Thrive As A Product Reseller

Don't tell George Hertzberg there's no money in selling hardware and software anymore. I would also suggest that you don't try to push him into providing his own professional services. In fact, it's a safe bet that Hertzberg may take the opportunity to educate you on a few things — including how to survive in 2009 as a traditional product reseller.

Hertzberg is a seasoned sales trainer who founded Chicago-based GHA Technologies (GHA), where he serves as president, 19 years ago. Over the years, the company has seen a lot of growth and many changes — including a relocation of the headquarters from Chicago to Scottsdale, AZ. However, there is one thing that has remained consistent — Hertzberg's focus on building a nationwide sales organization as the foundation of his company. Instead of conforming to the popular consensus that services are the best way to generate decent margins, Hertzberg maintains that adding professional services in-house would dilute the focus of his company — selling. It's easy to react negatively to Hertzberg's product-only approach until you learn that he expects to generate $70 million in sales this year. How is he planning to do that? When I sat down with Hertzberg and VP of Sales John Bahaveolos to get the full GHA story, I got some solid advice that may help other VARs grow product sales — regardless of technology focus.

Build Your Sales Force First
If you're in an elevator with Hertzberg and ask him to describe his business, he'll tell you that GHA is a professional sales organization, not a VAR. "Many VARs have a strong understanding of networking technologies," he explains. "However, there isn't a lot of expertise in selling those technology products." Hertzberg believes that this lack of sales expertise in some VAR companies is one of the main reasons his company continues to be successful selling products and services. "By abandoning the traditional VAR sales model, many VARs have created product and services sales opportunities for us," continues Hertzberg. That makes sense. How many VARs do you know that convert a technical person to a salesperson? It's not a given that a good technician will make a good salesperson.

To capitalize on that market opportunity, Hertzberg has assembled a nationwide sales team of 85 professionals. Yes, some are technical types, but all have a solid sales foundation. "The majority of our salespeople work from home offices, saving us the costs associated with providing regional or local offices," explains Hertzberg. "We provide one week minimum sales training for new sales employees and continuing product education delivered from our vendors." One-third of GHA's sales are unassisted sales on its e-commerce site, 1/3 are assisted (GHA salesperson assists the customer while online) e-commerce sales, and the final 1/3 are direct sales. "Our sales skills are what allow us to earn great margins on hardware and software," he says. How great are his margins? "We earn no less than 5%, with most margins pushing 20%," he explains. That's not bad when you consider GHA is earning those margins on product sales with no engineers on staff.

To stay competitive with larger VARs, Hertzberg focuses on the sales process and customer service. "We focus on hiring experienced sales professionals, and then we add complementary technology selling skill sets to their portfolios," he says.  "Keeping them positive, focused, and motivated is critical." Hertzberg often works directly with his salespeople to keep them informed and motivated. Although highly-motivated salespeople are a key to GHA's success, Hertzberg admits that regardless of how great his customer service is, price is at the top of the list for most of his customers. "It's a delicate balance," he continues. "In order to survive in our business model, good sales volume is necessary. In order to generate the volume, we have to keep our prices competitive. This balance requires constant attention."

Utilize Vendors, Distributors, And Partners To Deliver Services
Just because GHA doesn't provide services through its staff doesn't mean the company doesn't sell services. In fact, GHA sells services with many of its orders for hardware and software. "Many VARs don't take advantage of the professional services offered by vendors," explains Bahaveolos. "For instance, we recently sold an Eaton UPS [uninterruptible power supply] for a customer's data center. After the product was delivered, Eaton sent a technician in for startup and configuration of the product — at no cost to us. We sold the initial services and the ongoing maintenance contract with the UPS — all without having a UPS engineer on staff."

GHA always looks first to vendors to provide professional services. For instance, the company uses relationships with Dell, Eaton, HP, Microsoft, and others to provide professional services. If its vendor partners can't offer those services, GHA will contract with third-party companies such as DecisionOne (a technology support services provider) to provide those services. In a typical implementation, GHA sells computers, network equipment, power protection systems, software, and professional services. Few of those products are actually delivered from GHA. Most products are drop-shipped directly from the distributors, and in some cases, the vendors — meaning GHA manages little inventory. With its hands-off approach to the hardware, software, and services, GHA is able to maximize margins by keeping operating costs low.

Build Green Technologies Into Your Sales Plans
When speaking with Hertzberg, it's clear he believes in the movement toward 'greening' data centers. Although some may applaud his concern for the environment, there is also a strong business case for helping his customers go green. According to Gartner, 75% of all organizations will use full life cycle energy and CO2 footprint as mandatory PC hardware-buying criteria in the next few years. GHA is selling technology such as power conditioners, virtual servers, and energy-efficient storage products that help customers save on energy costs. However, the VAR has some interesting methods of saving customers money with green technology. For instance, GHA offers a complete product procurement e-commerce Web site — a paperless product acquisition process for customers. In addition, the company is focused selling the business case for green technology such as MFPs (multifunction peripherals) that can eliminate the need for customers to have copiers and faxes. "Costs such as FedEx shipping are not always obvious to customers," says Hertzberg.

For more information on green sales opportunities for VARs, go to BSMinfo.com/jp/3298.

There may be a negative byproduct of the green movement for traditional VARs like GHA. Gartner predicts that by 2011, early technology adopters will forgo capital expenditures and instead purchase 40% of their IT infrastructures as a service. Is it a concern to GHA that many customers are moving away from purchasing their own hardware in lieu of purchasing hosted services? "No," answers Hertzberg. "Someone will always need hardware and software — even if those companies are service providers. We are not worried about the demand for our products going away anytime soon."

So, maybe you're not buying into GHA's business philosophy of reselling products and services without actually handling the products or providing the services. That's OK. I'm certainly not suggesting that services providers stop providing their own services. However, there's still a lesson here for VARs that want to provide managed services. Just because you want to sell services, you don't necessarily have to provide those services. Many managed services providers are already selling hosted services — saving them the cost of a NOC (network operations center) and the high-priced employees required to manage a NOC.

A good friend of mine once told me, "Nothing happens in business unless there are sales." I think that really sums up the mission of all 'for profit' businesses. While some VARs are letting the hottest technologies and services drive their business plans, GHA shows us there are still great product sales growth opportunities for VARs that prefer a traditional approach.