works out very well for all concerned, as none of us are large businesses yet we can all offer comprehensive services to our individual customers.”

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