General Consultant Discussion

TGIF! As a one-man-show I sometimes sell a lot of Sage product and sometimes I don't. Most of my revenue is service. I have a couple of customers that pay the annual renewal through me. Sage sent me an email for a customer's renewal and I sent an invoice to the customer. When I called Sage to pay it today I discovered that I didn't hit the minimum tier levels that changed in October 2015. I am so busy I didn't even remember they changed. In addition, Sage quoted me the 2015 renewal price not the 2016 renewal price... a $853 difference This is an $19K, 30 user Premium renewal. Sage basically told me ""if you have a problem with the margin then contact your account manager"".. This was my email response: I am not doubting that I am on a different tier. I understand the program changed in October. It is very surprising that my margin is 0% on renewals. I have been a State of the Art/ Best/Sage business partner for 26 years and have never had 0% for promoting and collecting money for your company. My bad, and it won't happen again. I hope you report a great quarter to your stockholders. Please call my customer and explain to them you sent me an incorrect invoice and they owe you another $853. I won't be spending any more time collecting maintenance renewals.

Perhaps Sage needs to have their ""Chief People Officer"" do a better job of instilling a positive attitude toward partners.

Partner"" is a misnomer. What a f78king joke.

Give it to them @DougHiggs! They deserve to be blasted with both barrels!

I had the same problem last month. This month I have a 15K renewal I'm sitting on, not sure what to do. Client asked me to renew but I get 0.00 margin

This is ridiculous. I'm sure it the same for many of us. Customers ask all the time if they should pay the renewal, or if they pay through me if I can give them a 2 or 3 percent discount... and I usually will give a small discount because I collect the cash up front. NOT ANYMORE! Sage can collect their own debts. Renewed motivation to pass a couple more Acumatica exams this weekend.

Send a letter to Stephen Kelly thanking him for the imaginary check for $0.00 on a $15,000 renewal you collected from your client for Sage.

But hey, Doug, if you move them to subscription, you will get a guaranteed 30% margin!!

Maybe we should start the 90 Minds buying group. Oh, wait, that's against the rules.

@ThereseLogeais I haven't had anyone that wants to change to subscription. They already paid for the software and want the option to stop paying maintenance when they don't foresee any more value, times get tough, or want to change to Acumatica. :-)

That was sarcasm Doug.... And good luck with the Acumatica venture - you're not alone!

Something from Ed Kless: https://youtu.be/kp9BJxFHDYI

Then there's the situation where the client wants to move to Silver from Gold - today is the renewal date - but Sage already processed the monthly payment on 2/28.

Yay, the RAM is coming to the rescue - maybe. More on this Monday - I hope.

We get still get margin on renewals but stopped taking billing or taking payment for them 7 years ago. We did this when Sage hired an outside firm to do the collections. We constantly found our sales team butting heads with Sage and their agents. We finally just stopped. Now Sage does all the work and sends us a check monthly. Pretty dumb on their part but oh well.

@ShawnSlavin I usually let Sage do the renewal. I have about 10% of my customers that like to pay through me. These are the larger clients, and in the past I would give a 2.5% or 3% discount. On the remaining 90% I would get a check from Sage every month. I was just thinking the other day that I haven't received a check from Sage since the beginning of December. I thought... well... maybe there just aren't any renewal the last couple of months. It never occurred to me that I dropped off the commission list. Surely Sage calculated that if they doubled the minimum tier from $25K to $50K that a certain percentage of the small partners only hit $50K 65% of the time they will save several million dollars a year in commissions. Thanks Sage.. another punch in the gut. And don't worry. Sage changes the commission structure every six months. So that 30% subscription margin will be 10% five years from now.

That's the Sage strategy. Get end users addicted to subscription by promising partners a good ""teaser"" margin. Sage will then gradually start keeping a bigger piece of the pie until there is nothing left for us.

Tip: That's EVERY publisher's strategy. The only difference is the maturity of their offering. The only way to win is not to play the game. Develop standalone recurring revenue sources that don't rely on the publisher.

Yes Wayne, and just because the offering is mature doesn't make it a better or worse offering for the end user. It isn't the product maturity but the product relevance. Mature products can still be modern and relevant. End users and partners that dont perceive a product as modern and relevant may not be able to flee tomorrow but they may be looking for an opportunity. I have never relied on software sales to stay in business and I never will. I sell my knowledge, not a product. It is irritating though when the company you have ""partnered"" with for many years has gradually become a suspicious ""acquaintance"".

@WayneSchulz Do you really believe that EVERY publisher's strategy is to gain market share and then gradually cut out the reseller channel? It is difficult for me to believe they would have such a short-sighted approach. Why would a company have a strategy to gain market share and then keep all of the recurring revenue by slowing cutting out the source of the sales? One reason for such a strategy is the publisher believes the product is outdated and it will be futile to increase market share so they simply milk the existing customer base to squeeze as much cash as possible out of a dying product. Software companies with a modern product offering that expect an expanding market share empower and reward their resellers. These companies reinvest in the product so it doesnt become outdated.

I think it's unrealistic to compare the strategy of a mature market 30 year old product to ones that are 5 years old. And, yes, as markets mature companies are forced to make changes to keep their profits up. Best to realize this and plan for it. Take a look at other markets which matured much faster than ERP --- for example networking software. How many VARS are around still making money selling big boxes of Novell. When I started out back in the 80s there were dozens and they bought full page ads touting this new service. Today I don't think these same VARS are around and if they are they're making almost all their money from services or selling managed service plans and not margin on boxes of Novell or Microsoft networking.

Wayne's been preaching his insight for more than a few years, and it's completely correct. Really hard to execute, but necessary for your long run. That said, publishers will always look for resources ""close to"" the customer to help with the solution's adoption. With few exceptions (salesforce notably) they will pay for that. However, make no mistake: strip all of the niceties away, and their payment is a ""cost of sales."" Hence ultimately the sales manager's top question is always somewhere in their thinking, ""Sure, you beat quota last month. But what have you done for me TODAY?"" So, if you regularly create new sales, then you essentially answer that (usually) silent question affirmatively. Otherwise you are too close to ""non-performing salesperson."" Every publisher is convinced its poop don't stink, and that consultants are absolutely not needed by customers. We know that many customers really do need us. However, arguing that with publishers is essentially casting pearls before swine, because they simply do not understand the context. (Remember too that modern applications are relentlessly improving in ways that push the need for customer assistance much higher in the need chain - for example upgrade help is not relevant with SaaS.). So arguing with publishers and hoping they'll change won't work. The hard thing for us is to take the sad reality and figure out where in it we can deliver value to customers, and how we can show the customers that value. The details will be different for Acumatica than for Sage, but the underlying need is the same. Acumatica says it will never change toward using partners, but that promised ""never"" has never stood for any company. While frustrating, there is real power for us in recognizing that.

As long as there are ""customers"", consultants will be required. The Ed Kless story at MOTM about a customer who copied the cash received is replayed in different ways every day. Customers require us to look at their watches and tell them what time it is, because they are not doing it. There is a gold mine of opportunities to help customers without representing any publisher or making money from them. We are probably inhibiting those opportunities due to all the time we spend on requirements defined by those publishers. I have heard multiple times from my CPA partners that they hesitate to introduce us to their clients, because we'll try to sell them something. But if I tell them about business process reviews and helping they and their clients to improve and find solutions that are appropriate, they are all over that. We need to take Wayne's advice and strengthen our consulting approaches and terms in order to make more money and continue to do that without the need for the publishers' money. If Sage and others choose to pay us a pittance, then that's a bonus. If not, we don't lose.

Welcome to the club @DougHiggs...Kept looking for that commission check for days!!!!!

OHH..and I am based in Puerto Rico...so you can imagine I am very pleased with the Spanish speaking support lines from SAGE....yeah right!!!!

@LourdesSobrino Yo entiendo. Mi esposa es de Mexico City. Y hablo un poco espanol! I have decided to stop complaining (Surprise! Complaining doesn't seem to help). I am going to shut up and do something about it.

There are larger resellers that will work with smaller resellers that do not have adequate sales volumes to get paid on maintenance renewals. If a large reseller gets paid 30% margin on maintenance renewals, and pays the smaller reseller 50% commission, the smaller reseller avoids losing their commissions if sales volumes do not meet Sage's minimum activity levels. Of course, if you feel it would be unfair to reduce Sage's net maintenance windfall on your clients by that additional 15% the larger reseller retains, such an arrangement may not be for you.

The only legitimate ways in which a smaller reseller can work with a larger reseller are: 1. ROR client to the larger reseller with written commission agreement. 2. Execute a merger according to Sage rules. Sage will eventually catch on to the first option, because it is being done for the sole purpose of getting the payment. The overall strength of the channel should be to have more than just a few large resellers. Sage should be working to help the smaller resellers make more sales, which is not happening.

Small re-sellers have an inconsistent sales pipeline. We can sell $75K in one month then only $30K the next 12 months. So the margin on maintenance can vary from something to nothing (as of 10/2015). As has been pointed out by many, we shouldn't rely on product margins.

I'm referring to the first legitimate option. If I recall correctly, I think Sage puts a 2 year restriction on maintenance revenues from mergers. And I agree John, Sage should be working more with smaller resellers. When they bump the minimum tier level to 50K (cost), it's hard to believe they aren't just trying to wring more money out of smaller resellers.

@AcumaticaGeneral

I think the ROR trick works for onesies and twosies but during the months Sage is paying attention they start to question if a bunch of ROR transfers happen all from one partner to another. This is a super YMMV (your mileage may vary) and seems to depend upon who at Sage is paying attention and what their policies are that week with respect to mergers.

Don't think for a minute that if Accumatica builds momentum they won't be raising their tiers levels etc. Currently with them you are buying into their 'triple play' deal.

@MarkChinsky Why would they raise tiers? If the strategy for adding partners / sales revenue / market share works now, why would they change it?

If the strategy is to operating at a loss and burn VC to gain market share and then piss off all of the partners then it is a horrible strategy.

Doug, for the same reason Sage, Microsoft, Epicor, Infor ...Insert mature well represented solution here... did. As you said, its a way to gain marketshare fast. The same reason Uber is so low priced, Amazon sells at or below cost etc. In the .com world (and don't fool yourself, SaaS is .com 2.0) its all about 'customer adds' 'momentum' etc. SHowing a profit is VERY low on the list of requirements. Once the founders get to cash out thanks to an IPO or big acquisition, the party is over and your margins will be squeezed. If you don't like it to bad, as I guarantee you your agreement doesn't lock in your recurring margins. Those customer's are Accumatica's, not yours. Even more so than with Sage. You might get a nice trophy for your troubles, but the millionare's will be minted at Accumatic, not Doug Higgs Inc.

This topic of conversation interests me a great deal. I hope my posts don't seem argumentative. They certainly are not meant to be. I am curious to learn what others think about this topic. I don't dispute that Acumatica or any other company might change the commission policy. I see the point that offering a teaser commission to gain market share. However, the founders should be able to make money on the IPO (on paper) and still keep the people (partners) happy that helped create the value. My understanding is that Acumatica is now turning a profit. I envision a plan that enables the publisher and the business partners to work as a team. Some of the profits would be re-invested to keep the product current. Everyone (the publisher and the re-seller) is fairly compensated and presents a consistent message to prospects and customers. To me, that is a long-term strategy that endures long after the founders have cashed out on an IPO. The founders of Sage cashed out several years ago. Sage has implemented the reduced margins. Does anyone believe that Sage has implemented a good strategy? It seems to me they are alienating partners and many are seeking alternatives. Just because everyone (Microsoft, Epicor etc.) is doing it may be a good reason to consider other strategies! I am not delusional enough to not see this coming from Sage (some may disagree on the delusional part). I don't have to like it or agree with it. I am just trying to understand it. As the top sales rep at a company I worked for many years ago used to say., "" You can mess with me, but don;t mess with my money."".

Richard Branson's policy at Virgin does not put the customer first. In fact, Virgin employees are the company's top priority. As Branson sees it, the formula is very simple: Happy employees equal happy customers. Similarly, an unhappy employee can ruin the brand experience for not just one, but numerous customers. I see this concept extending beyond employees to include business partners / re-sellers of the brand. Ironic that Richard Branson is one of the speakers at this year's Sage Summit. http://www.inc.com/oscar-raymundo/richard-branson-companies-should-put-employees-first.html

What really gets me is the ping-pong decisions at SAGE. One day they establish something with big celebration and six months later they change it. Even tough I am a one person show....I will continue with my customer base and not fill out a single RoR. You never know what they will do tomorrow. I have been a SAGE reseller for too long to begin with a new product. Ever since the first change of rules at SAGE I decided that their income could not be part of my budgeted revenues. That was my bonus...My customers will still need support and consulting....