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082 - Craig Schlagbaum - Building Channels With Recurring Revenue · Partnerships Unraveled

• 0:07
  Speaker 2: Welcome back to Partnerships Unraveled, the podcast where we unravel the mysteries about partnerships, and channel on a weekly basis.
• 0:14
  Speaker 2: My name is Alex Whitford, I'm the VP of Revenues here at Chanix and I'm very excited to welcome our special guest, craig.
• 0:20
  Speaker 2: Craig, how are you doing?
• 0:22
  Speaker 1: Hey, I'm great, Alex.
• 0:23
  Speaker 1: Thanks for having me here today.
• 0:24
  Speaker 1: Appreciate it.
• 0:26
  Speaker 2: Yeah, of course, it's absolutely my pleasure and maybe for the uninitiated, you can give us a little bit of background about who you are and where you've come from.
• 0:34
  Speaker 1: Well, I've been a channel professional pretty much my entire career and oddly enough, my father did it before I did and started building the channel at IBM, which was an interesting time in the PC evolution a long time ago in the 80s.
• 0:49
  Speaker 1: But I spent a lot of time on the IT side of the channel and then, at the dawn of the millennium, I went into more of the telecom side of the channel and working for companies like Quest, level 3, and now, most recently, comcast, running channel programs, sales, marketing operations and the entire team, and I just love working with partners.
• 1:12
  Speaker 1: I've traveled all over the world.
• 1:13
  Speaker 1: I've got over 3 million miles on United and another million on American, having gone out and seen partners everywhere.
• 1:28
  Speaker 2: So I've spent my life on the road for the last 34 years well, with uh four million miles in the bank.
• 1:31
  Speaker 2: I'd love to hear a little bit more about your experience.
• 1:32
  Speaker 2: Is it at comcast?
• 1:33
  Speaker 2: Can you talk me through when you first entered that business?
• 1:35
  Speaker 2: What was comcast like?
• 1:37
  Speaker 2: What was your position within there?
• 1:38
  Speaker 1: and I'd love to hear how you sort of led that development and growth of that business well, I got in there about 13 years ago, in 2011, and they hadn't built a channel yet.
• 1:50
  Speaker 1: In fact, it was just nascent.
• 1:52
  Speaker 1: They built a division for business services and I was at the time working for level three and decided I needed a new challenge.
• 1:59
  Speaker 1: So I left there, started that program with literally a skeleton crew of a couple of people and built it into quite a force over 150 people.
• 2:09
  Speaker 1: But in the beginning there wasn't a lot of advocacy to the channel and I had to be really almost an evangelist for it internally and externally.
• 2:17
  Speaker 1: But it was a great opportunity because the service offering was tremendous and there was a lot of need for it in the channel.
• 2:23
  Speaker 1: But there wasn't the advocacy to the channel at the time.
• 2:27
  Speaker 1: It was very much oriented around a direct sales model without channel, and we built it into a powerhouse channel, one of the largest in North America.
• 2:37
  Speaker 2: I often hear when I interview guests around them, being one of the first sort of leaders of a nascent channel business but there's a, you know, a tremendous direct business and I often hear that people are that sort of that two-sided channel evangelist where they're selling it externally and internally.
• 2:54
  Speaker 2: Talk me through some of the sort of tips and tricks but also complexities of having that two-sided role.
• 3:01
  Speaker 1: Well, internally, you know, you've got a culture war to fight at times, because some folks just don't like the idea of abdicating control to a third party to sell something, and they're used to a certain way.
• 3:12
  Speaker 1: So what you have to do, I think, is spend a lot of time demonstrating that the channel is not the foe but actually the ally, and that there's an opportunity to leverage that channel and magnify your sales beyond that which you would ever get on your own.
• 3:28
  Speaker 1: And once you demonstrate that, you can see that they see the sales, they see the kind of customers they get involved with these partners and you need to spend time introducing them and getting them used to these partners then they understand that there is that opportunity.
• 3:42
  Speaker 1: Then they understand that there is that opportunity.
• 3:43
  Speaker 1: So I think that's a big part of it.
• 3:44
  Speaker 1: Internally, and also getting advocacy from your finance executives, who often have concerns about these models and worry about the cost of these models as compared to that of a direct model, especially in a recurring revenue company.
• 3:59
  Speaker 1: That's a big deal.
• 4:01
  Speaker 1: Then, externally to the partner community, it's really showing that there is an advocacy, that there is a desire and a belief that the channel is an important asset to the company, and that takes time to build that up.
• 4:14
  Speaker 1: I think initially that's not easy to do, but over time, as you get investments from the internal side of the company marketing dollars, resources Then the channel starts to believe that it's real.
• 4:26
  Speaker 1: It's not just an experiment, and in the beginning for me that was very much the way it was.
• 4:30
  Speaker 1: It was kind of people were skeptical, not certain about whether or not this was for real or whether it would last, and so we just kept on going and we continued to demonstrate those successes little by little.
• 4:42
  Speaker 1: It takes years.
• 4:43
  Speaker 1: It's not something that happens overnight.
• 4:45
  Speaker 1: You have to be extremely patient, both internally and externally, and in doing so, I think that's where you end up in a good place.
• 4:53
  Speaker 1: But you've really got to have a lot of devotion towards this channel in order to gut it out over the long haul.
• 5:01
  Speaker 2: Great answer, craig, and I think from my perspective, I've always been told that, from a sort of a balance sheet perspective, when we're arguing internally to the CFO why channels are more profitable, I've always heard that once a channel does hit that sort of hyperscale and is really self-sufficient, it actually becomes one of the most profitable and scalable parts of the business.
• 5:21
  Speaker 2: From your experience, is that what you were seeing at Comcast?
• 5:24
  Speaker 2: That once you got through that nascent period, actually it becomes incredibly profitable and you're almost the CFO's best friend.
• 5:32
  Speaker 1: I think it becomes profitable.
• 5:34
  Speaker 1: I think there's also the market reality of marketing one-on-one.
• 5:38
  Speaker 1: You need to meet the customer in the way they wish to do business, not in the way you might wish them to, and so, therefore, if the customers want to do business with an outside advisor, you need to meet how they want to do business, and, particularly if they're trying to construct solutions that cross multiple providers, your direct team really can't do that, and a lot of customers have a belief that I need this for SD-WAN, I need this for UCAS, I need this for connectivity, that I need this for SD-WAN, I need this for UCAS, I need this for connectivity, I need this for security, and it might be four separate vendors.
• 6:10
  Speaker 1: Well, the direct team can't do that because they're an employee of only one company, and so the customer sees that, as you know, that's a biased lens.
• 6:16
  Speaker 1: I want to buy in the manner in which I want to buy, and I want advice that is neutral, not, you know, oriented towards one single provider.
• 6:24
  Speaker 1: That is neutral, not oriented towards one single provider, and I think that's the bigger issue that not only is the channel scalable and profitable, but it's also the way in which the end user wishes to conduct business, and that's where you need to meet in the middle.
• 6:36
  Speaker 2: I think that's certainly something that I've seen time and time again, especially being in Europe, where a lot of businesses really struggle to make that transition to the European market because the European market is so heavily weighted to sort of resellers and to partners and actually if you refuse to deal with them, you suddenly find yourself that you're not in involved in deals because you know so many customers are buying from frameworks or buying buying from certain types partners and, like you say, your sort of total addressable market grows if you're able to meet the customer with the sort of vehicles that they want to buy through.
• 7:12
  Speaker 1: Yeah, absolutely, and I think that's the most important part and that's for any product any good.
• 7:17
  Speaker 1: It's not just, you know, in the IT space, but any industry.
• 7:20
  Speaker 1: You have to meet the customer in the way they wish to do business.
• 7:26
  Speaker 2: And my research team and myself have done a lot of digging and I think we dug up some articles where we found out that you sort of, I think, had over 3,000 solution provider partners for Comcast and you were running all of indirect sales, marketing and support.
• 7:40
  Speaker 2: Craig, how were you getting any sleep?
• 7:42
  Speaker 2: Talk me through the sort of architecture, organizational structure that you have to generate that massive scale.
• 7:48
  Speaker 2: What's your priorities?
• 7:49
  Speaker 2: What are you looking at?
• 7:51
  Speaker 1: Yeah, well, you have to obviously build a team that can support that many partners and you have to have tools and resources to do it, because there's constantly issues associated with where's my order and what's the status of that, especially in a recurring revenue channel.
• 8:06
  Speaker 1: So you have to build IT systems and operations teams that can allow you to scale, because there's always going to be inquiries and particularly in a recurring revenue business like ours, it's not just the next sale for that month but all the sales made in all the prior years, so that the partners have to have access to what's going on with that customer and their bill and their issues.
• 8:27
  Speaker 1: So there's a lot to do with ease of doing business associated with operating models and systems and tools, and that's a big part.
• 8:34
  Speaker 1: And then there's a lot to do with the right sales-facing channel team that is in front of the partners on a daily basis.
• 8:42
  Speaker 1: And while you can't manage all and it was many thousand, even more than 3,000, you have to divide between the A-type partners that are doing most of the business and then the B and Cs, and you need to prioritize that focus and spend a lot of time in front of your top producers but at the same time, you need to continue to reach out to the other ones as well.
• 9:03
  Speaker 1: So I think that's a lot of it, and we built this over to a billion-dollar recurring revenue business, and that's because you spend enough time and ultimately that generates that kind of revenue.
• 9:14
  Speaker 1: It's known as the rule of 78s.
• 9:16
  Speaker 1: It's an accounting principle, or also known as the sum of the digits, and when you take a sale, for example, of $1,000 a month and you do 1,000 every single month, then at the end of 12 months, because it continues to build, that's actually $78,000.
• 9:32
  Speaker 1: So that's the rule of 78s and that magnifies the amount of customers you end up getting, because you're managing thousands of customers over time, not just a one-time sale like a resale-rebill model, where it happens once and doesn't happen potentially again.
• 9:57
  Speaker 1: Issue is churn.
• 9:57
  Speaker 1: You don't want to churn out those customers, and so those are the things you have to have in place, at least in a recurring revenue model, and you have to have a really good team of top lieutenants that are on top of those issues, both on the sales side, the operation side, but also on the marketing side.
• 10:08
  Speaker 1: There's a lot to do with reaching out to your partners and having input from them on a regular basis.
• 10:14
  Speaker 1: So I mean I could go on for an hour on the details of all of that, but those are some top line items about that issue.
• 10:21
  Speaker 2: And you spoke there about your sort of A partners and then maybe your B, c and D partners.
• 10:26
  Speaker 2: We're seeing top brands like Microsoft and Cisco almost building parallel channels to sort of separate the tooling, the payment structures, even the types of people they hire, the payment structures, the, even the people that the types of people they hire, to separate between the a partners and everyone else, because you need a much more digital approach to sort of managing the masses.
• 10:47
  Speaker 2: Right, so it's much more digital light touch approach, even when it comes to generating and managing opportunities.
• 10:52
  Speaker 2: Is that something that you sort of particularly paid attention when you talked about prioritization, almost building two separate processes?
• 10:59
  Speaker 2: Can you talk me through sort of how you tackled that challenge?
• 11:02
  Speaker 1: Well, in our world we have what are effectively distributors of services or in the US known as technology services distributors, who sell recurring revenue services.
• 11:13
  Speaker 1: They don't sell physical products and it's really empowering those companies with the resources and tools necessary to support the downstream partners.
• 11:22
  Speaker 1: So, while we would support a lot of the top producing partners, underneath them, and some that we took direct without distribution, really was about enabling those distribution partners, or TSDs as we call them, to be more effective, and so we would empower them to act as sort of our emissary on behalf of Comcast or any company that they represent, and make them more effective dealing with the downstream channel, so that we empower them with the resources, tools and capabilities necessary to do that, and then, at the same time, we would support the downstream selling partners underneath them or otherwise, the A partners as we described them earlier.
• 12:02
  Speaker 1: So, yeah, there was a differentiation in that regard and we definitely, together and in unison with our distribution partners, worked jointly to try to make sure that we supported the most producing partners, the best, and then go down from there.
• 12:15
  Speaker 1: So that was definitely a best practice and it's what a number of companies in the us anyway do, and certainly makes a lot of sense because you got to stratify by those different categories and make sure that you spend your time with those who can help you meet your numbers and then, uh, in addition, you've hired and managed a significant team, I think over 150 sort of indirect channel professionals, not to blow smoke, but I think you've been nominated for 25 Channel Chief Awards from CRN.
• 12:49
  Speaker 2: In my experience, running large teams comes down to either managing processes or building culture.
• 12:55
  Speaker 2: What are the sort of levers that you pull to run such a successful, large-scale team?
• 13:02
  Speaker 1: Well, the culture is definitely one that's a big deal, and I try to find people that really want to be part of a more nobler purpose, that not only do they want to enjoy their career and continue to prosper, but they want to be part of something special, something that is interesting, bigger than themselves and makes them want to stay around for a while and not shift between employers.
• 13:25
  Speaker 1: And I think it's because they feel like they're part of a team spirit, and I try to really focus on that aspect.
• 13:32
  Speaker 1: Build top leaders that can build great teams and have folks that are interested in being there over the long haul because they really enjoy their job and the challenges it brings and they get recognition and they enjoy working with partners.
• 13:45
  Speaker 1: So building a culture like that, a culture of excellence, really, where people feel proud and excited to come to work every day, is what I spend a lot of time doing.
• 13:56
  Speaker 1: Similarly, you have to make it such that those same people aren't plagued by too many operational challenges, and so you have to put just as much emphasis in trying to make it easy to do business both with the partners and internally, so that they can actually flourish and be their best self every day, while the tools take care of a lot of those issues, and it takes time to do that.
• 14:19
  Speaker 1: You need to spend a lot of years and money to make those tools and resources be in place so that people can spend their time getting in front of their partners, maximizing their relationships and getting the maximum share and enjoying what they do every day so that when they get up in the morning they're excited to go to work and they can't wait to have the next challenge and continue to learn and grow every day.
• 14:41
  Speaker 1: I mean, those are some of the things that I would say at a high level that sort of differentiated what we did versus others and we didn't have a lot of churn on our team.
• 14:49
  Speaker 1: There was a lot of people there that were there for eight, ten years.
• 14:53
  Speaker 1: They weren't jumping jobs because they enjoyed being part of a team of excellence.
• 14:59
  Speaker 2: I love your point there in terms of making it easy for people to be successful right, certainly someone who sees admin as a very necessary evil, but it's something that just bogs myself and other specifically sort of hunter sales people down, because we want to be out in front of customers chasing deals, making business happen.
• 15:20
  Speaker 2: Um, so I I think you can absolutely grease the wheels.
• 15:23
  Speaker 2: I'd love to double click to understand how were you finding those people?
• 15:27
  Speaker 2: What was the process that you were going to qualify and and differentiate the people who wanted to be part of something bigger, part of that culture of excellence, versus everyone else?
• 15:35
  Speaker 2: What are the tools you'd use?
• 15:38
  Speaker 1: And it would be at any company too, not just Comcast, but all the places I've been.
• 15:42
  Speaker 1: You know it's relationships.
• 15:45
  Speaker 1: You spend your time in an industry and you build relationships.
• 15:49
  Speaker 1: So a lot of people I know you know that goes back in this industry to 24 years ago, and so a number of the people that I work with are people that I've worked with before or knew of in other places, and you know I try to continue to keep those relationships strong and it's not easy.
• 16:06
  Speaker 1: You have to spend a lot of time, you know, reaching out to those people, even if they're not on your team and maybe at some point they will be.
• 16:13
  Speaker 1: And so you know you continue to look at other opportunities to draft in people who are from other companies that might know you or know your reputation.
• 16:22
  Speaker 1: And so it's important that you operate professionally and with a lot of integrity in the industry because over time you're going to have a lot of connections and people know who you are and people know who you are, and that then eventually leads to you getting some of those top talented people to join your team, where they might have been on another team, because they want to be part of something special, they see what's going on, they understand, even if it's not the highest compensation, they would rather like to get up every day and have fun and enjoy their work, even if it's not being paid the highest of any employer, even if it's not being paid the highest of any employer.
• 16:55
  Speaker 1: And I think that really comes down to the leadership of the team and especially the people you put in charge of the key areas in your channel sales, your channel operations, your channel marketing, your engineering.
• 17:10
  Speaker 1: You've got to have top notch people and I spend a tremendous amount of time trying to groom those people in any company I've been at over the last 34 years so that they would be better, that they could be a better professional, a better leader, and I spent a lot of time really trying to mentor them to be their best self, and I think that combination is really what led to a lot of my success over the years.
• 17:35
  Speaker 2: So not to parrot your own words back at it, but what I'm hearing is your job is sort of threefold Build an amazing culture where people enjoy to be a part of and want to be a part of.
• 17:44
  Speaker 2: For a long, long time You're a talent scout who makes sure that you're consistently networking and bringing the right individuals into your channel organization, and then you're trying to make it as easily and operationally successful so that it's very easy for them to be successful continuously.
• 17:58
  Speaker 2: Is that a fair summation of what you've, what you figured your role to be, to be constructed of?
• 18:27
  Speaker 1: Yeah, I think so, and certainly to the influence that you have with the.
• 18:30
  Speaker 1: The partner's image of you is is they're going to tell the same people because they're going to ask that question should I go to work for this company?
• 18:37
  Speaker 1: And if the partner says no, then you know, right there you've got a challenge.
• 18:40
  Speaker 1: So your reputation is all over the place and every day you got to earn it.
• 18:46
  Speaker 2: Because I think that's what's so interesting about building a culture within a channel business.
• 18:50
  Speaker 2: You're building a two-sided culture right, because you're building your internal culture within your organization, for that culture emanates through your partners and even all the way down to your end customers.
• 19:00
  Speaker 2: And so I think in all of the types of businesses in the world, in our business, it becomes the most important because if you mess up your own culture, you don't just mess up your own business, but you're actually emanating that out to the market and it signals to the market to work with you or not to work with you, depending on how right you get it.
• 19:18
  Speaker 1: Absolutely, and I think you know.
• 19:20
  Speaker 1: An old boss of mine once told me you're only as good as your last movie, and so you got to make every movie good.
• 19:26
  Speaker 1: You can't ever let down.
• 19:28
  Speaker 1: So you got to make every movie good, you can't ever let down.
• 19:30
  Speaker 2: You always got to be striving for excellence and so pivoting maybe from Comcast, which you recently left, to set up your own business reoccurring revenue channels.
• 19:42
  Speaker 2: This is helping the market and the channel understand the importance of growing and how to grow reoccurring revenue.
• 19:45
  Speaker 2: What are the sort of critical differences?
• 19:48
  Speaker 2: You've already touched on the rule of 78.
• 19:49
  Speaker 2: What are the critical differences between transactional and reoccurring revenue?
• 19:54
  Speaker 2: When it comes to the partner, why should they be looking at reoccurring revenue?
• 19:58
  Speaker 1: Well, you know, the IT industry is worldwide some 4.7 trillion if you believe Jay McBain and Canalys and those companies, but this channel is probably somewhere $20 billion-ish that's being done in this space, but all of it 100% of it is sold by the provider.
• 20:17
  Speaker 1: The provider bills the end user directly and the partner earns a commission.
• 20:21
  Speaker 1: That's not unlike in the United States financial services industry where you have a financial advisor who earns a commission for the life of your account based on the value of your account.
• 20:31
  Speaker 1: Same in the insurance industry.
• 20:33
  Speaker 1: So it's not an unusual model in terms of other industries.
• 20:36
  Speaker 1: It is a bit unusual in terms of the IT industry, although it's become more prolific, but it's a much larger focus about being more of a consultant and more oriented around selling and less about building technology solutions, because the provider themselves, who you're representing, builds the technology themselves.
• 20:57
  Speaker 1: You don't need to.
• 20:58
  Speaker 1: They have their own engineers.
• 20:59
  Speaker 1: They buy all the ingredients, if you will, of the solution.
• 21:02
  Speaker 1: You just have to sell the solution.
• 21:05
  Speaker 1: And that's different than some IT partners who are more about building the solution, constructing the solution, and much more focused on technology.
• 21:13
  Speaker 1: I think the kind of partners we have are more oriented around advising their clients and it's more of a sales role versus a technologist role, and so it's really a trusted advisor, as many call it over here.
• 21:27
  Speaker 1: It's a different approach.
• 21:28
  Speaker 1: It doesn't make it better or worse, but it's my belief that as companies start billing the end user and you look at some of the largest IT companies on earth, whether that's Google, whether that's Amazon, microsoft what are they doing?
• 21:42
  Speaker 1: Salesforce, they're billing the end user directly and some people are able to rebuild that.
• 21:49
  Speaker 1: But I think more and more we're going to see this model of the provider the company, the IT company bill the end user directly.
• 21:57
  Speaker 1: So the partner is either going to have to resell that model or they're going to have to become an agent, if you will, on behalf of the provider.
• 22:06
  Speaker 1: And I think, especially when you get into things like hardware as a service, where the customer may want to buy the hardware and they're like no, you can't, because there may be new laws and regulations put in place that say you need to track Mr XYZ company where the location of that equipment is, because it becomes a biohazard, an issue in the environment and you need to reclaim that equipment there may be legislation coming.
• 22:34
  Speaker 1: Well, in that case, then the company's liable for the location of that equipment.
• 22:37
  Speaker 1: They may very well then want to sell it as a service they bill for and the partner is simply a broker in that model.
• 22:46
  Speaker 1: I think it's not going to probably ever become the largest share of the IT channel, but it's going to become an increasingly larger share and therefore recurring revenue channels become more apropos to where the future is headed, where the puck is moving.
• 23:01
  Speaker 1: If we talk about a hockey analogy, it's where the puck is moving because more and more customers want to buy recurring revenue services paid monthly instead of upfront, and more end-user IT companies that are focused on technology want to bill the end-user directly.
• 23:17
  Speaker 1: That's going to lead towards recurring revenue channels, commission-based channels, being a much larger portion of the sales that are completed in the IT industry, and we're seeing that.
• 23:29
  Speaker 1: And when I got in this 24 years ago, it was very much oriented around data and voice only Today, in this channel you can buy security, you can buy cloud, you can buy SD-WAN, ucaas and a variety of other services, all paid to the partner on a recurring commission basis.
• 23:47
  Speaker 1: So I think that's where we're headed.
• 23:49
  Speaker 1: It will never be probably 80% of the channel, but I can certainly see it being 25, 35, 40% of the channel and the more companies move towards it, the more recurring revenue is going to be a key model, and it's also a very lucrative model.
• 24:04
  Speaker 1: A lot of companies strive for recurring revenue.
• 24:07
  Speaker 1: It's the gift that keeps on giving, as they say, because you don't have to keep selling the customer from the past over and over.
• 24:14
  Speaker 1: They rebuild every single month.
• 24:15
  Speaker 1: You don't have to get them to buy new equipment every month, and that's the value.
• 24:20
  Speaker 2: Yeah, I think from my time at Zoom and working in the sort of master agency space which I think is another term that we hear a lot within this space.
• 24:28
  Speaker 2: You know, I was hearing small elite groups of salespeople who were closing mid-market and enterprise deals as a team of you know, really two or three salespeople, but they were closing enormous deals that if they had to put it on their own headed paper, they'd never get the credit lines or whatever to, you know, to fund a 3 million OPEX deal.
• 24:48
  Speaker 2: It's just never going to happen, right.
• 24:50
  Speaker 2: And so instead they were leveraging the vendor to bill directly and they were getting the monthly commissions.
• 24:55
  Speaker 2: And I was speaking to them and they couldn't be more over the moon because for them they got to do the thing they were best at, which was networking and providing consultancy value, and then they were leaving the detail and the complexity down to the people who do that all day.
• 25:09
  Speaker 2: That allowed them to go and close enormous deals and they take a small cut, but a small cut of an enormous deal that's paid monthly over a seven-year LTV.
• 25:20
  Speaker 2: They're doing extremely well because you only have to close two or three deals a year and they're going to be set for a very, very long time.
• 25:29
  Speaker 2: So I'm seeing the real cream of the crop in the reseller partner space of sales.
• 25:34
  Speaker 2: People really look to this model and saying, hang on a second.
• 25:37
  Speaker 2: I can almost bootstrap myself off one customer and use that as my foundational platform to really start to scale and become aggressive in the market.
• 25:46
  Speaker 2: In terms of your role, craig, can you talk to me about what RRC is doing in the market?
• 25:52
  Speaker 2: What is the role that you're playing and what should our listeners be looking out for you?
• 25:57
  Speaker 1: Well and for me, I've been working with new clients that are trying to access this channel and launch new services into this channel, and some major companies that I won't name.
• 26:06
  Speaker 1: But we're trying to get into this channel, the same as some of the other companies that I helped get into this channel years ago, and I'm using a lot of my tried and true methods to be able to help them do the same thing that some of my former employers did as well, and I'm also helping some partners do M&A opportunities where I'm finding acquisition targets for certain partners to go after who want to consolidate.
• 26:32
  Speaker 1: There's a lot of movement in this and, to your point a few minutes ago, this is a perfect business for a millennial to get into because now there's a blueprint and roadmap that says if you do this, here's the likely outcome over time and what the multiple is going to be, based on the billing revenue of your agency, of your practice, and before there wasn't really that blueprint.
• 26:54
  Speaker 1: Now there's so much M&A activity in this industry that it invites others into this space and, to the point you raised, the barrier to entry is low because you don't have to put up a bunch of capital financing and get investors to get into it.
• 27:07
  Speaker 1: You can simply hang a shingle and start selling, and, and one of the partners the largest partner we had was a former zoom employee, actually to your point, and left there to become an agent because he realized, you know just this was a lucrative business model and they could sell other services beyond zoom.
• 27:25
  Speaker 1: Uh, so I think that that's where it's going yeah, a hundred, 100%.
• 27:29
  Speaker 2: A sort of former mentor of mine.
• 27:31
  Speaker 2: He owned three partners, three resellers they sold telecom at the time but he actually transitioned to more of this agency model and he built a business and I think the target that he set for himself was we need to get to sort of a million ARR.
• 27:45
  Speaker 2: And then he sold that business to another company because they just wanted to acquire his million ARR.
• 27:47
  Speaker 2: And then he sold that business to another company because they just wanted to acquire his end user base.
• 27:51
  Speaker 2: He then did it twice more and each time sold it back to the same company.
• 27:56
  Speaker 2: He hit that threshold, called them back up and said hey, are you looking at buying another base of business?
• 28:01
  Speaker 2: And for him, that's what he did over a 10 year period and he was just done right From between I think it was 33 to 43.
• 28:07
  Speaker 2: He did it three times and he was just like cool, that's me, that's me sorted, because not only are you building an incredibly valuable base where you've got significant reoccurring revenue and a very predictable lifetime value, but, like you say in the M&A world, then what happens is a you know, a French business wants to move into the UK or a company in the North of the UK wants to move into the south and they just go.
• 28:28
  Speaker 2: Well, how do we land effectively?
• 28:31
  Speaker 2: We want to buy a book of business and that is a very predictable motion, and so we see a lot of businesses being bought and a lot of consolidation in that space, because it's such a valuable business to get into.
• 28:44
  Speaker 1: And I can't count the number of millionaires I've made at HelpMake over here from helping invest in their business and build them from when they were nascent to where they are today.
• 28:55
  Speaker 1: And it grows over time, Again to the rule of 78, you do that math and over the course of 10 years it's incredible how much recurring revenue can be built up over time.
• 29:05
  Speaker 1: But it takes fortitude, it takes some guts, but if you're willing to stay the course you can be very lucrative.
• 29:12
  Speaker 2: Awesome, Craig.
• 29:14
  Speaker 2: We wouldn't be a Partnerships podcast if we didn't ask for a referral at the end.
• 29:18
  Speaker 2: So we always like to ask our guests who they think would be a great next guest to have on.
• 29:23
  Speaker 2: Who did you have in mind?
• 29:25
  Speaker 1: Well, there's an individual that I helped mentor when I was at level three.
• 29:29
  Speaker 1: He's the channel chief at a company called Ariaka.
• 29:32
  Speaker 1: It's out of California, his name's Craig Patterson.
• 29:35
  Speaker 1: He does a lot of work with agents in Europe, in the UK, and I think he'd be a great guest to talk about what he's doing in this space and how that solution area, especially SD-WAN, might be a fruitful area as well.
• 29:49
  Speaker 1: So I think it'd be a great insight for you as well.
• 29:53
  Speaker 2: Amazing Thanks, craig.
• 29:54
  Speaker 2: And for the next, craig, I'm coming for you To our listeners.
• 29:58
  Speaker 2: I hope you really enjoyed listening to Craig sharing all his insights on how you build the right culture to build a successful channel.
• 30:06
  Speaker 2: Through his experience at Comcast and the power of reoccurring revenue and I just how much is going to influence the market over the next five to ten years.
• 30:12
  Speaker 2: Great thanks very much for having uh for coming on thanks, alex, appreciate it.