MasterMinds: The UCaaS Gold Rush — Is It Sustainable?
**Editor’s Note: MasterMinds is a biweekly feature in which we invite leading master agents to share information, insights and expert opinions about what’s going on in their agencies, the IT/telecom channel or the business community in general.**
By Adam Edwards
Compensation for selling unified communications (UC) has continued to rise. Selling UC has always paid more than selling traditional telecom, but it hit a new high when one provider offered a five times MRC spiff in addition to regular compensation. I’ve been asked by suppliers and partners if that’s sustainable. My short answer is yes and no. Here’s why.
Market Valuation
UCaaS providers are currently valued like software companies, which is to say they’re getting BIG valuations. Consider the sale of InContact which had $240 million in revenue and was purchased for almost $1 billion. That’s more than a four-times multiple on revenue! And, did I mention, inContact has been losing money for the last three years? Welcome to the world of SaaS valuations.
UC is now in a period of consolidation, and that means these organizations are trying to increase their value before a sale or simply boost shareholder value on the public markets. Based on the numbers above, for every one dollar in monthly recurring revenue (MRR) a UC provider adds, they’ll receive a boost in valuation of 48 dollars!! (one dollar in MRR = 12 dollars in annual revenue times four = 48 dollars). Is it reasonable that a company would pay five times MRR or five dollars to get a 48 dollar increase in valuation? Absolutely!{ad}
This won’t last forever, but while this valuation trend continues, expect upward pressure on compensation.
Account Value
The value of a new UC customer continues to rise after implementation. UC is more than just a replacement of traditional voice services. When implemented properly it’s a communication and collaboration platform for the organization, and it changes the way the enterprise works. When the promise of UC is realized, the account continues to grow and UC customers bill for much longer than the initial contract term. This means the value of each…
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…account sold is higher than the value of a customer being sold a legacy voice product. This increased value will also keep upward pressure on compensation rates.
It’s Time to Grow a UC Sales Practice
It’s not too late to start a UC sales practice or simply increase your existing efforts. With only 20 percent of companies having adopted UC, there’s lots of opportunity. UC will continue to be highly compensated and will also continue to evolve into a primary enterprise platform putting you in prime position to take advantage of a gold rush that will keep delivering. {ad}
Adam Edwards is a co-founder and CEO of Telarus. His day-to-day responsibilities include all aspects of the business related to strategy and culture. A well-respected member of the channel community, Edwards is a frequent speaker on industry discussion panels and forums. Prior to co-founding Telarus in 2002, he was the vice president of finance for Quest Manufacturing. He also served as the vice president of finance for Silicon Film Technologies and was an auditor at KPMG. Edwards holds a bachelor’s degree in accounting from Brigham Young Univeristy and is a CPA.
Hear more from Adam at the Channel Partners Conference & Expo on Wednesday, April 12, at 1:20 p.m. when he is a panelist in the keynote “Distis & Masters Look Ahead.”
Have a question or topic you would like considered for discussion? Submit it to [email protected].
