Revenue drops as customers resist large upfront costs for IT projects, opting for pay-as-you-go Cloud solutions instead. Margins shrink as you re-purpose the resources needed to deliver these solutions. Welcome to the P&L trap. What to do?
Immediate response – sell more. Except that requires both a different sales approach, and an online lead generation engine, neither of which you have. And even if you did, the Cloud customer wants a different offering entirely. All of which require material investment to develop. At a time of falling profits. The P&L trap grips you tighter. No matter what you do, it seems restoring profitability gets harder at every turn.
In my experience working with Partners, the first step in freeing yourself from the P&L trap is to recognize that it’s not your biggest problem. As worrisome as your P&L trajectory might be, your business valuation is taking a much bigger hit. That’s the biggest problem you face.
To solve that problem, you first need to take a step back. Valuation in a Cloud-first world is fundamentally a function of revenue composition and margin durability. Without understanding where you really are at today, relative to others in your peer group, you really can’t take the steps you need both to increase profitability and the value of your business.
I have recently completed an independent Valuation Study of leading Microsoft Partners. It tells an intriguing story about where the money really is in the Cloud. In exchange for your data, I’ll send you the Study results. Contact me here to participate.