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The Journey of one Born In The Cloud VAR

A new breed of entrepreneurs is taking root in the channel. Called “Born In The Cloud VARs” (BITC), their business infrastructure is 100% virtual and they mostly work from home or I should say their cars or coffee shops.

Here is one story of the journey of a BITC that I will call “Frank”. He is 31 years old and has been working for a VAR as a sales person for four years. He made about $52,000 per year, including commissions, and work roughly 55 hours per week. Frank is an average sales person and has never owned a business. When he originally started working for the VAR, he was able to make good commissions from selling hardware, software and services, but over the recent year, his take-home dropped by about 20%.

The company changed Frank’s commission plan as their revenues were shifting towards a lower managed service fee per user/device per month. Poor cash flow is one of the negative consequences facing VARs as they transition into a recurring revenue model. As they shift from selling larger capital expenditures sales towards a smaller but on-going operational expense, some struggle to implement the right compensation plan to motivate their sales team. This is something that all VARs in transition should get right.

The impact on the compensation for Frank seems to be the main catalysis that started him thinking of opening his own business. Over an eight-month period, Frank worked on setting up his new company. He picked his company name and registered the URL. He outsourced the design of his logo and web design to a third party and got the copy professionally written for a few hundred dollars.

While still working for the VAR, he started to prep his closest customers to become his future clients. He started to keep new prospects on the side to nurture as clients for his new company. He met vendors that he wanted to represent and started to develop new partner relationships. He also opened up an account with one distributor to buy hardware.

He set up his company on a Cloud-based accounting platform with a virtual accountant. He worked on his web site every night until he felt it represented what he wanted to offer before pulling the trigger.

Unaware to his current employer, he was ready to open for business the same day he handed in his resignation. He was literally ready to hit the ground running! His focus was now on working his current clients and new prospects to close sales. The transition was seamless as all of his contacts were already on his LinkedIN account. It was instantaneous to make his big announcement. He did not have to take any customer contact information from his previous employer.

Frank’s initial offerings were made up of the typical Microsoft solutions, BDR, Managed Services with the support of a NOC, Data Centre, IT Security as well as hardware. Since he already had a basic understanding of the needs of his current prospects, he focused on a limited number of solutions that he knew his clients wanted. He would spend lots of time researching and engaging vendors to help him put the right solution together for his clients. He was able to get some to do “buddy-calls” with him to clients.

Frank worked 65+ hour weeks to build his company and while he initially did not make as much money as he did at his previous job, he was able to make ends meet with a loan from family and credit cards. While he started off with only a few clients and some revenues, the key to his success was from the effort to find and cultivate new clients and expand his product offering. His business could not survive without growth in new customers. Since finding new business was a main part of his previous job, this task was something that he was already familiar with, but he knew that he had to double down on his efforts [An interesting comment that all sales reps could learn from to generate more revenues. When motivated, sales people can dig deeper to find new business!].

Fast track to today, about 18 months into his new BITC VAR business, Frank has a good monthly recurring revenue stream mixed with some hardware sales. Enough revenues that Frank’s take home pay would now be over $65,000 per year – a 25% increase within 18 months!

Frank intends to leverage everything in the Cloud to deliver IT solutions as well as run his business. He sees his company as a buyer of IT products for his clients instead of a seller of IT products. He listens to his clients and offers the best solutions to get the results. His focus is on the customer’s relationship while he partners with experts to help him deliver the IT solutions. He also relies heavily on his vendors to provide the support and sales leads. He focuses lot of time prospecting for new clients on social media, vendors and referrals.

Frank did not know everything about running a VAR business nor was he technically trained when he decided to start his own company. Yet, he was able to quickly build a business that made him more money than his previous job within 18 months. Frank is not unique as many BITCs had a similar journey. Some actually started their new business together with some colleagues. Frank has since hired his first employee and sees a bright future.

We are now seeing that BITCs are partnering with other BITC’s as well as VARs to grow business and expand expertise. Some BITCs have been able to build stronger sales-agent type partnerships with data-centers and other Cloud solutions. Since it requires zero upfront investment from them, the opportunities are unlimited.

The journey varies for every BITC, but from what I see, selling and delivering profitable IT solutions are becoming easier with the Cloud so the barrier of entry is much lower today to start up a new IT business. The one thing that is exciting to see is their willingness to adopt any tool or service to help them improve their business. This open attitude may help them to accelerate their success in the future. It also proves that a motivated person can do things that they never thought possible.