In today’s copier centric sales world, why has MPS failed to gain “real” traction? Why can’t we get our sales reps to sell it and make it a profitable branch of our business?
We can start to answer these questions, and many more, when we start focusing on, what I have coined, the “3 C’s of Reluctance.”
Cost Management
The Complex Nature of MPS cost structures and assessments
How do we Compensate our reps to energize them to get out of their copier sales comfort zone?
Cost Management, as I will address it, is looking at the administrative functionality of MPS and how do we set it up properly for success. There are many questions that need to be answered in order to successfully implement this. I will address a few here.
Are you set up properly to run the operational aspects of your MPS business?
- How many supply partners are you aligned with in order to maintain the tens of thousands of SKUs for consumables?
If you are a traditional copier dealer, you are probably used to maintaining a direct relationship with your manufacturer where they supply most, if not all, of your parts and consumables. The same concept will not succeed in MPS. As good as our supply partners are, no one vendor covers every device and consumable on the market. So, if you employ the same business tactics as you do with copier sales, how will you be able to support all of your client’s fleet? The answer is you won’t. Best practice for successful MPS providers have three if not four supply vendor relationships and are regularly involved with them in negotiating best pricing. This will keep you covered in parts and supplies and will give you more negotiating power over pricing. Thus, making you that much more profitable with your MPS customers.
- How are you managing what suppliers to go with for the most profit and how are you internally managing all of your SKUs?
This is where I see a lot of dealers fail. Their mistake is thinking that they can rely on their vendor partners to be responsible for the maintenance of all of their SKUs. Think about it: you may have four supply partners but each of those partners may have a thousand dealer clients. How would they manage all of their dealer’s SKUs. It just can’t be done, or be done well.
In order to succeed with managing this business, you need a dedicated person to oversee this project on an ongoing basis. This may be a person solely dedicated to maintaining your MPS business or it may be a service manager that is tied directly to the service side of MPS and already has skin in the game. I’ve seen both work. It ultimately depends on how your business is structured and if you are willing to support a dedicated admin.
Once you have decided on who will manage the operational side of the business, how will you actually manage it? If spreadsheets are your answer, please be ready for a time intensive, ever growing debacle that will be fraught with errors. I learned the hard way years ago with working with spreadsheets. It is almost impossible to manage and stay up to date. Manufacturers are coming out with more and more devices, which in turn means more and more consumables that you will have to stay up to date with and manage. I once had an excel spreadsheet that had grown to a 1 gigabyte file that was riddled with errors and I knew it but had no way of troubleshooting it adequately enough to make sure our costing was correct and our profit margins were in line, so I did what a lot of us do….I gambled and hoped to God I would be profitable. Why do we run our business that way when, today, we have the tools available to help us manage this ever growing and ever changing problem? Some of your supply vendors have these tools already or you can look at vendor neutral solutions to help.
- Have you determined what printers and MFPs you will manage and how do you keep updated with new and deleted models?
This falls in line with the previous question and can be accomplished with the same solutions but definitely needs to be addressed before proceeding with MPS.
- Have you determined if you will be providing parts and labor in your program or will you be outsourcing it, or a combination of both?
Another important question that needs to be addressed prior to starting your MPS business. If your market deems that you need to include service to be competitive, you need to make sure you have a plan in place where your copier technicians are, or, can be trained on how to service printers. All of your major printer manufacturers have training programs, online and in class, that can give your technicians the training they need. You are making a big mistake if you think that just because your techs can fix copiers, they can fix printers. Believe me, I learned that the hard way.
If you don’t have the capacity to do service on your own, many of your supply partners have programs that can help with providing services, along with the consumables. Just reach out to them for guidance.
- Do you have a partner for Data Collection? What tool will you be using?
Up until recently, there were really no solutions out there that could help us with this. So, we had to figure it out ourselves through spreadsheets, pen and paper and whatever else we could come up with. If you are still doing this, stop…..there are much better and safer ways. For Data Collection, there are numerous solutions out there. If you don’t have a data collection tool today, get one. It will make yours and your reps life much easier.
These are just some of the more important questions regarding Cost Management that need to be addressed prior to starting a MPS business. There are many more, but if you can tackle these to start, you are setting yourself up for success.
Now let’s look at the next hurdle we all deal with, Complexity of Managed Print Services….
The most important first step in dealing with the complexity of MPS is making sure that your sales reps have been properly trained on how to prospect and qualify MPS opportunities. This is not copier sales and if you think a traditional copier salesman can use what he or she has learned about selling copiers and translate that into selling MPS, you are setting yourself and them up for failure. Proper training is a must. There are several training programs out there that will be helpful. Reach out to your partners for help in finding the right training program for your business.
Have you determined if all reps will pursue MPS opportunities or will you assign specialists?
This needs to be determined before rolling out your MPS program. In your business, your copier salesmen may not be open or equipped to sale MPS. You have to evaluate your team and figure this out ASAP. Unfortunately, not everyone can sale MPS. It goes back to the training issue, if they can’t and/or won’t be trained, don’t force the issue. You’re only hurting yourself. Find the ones that can and are willing and focus on them, or leave your copier team be and bring in a specialist or two. You have to set yourself up for success. You could have the admin and operational side of this down but if you don’t have the right sales team leading the charge, it’ll all be for nothing.
Finally, have you given your team the right tools to be able to conduct assessments quickly, easily and effectively?
Today, most of us are doing this by hand. We’ve figured out how to create an excel file to house all of our pricing information along with all of our models and we are spending an enormous time keeping it up to date and are struggling. In turn, our reps are spending too much time in conducting assessments and getting lost along the way. They get frustrated and lose interest. As a result, your MPS business declines or never gets off the ground. When we all first started getting into the MPS business, this was really our only choice and we had to figure out how to make it work if we wanted to succeed. That is not the case today, there are tools out there. It will take what traditionally took days or weeks down to minutes and hours, and will give your reps the simplicity they need to effectively conduct assessments and generate valuable proposals for your clients that are accurate and profitable. Shameless plug I know, but we here at Compass have one of those said tools and would love to share it with you. There are others as well. Do the research, reach out to us or them. Get this in your reps hands!!! They will love you for it!!!
The Final, and possibly the most important “C” is Compensation….
I could probably write a book dedicated to this topic and just may. In my professional opinion, and this is coming from someone who first was a sales rep in the trenches selling copiers and managed print services, and then became a manager and teacher showing reps how to assess and sale. I’ve also been a part of creating training programs focused on managed print services and have written two compensation plans myself. If you fail at this aspect of MPS, nothing else you do will matter!!! This is the #1 reason sales reps shy away from MPS. Sales reps are used to instant gratification when it comes to copier sales — get in and get out. MPS requires a little more customer hand holding and rep engagement. The more complex the environment, the longer the assessment will take, thus creating a longer sales cycle. If the rep feels like they are not being fairly compensated for their time and effort, they will simply move on. A strong compensation plan is key if your MPS program is to be successful. There are many different ways one can compensate for their MPS program. Every dealership is different and, unfortunately, one plan does not fit all. To get you started, here are a few ideas:
One-time payment on MPS contract…..
I’m showing you this for two reasons. One, it seems to be one of the more popular compensation strategies out today and two, it’s probably the WORST compensation strategy out today!!
I’ve seen it paid out as paying the rep first month revenue of a 12-month contract (ex. 12-month contract at $1,000 per month, rep gets a one-time payment of $1,000)
I’ve also seen it paid out as paying the rep 10% of the first year’s revenue on the MPS contract (ex. 12- month revenue at $25,000, rep gets one-time payment of $2,500)
Why is this bad? Well for one, it’s not enough money. A rep can make a lot more with a lot less time invested in selling a copier. A rep would have to find a very large printing environment printing at least one million prints a year to even be remotely juicy enough to spend their time on it. Secondly, for a MPS program to truly work, you need residual profit coming out of each client for years and years to come. That’s how you build up your base and market share. With this method, what is keeping your rep engaged with the client to insure the program is successful and continues to renew at each renewal date? I’ve seen some dealers pay first month revenue initially and then another month’s revenue at month 13 but I still think you’re putting your MPS clients at risk.
I’m not saying that all upfront commission structures are bad for MPS, as I said before, every dealership is different. You just need to make sure it’s lucrative enough to keep your reps enticed and you need to have some type of enticement to keep them active in the account.
Monthly recurring payment on MPS contract….
This is my plan of choice for many reasons that I will point out shortly. I’ve seen this done a few different ways and I’ve even seen a hybrid of upfront commissions and residual commissions that have been successful (I wrote it). Again, every dealership is different so you have to find the one that best fits you.
Probably the most popular and traditional recurring method is paying a percentage of the monthly revenue or gross profit throughout the life of the contract (ex. monthly revenue is $2,000, rep is paid 10% at $200 per month for the life of the contract).
Another way you could go about it is by paying on a sliding scale dependent on the gross profit of the contract (ex. at time of contract GP is determined to be 40% margin, rep would receive 4% of that margin, if 45% rep would receive 5% and so on).
You could also pay a diminishing % year over year on revenue or gross profit (ex. 1st year paid at 5% of gross margin, 2nd year at 4%, 3rd year at 3%).
Any of these could work or a combination of all of them. What makes the most sense in your company?
There are clear cut advantages to recurring payment models. Reps are able to build a recurring revenue stream. Most of your reps are 100% commission reps or are heavily weighted on commissions. This will allow them to build an annuity stream that will act as a base salary. It can definitely lead in helping with rep retention. If a rep has built up a revenue stream of 80k a year, it will be very hard for him or her to want to leave for greener pastures. Plus, they will have a sense of pride in what they have built.
You can tie recurring commissions to equipment quotas (ex. 100% MPS payout at 100% equipment Quota). You can keep your commissions in sync with your MPS invoice/payments (ex. Pay rep as company bills and gets paid). You can build territories based off of recurring commissions that have been vacated. This can be a great recruitment tool for new hires and can help offset new hire salaries.
All of these are great advantages for paying a rep a recurring revenue stream but probably the most important advantage is that it keeps your rep involved with the account. Quarterly or semi-annual reviews, asset strategy meetings, optimizing of device meetings, etc. Your reps will want to be involved with their accounts and they will know that they are not working for free. It’s a win/win.
I hope I’ve given you some very important thought starters in creating a successful Managed Print Services business. As I stated before, there are many other factors that you will need to address and there is no “one size fits all” approach but if you can successfully implement a Cost Management Strategy, start using the tools that are available to you to cut down the Complexity of managed print services, and develop a creative and strong Compensation program for your reps, you will be setting yourself up for success and be far ahead of your competition.
