How Can Startup Agents Ensure Success?

Channel Partners

December 30, 2009

7 Min Read
How Can Startup Agents Ensure Success?

Telecom agents come from a variety of backgrounds, but if you are like most agents, you come from a direct sales role for a carrier. Making the decision to jump from a secure, salaried job is often a difficult one. You are concerned about your health care, regular paychecks, expenses, and leaving the comfort and security of Corporate America. You are confident that your relationships with your customers are strong, but there’s a lot more to running an agency than being a great salesperson.

If you walk into it unprepared, it won’t be long until reality sets in: the commissions take a lot longer to be paid than you expected, the cash flow takes longer to build than you planned, general business expenses are greater than you projected, some of your customers are not in a position to make changes or purchase new services and there are still bills to be paid on the home front.

In 1993, I started my first agency. Commissions were 5 percent to 10 percent and all we had were a few long-distance providers to sell and a few LEC products through an exclusive Ameritech agent. Today, startup agents have so much more to build upon. There are large reliable master agents to work with, advanced Web resources for support and more products and services than ever. Regardless, the fundamentals of success are still the same. It takes hard work, strategic partnerships, loyal customers, a focused business model, realistic expectations of your business and an understanding of cash flow and compensation to be successful.

Here are some basic tips to increase your chances for success:

1. It takes money to make money. Hire a lawyer and consult with an accountant before you get started. Also, make sure that you have an accountant set up your agency properly from the start. Have a professional attorney review your agreements and your agency structure. If you have a partner, make sure you have an ironclad operating agreement prior to starting your agency. These small investments upfront can save a fortune in the long run in taxes and potential contractual issues.

2. Successful startups can expect to be cash-flow positive within four to five months. To bridge the gap, some agents run business through other agents or master agents to begin to build their base before they quit their day jobs. Others have been known to double dip, actually working two full-time jobs simultaneously and collecting multiple salaries. These are risky and, frankly, unethical practices that are not condoned, but nonetheless common. Regardless of how you do it, you should plan to have six to nine months of personal and business expenses covered in case of any shortfalls.

3. Understand your compensation plans and when your commissions are paid. This is the key to balancing your cash flow and managing your expenses. Do not assume anything when it comes to income. To avoid the horror stories of not seeing a single check for the first six months, be sure to diversify your portfolio — not just in products and services, but also in how you are paid. For example, you want to avoid selling only products that are just residual with no upfront payments. The key is to have an understanding of who is paying what and when to obtain a balanced offering of products and services that will generate 15- to 30-day cash flow.

4. Balance your compensation portfolio. Most service providers have products that carry upfront spiffs and residuals, as well as one-time commissions. If compensation is spread across payment methods, your agency can be cash-flow positive within 120 days primarily on upfront payments while building your long-term residuals. Working with other complementary resources like hardware vendors, Web designers, auditing and other products will increase your cash flow quickly.

5. Build a network of referral sources. Get involved in lead groups and other professional social groups. Let’s face it, prospecting is the hardest part of the job, and a closer needs to be closing. You need to build your identity now as a business owner, not just a rep.

6. Leverage your relationships for cash flow. Most suppliers will have cash on hand for advances on business sold. Being from the Show Me State, I call this the “Missouri Draw.” With a willing supplier (and not all are, so you have to ask), you can generate cash flow needed on your sales within a few weeks. For example, you might be able to get the upfront spiff at the time of the sale instead of when it is provisioned. Or you may be able to negotiate an advance of three months of the residual. The supplier may lower the points you get on the back end for a period of time. An example might be lowering the residual commission from 12 percent to 10 percent for the first year of the term.

7. Keep your friends close and your enemies closer. Know who your real friends and allies are. Don’t assume anything. Most people will wish for your success, but others may view you as competition. Protect your relationships, and keep your eyes and ears open.

8. Don’t do nothing for nothing. The work you do for free is the most costly. That’s because the more you do for free, the more people expect for free. Be sure to set expectations properly by putting a value on everything your company offers. Aside from legitimate customer service calls, invoice customers for work that you do for them. Set rates for administrative work and consultative work. In my company, for example, admin is billed at $65 per hour and consultative work (e.g., engineering, RFP creation, forensic accounting) is $165. Always send a bill — even if you agree to waive the charges — so the expectation is set that the service costs money and may not be free the next time. This is an important practice for existing customers, but also applies to prospects. When you are starting out, you may be inclined to provide free consultations on the chance that you’ll get orders. Don’t leave it to chance; value the audit or consultation with the agreement that fees will be waived if the client books services through your agency or if achieved savings are shared with your agency.

9. Set realistic goals. There is nothing worse than falling short of your numbers. The pressure at first is tough enough, but falling short will put you behind and, chances are, will keep you behind. The formula for setting realistic goals is pretty simple. Add your business expenses plus your personal expenses and then add 35 percent to cover other expenses that come up like legal, tax and unexpected maintenance costs.

10. Work smart. Time is all you have, so work smart! Work with master agents and other partners that will give you the most resources to save you time and support for your sales efforts and your customers. These resources should include as much self-service capabilities as possible through Web portals, etc. And, when you can’t resolve the issues on your own, these tools should be backed by experienced and available personnel that are able to assist you.

11. Don’t pass on opportunities. If you have a sales opportunity, don’t pass it up even if it’s not for a service you offer. You can always locate a partner who will be able to provide the service and you’ll earn points on the back end — literally, in the form of commissions from the partner and figuratively, in the form of loyalty from your customer.

Being in the telecommunications industry for 25 years, I have seen a lot of agents come and go, but the success formula is the same: work hard, work smart, stay focused and never look back.

Gregory Nasto is the co-founder and principal of Kennon Worldwide Inc. (Special Agent Advisors) and Konsyerzh LLC (GuestMVP), marketing and technology companies supporting the telecommunications and sports industries.

Looking for more information on getting started in the telephony business? This article is from the PHONE+ Fact Book 2010 Edition. This compilation of advice, tutorials, glossaries and best practices from the editors of PHONE+ and other contributors provides basic information on becoming an agent, getting started and building business. To download your free copy, click here.

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