Picking Sales Models and Services Offerings In Services Businesses
Two of the most important decisions a services business makes are 1) how it approaches sales and 2) whether it offers one or multiple disciplines of expertise. These decisions are related, and the combination has a profound effect on the trajectory of the business.
Founders sometimes make these decisions without considering the implications, setting the business back by months or years. Luckily, these setbacks can be avoided by being deliberate and answering two key questions upfront.
Question 1: Are you willing to manage multiple talent benches to provide clients with multi-disciplinary services?
For example, providing a comprehensive product development service could mean that a services business provides software architects, developers, test engineers, business analysts, scrum masters, cloud engineers, DevOps engineers, visual designers, and possibly more for a client. While these are complimentary and sometimes overlapping skills, at least four distinct types of staff are involved. Those four groups of people need to be recruited, interviewed, on-boarded, managed their utilization and margins, provided career growth, and so on.
Contrast that complexity with a services business that provides a single area of expertise or discipline. A single-discipline consultancy could be built around a technology-specific offering like Snowflake, ServiceNow, or Salesforce services or around a domain of expertise like Agile coaching, digital design, or machine learning. The staff required in these businesses is much more similar to one another. While these businesses still require talent at varying levels of seniority, and potentially with different specializations, it's far less complicated than carrying a bench of software engineers, cloud engineers, visual designers, and scrum masters!
Of course, the disciplines you have available are directly related to the types of projects you can credibly compete for and sell to prospects, which leads to the second critical question...
Question 2: Will you sell using a partner-led or direct sales process?
Partner-led and direct sales motions are very different and require different investments in staff and other resources.
Partner-led sales processes are most common with technology-specific service offerings where a technology provider like Microsoft, Snowflake, Salesforce, etc. will use a network of service providers to design and/or implement their solutions for clients. A partner-led sales motion typically relies on good company and personal relationships between the services provider and the partner and investing in technology certifications. More sophisticated partnerships may also require, or benefit from, additional specialization by the services provider, such as focusing on a particular customer industry segment or geography or focusing on a particular aspect of the technology.
Partner-led sales models are typically easier to start, assuming you have or can build relationships with the partner. They also tend to be leaner to operate because partners will help with lead generation as long as the services provider is willing to invest in some joint business planning. Partners typically expect that their service providers don't engage in competitive business, like a cloud services company simultaneously promoting both AWS and Azure solutions.
The potential downside to this model is that the services company is completely reliant on the partner for sales. If the partner decides to promote another services company or to take services work for its own professional services team, there isn't much that can be done. It also relies on the technology remaining in demand.
A direct sales model is more common in areas where there isn't a specific technology, like providing digital design services or Agile coaching, or when the services tend to be multi-disciplinary. Direct sales models often start with founders selling to their network. At scale, however, the direct sales model requires marketing support for demand- or lead-generation and dedicated sales teams to lead qualified sales pursuits.
Building a marketing and sales team at scale is a much more complicated and costly undertaking. It does have some advantages over the partner-led model: a services business operating its own sales function means it's resilient to external factors like partners affecting the flow of leads. The tradeoff is that the model takes longer and costs much more to get right!
What's the best model for a services business?
Multi-disciplinary services businesses generally don't lend themselves to the partner-led sales model because partners are typically only interested in services that lead to the consumption of their own product. Multiple disciplines also increase the surface area for potentially conflicting or competitive products to be introduced to the client which is never desirable by the partner. As a result, multi-disciplinary services companies typically don't have a choice but to build their own direct sales function.
Single-discipline services businesses that can focus on a single technology are good candidates for the partner-led sales model. If the technology is in demand and not commoditized, these businesses can scale to tens or even hundreds of millions of dollars in revenue built around a partner focus. This is typically the most cost-efficient path.
Single-discipline services businesses not built around a specific technology may have no choice but to build a direct sales function. It's very difficult to do this successfully without having some track record of success selling and delivering using existing networks, though. Early-stage services businesses that intend to build a direct sales function should plan on founders or other early, senior staff in the business to put in the hard work of selling to their own networks to get started.
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