In my last two articles, we discussed the need to manage service personnel's time utilization, the means to measure it and the associated prof t implications. In this issue, I'll discuss one of two seemingly emotional areas that affect service prof tability: pricing of service personnel.

Think about this topic for a minute. How do you decide how to price your service personnel? Let me give you some of the processes we hear from our clients:

• We charge based upon what the market will bear.
  
• That is the price our sales people say they can sell it for.
  
• Ownership does not believe we should charge any more than that.

Notice that none of these reasons have any basis outside of "we think," "we believe" and "they don't want to." When we begin challenging our clients regarding any one of these three statements, the response is often based on emotion more than fact.

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Am I a leader?

How do I become a better leader?

What should I be doing to lead my company?

These are the questions we are asked most often by our clients. Just what does it take to be a good leader? How do you effectively lead your team?

The first thing you need to understand in order to answer these questions is that everyone is different, and that includes you and your employees. You cannot be someone you are not. Some people are willing and able to be leaders and others are not.

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Analyze your sales compensation plans. Can you say they reinforce your business goals and objectives? Or are they simply a pay plan? These are very important questions to ask in order to determine whether or not your compensation plans are effective. Let's begin by defining why we have compensation plans. There are two reasons:

1. To pay people fairly for the work they do
2. To implement the objectives of the organization

When most business owners develop sales compensation plans, they focus primarily on the first point but don't spend much effort on the second.

People must be fairly compensated for the results they generate. Generally, their pay is directly related to the revenue and profit they create. If a sales person can't generate the profit needed to provide a reasonable return on investment over and above what you pay them, then the compensation plan isn't fair to the employer. If the compensation plan isn't competitive for the results the sales person generates, it's not fair to the sales person.

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Building a sales engine will be one of the toughest-if not the toughest-challenges you'll face in growing your business. With that said, a sales engine is essential if you plan to grow, and building a successful one starts with hiring the right people.

As a business management consultant, one of the first things I'm asked is: "When should I hire a sales person?" My answer is simple: "When you have the time to man-age a sales person." That's really the bottom line. The average VAR has between 5 and 20 employees. The smaller the company, the more likely the owner needs to be out in the field working. If that's the case with your company, then you're probably not ready to begin building a sales engine just yet because you can't assume a new sales person can get the job done without your guidance. They don't know your business, and they don't have your passion. If you don't have time to work with them, don't spend the time and money it takes to hire them just to realize later that they're not closing new business-of course, this assumes you hired the right person to begin with, which is really the focus of this article.

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The key is to manage smartly during the good times

Even in the best of times, VARs are intimately familiar with the challenges of managing a small business. In tough economic times, those challenges are magnified, especially for small technology companies trying to generate profit.

We've all read the articles. We know it firsthand. Your clients and customers are reluctant to make capital expenditures. They hold back on important upgrades or fixes and only spend money to keep their aging system running. Then they hold payment- your cash flow-until they have no
other alternative but to send it to you.

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