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Customer disorganization can be a big VAR margin killer

How closely do you manage your account size mix? There are certainly advantages to working with smaller companies—such as the chance to be a strategic IT advisor—but are you putting an inordinate amount of resources into these accounts?

A conversation I had late last week with Dave Casey, president of Westron Communications, got my mind racing on this topic. With the end of the year approaching, we were chatting about some things he’s learned about the business during 2007.

By his account, Westron has had a good year, basically doubling its sales to around $5 million. Its traditional client base is comprised of small businesses. But through Westron’s partnership with the 1NService solution provider alliance organization, Casey has been encouraged to take on bigger infrastructure projects.

And that, he says, has made all the difference this year. “We always thought we could get more margin from small businesses because we are more valuable to them,” he observes. “But the truth is that with these larger projects we can still add a lot of value, and we’ve been able to articulate that. We’re targeting larger projects, and we’re winning them.”

One example is a $100,000 deal that Westron was able to take on with the help of some of its 1NService partners. A focus on converged communications and IP telephony certainly hasn’t hurt Westron’s message, given the market interest in these solutions.

Westron has also learned some things about operational discipline by working with these larger companies, which it will use to rethink how it works with some of its smaller clients. For one thing, smaller accounts tend to be less organized about their IT strategy, Casey says, which means more of the burden lies on Westron’s own services personnel. On the flip side, Casey has found that his staff’s empathy with smaller businesses means that they sometimes overlook billing them for every service. I think you’ll agree that’s not exactly a sound business practice.

“All in all, we’re trying to target people who are better organized, no matter what the size of the company,” Casey says. “This should provide us with a higher profit margin.”

This is one of the leaps in logic that comes only with hard-won experience. For me personally, there’s a lot of validity to what Casey advocates. That’s because the first step to meeting a customer’s expectations is understanding those expectations, if not setting them in the first place.

Got a tip you’d like to share with other VARs and systems integrators? E-mail me at hccollins@mac.com.

Heather Clancy is a business journalist with 20 years experience covering the high-tech industry, especially the mechanics of the high-tech channel.

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