Presidio Discussion and Takeaways

PRESIDIO CASE AGENDA:
 Basic Business/Channel Model
 Account Managers Compensation Plan – Analysis & Suggestions
 EVP Inside Sales Compensation Plan
 Hiring from Inside Firm – Pros and Cons
 EVP Outside Sales – Bennett or Kanitsky
 Summary & Takeaways
 What Happened and Update

PRESIDIO CHANNEL MODEL
Presidio Clients Clients of Clients
Outside SF
(Landing Client)
Inside SF (Renewal Reminders)

Outside SF
(Landing Client)
Hunters:
Get Accounts,
Grow Base

Farmers: Retain Accounts,
Protect Base
Outside SF
(Landing Client)
Hunters;
Get Accounts
Reward SF for?
Reward EVP for?

Farmers; Retain/Renew Accounts
Reward SF for ?
Reward EVP for ?
Outside SF
(Landing Client)
Hunters;
Get Accounts
(Reward for
Landing Client
# of New Clients
GM, Effective)
Reward EVP for

Retention of Best SP
Faster Sales Learning Curve Farmers; Retain/Renew Accounts
More and Better Lead Gen Reward for Operational Efficiency
Gross Margin, # of New Clients Reward EVP for SOPs, Operational Efficiency, Net Margin,
Meet Targets in % of Renewals, No Missed Renewal Deadline.
ACCOUNT MANAGER COMPENSATION PLAN KEY POINTS
AND +, -
ACCOUNT MANAGER COMPENSATION PLAN ANALYSIS
(1)
 Allows company to specify and manage behavior and outcomes by accounts
 Focuses on long-term client development
 Progressive: Total potential compensation for client development (i.e increase sales /client) exceeds
total for meeting the current sales goal for client
 While client-development goals depend partially on the sales performance, the A/C manager is
also selling these products.
As bonuses are relatively similar to hitting minimum, acceptable, and excellent performance
targets, managers will likely prioritize accounts with targets they perceive are easy to hit
(ROE – Return on Effort).
A/C MANAGER COMPENSATION PLAN
ANALYSIS (2)
 The revenue targets encourage maximizing and increasing revenue for the PacketShield,
NetStrobe, and Macroterra accounts.
They also encourage the Illumex team to focus on the revenues that can be closed
most quickly. (+)
 As managers bonuses depend on team performance, the plan encourages them to keep their
account teams happy, well-trained, and committed so that they continue to maximize revenue.
(+)
 This plan does not directly encourage managers to control costs. So, headcount, sales spiffs,
and other such expenses must be managed through some other means. (-)
 Nothing in the plan directly encourages managers to keep their team’s composition stable or to
take any specific client-satisfaction steps
(beyond those required for the client development goals). (-)
SOME POSSIBLE PLAN
ADJUSTMENTS
SOME POSSIBLE PLAN
ADJUSTMENTS?
 This plan’s effectiveness is very sensitive to the EVP’s ability to set appropriate targets.
In many cases, the A/C managers themselves will have better insight into the targets and how
easily they can be achieved.
-Should they incorporate their assessment while setting targets?

-Will they get ‘honest numbers’ from them?
-How can they safeguard
against ‘gaming’?
 The company could implement bonus and target systems based on tiered increases in Q-o-Q or
Y-o-Y revenues.
Would such a scheme encourage right behaviors?
 Building a comp plan that treats managers’ accounts in aggregate (e.g., by giving A/C managers
an aggregate target for all of their accounts and letting them decide from which accounts to
generate those revenues) might maximize overall revenues. However, some individual accounts
may not reach their full potential.
 Outside reps would want the A/C managers compensation to be by individual accounts to
ensure that none of the accounts comprising their compensation would ever be neglected
while they are due their ‘annuity’ commissions from them.
SOME QUESTIONS
 What management aspects are the Inside Reps management positions (team leader and A/C manager)
more oriented towards ?
 What management aspects are the Outside Reps management positions more oriented towards ?
 Should the duration of the outside reps compensation decrease or end after a certain
period of time ?
 Should outside reps be compensated only for the revenue volume they can control
and the number of products and initial referrals that the client offers the company ?
 Should inside sales force be also responsible for client development?

SOME OBSERVATIONS
 Because revenues on accounts are not apparent at the signing of the contract,
it is difficult to pay out variable compensation at the beginning of the contract.
 The obvious alternative to paying out variable compensation at the contract’s inception is
-- to pay it on a monthly basis, as those revenues are realized.
The company had been using this scheme, creating some problems.
 Outside reps management positions (team leader and A/C manager) are more oriented towards HR
management, selling, landing new clients - effectiveness .
Need to reward EVP on Faster Sales Learning Curve, Acquisition of New Clients, Retention of best
SF…
 Inside reps management team positions are more oriented towards sales operations management
- efficiency.
Need to reward EVP on Renewal Rates, Meeting Customer Retention Rates, Operational Efficiencies,..
 Inside sales cycle relatively more mechanistic than outside sales so not so challenging for
a sales manager oriented towards sales goals and selling.
But the inside sales force would not be willing to be led by someone with no sales experience.
 As inside reps and A/C managers take on responsibility for generating and increasing revenues
from an account, the outside sales reps responsibility for those revenues decreases.
BACK TO SOME QUESTIONS
 What management aspects are the Inside Reps management positions (team leader and A/C manager)
more oriented towards ?
 What management aspects are the Outside Reps management positions more oriented towards ?
 Should the duration of the outside reps compensation decrease or end after a certain
period of time ?
 Should outside reps be compensated only for the revenue volume they can control
and the number of products and initial referrals that the client offers the company ?
 Should inside sales force be also responsible for client development?

EVP INSIDE SALES COMPENSATION
PLAN
EVP INSIDE SALES COMPENSATION
PLAN
 Are 3 components for total bonus an overkill? (EBITDA 50%, GM 25%, and revenues 25%).
- Doesn’t the gross margin component effectively cover the revenues from existing customers
(as existing customers are going to offer the best GM opportunities)?
- Of the 3 components of compensation, the inside sales EVP has the least control over EBITDA.
 Sales EVP has more control over Gross Margin than other managers, and so Gross Margin
performance should be a substantial part of their compensation.
 The equity compensation is important to the EVP’s “playing nice in the sandbox”.
-How large should it be? Competitive with the industry ?
 A series of other targets and bonuses could be added

(e.g., a measurement of employee turnover). (Simplicity of comp plan compromised ?)
EVP INSIDE SALES COMPENSATION PLAN
(CONTINUED)
For example:
- Some % of the compensation package could be based on GM growth on a

sequential, Q-o-Q basis
(90% of all accounts greater than 3 months old must meet the GM threshold)
- Some % could be based on meeting hiring objectives
 Additional questions:
 Is this a “sales operations” job?

If so, the company should look at the compensation of the sales ops managers
 What are the advantages / disadvantages of this scheme?

INSIDE HIRING ?
INSIDE HIRING ?
General notes:
 The company almost exclusively promoted A/C managers from within the inside sales team.
 David and Mike suggest if they hired managers from outside, the company would have to pay them
considerably more than if promoted from within.
 The model reduces friction and costs associated with hiring from outside and the likelihood of hiring
managers who turn out to be disasters, but they do not necessarily recruit the very most talented people.
Pros for promoting from within:
 Presidio Solutions is a unique company; insiders would know and understand the business.
 Establishing career paths is central theme of the company.
 Internal hires are materially less costly.
 Hiring just a few account managers from outside would create inequity and ultimately
raise salary levels - There are less salary differential issues with inside promotions.
 Internal candidates are well vetted.
 Internal candidates more likely to be more acceptable to the sales reps.

EVP OUTSIDE SALES: BENNETT VERSUS
KANITSKY
Tech sector experience vs. outsourcing logistics sector experience: Prefer? Winner?
KANITSKY
 Tech sector experience vs. outsourcing logistics sector experience:
Prefer?: Winner: If Outsourcing - Kanitsky; if Tech sector - Bennett
KANITSKY
Interest in sales process, tactics, and reps vs. sales strategy, organization, and pricing:
Prefer? Winner?
KANITSKY
Prefer?: Winner: If Tactical - Kanitsky; if Organization - Bennett
KANITSKY
Prefer? Winner?
Interpersonal “sales guy” skills vs ability to build and articulate a business case: Prefer? Winner?
KANITSKY
Prefer?: Winner: If Tactical - Kanitsky; if Organization - Bennett
 Interpersonal “sales guy” skills vs ability to build and articulate a business case:
Prefer?: ability to build a business case: Winner: Bennett better at building a business case
KANITSKY
Prefer? Winner?
Purely sales career vs. some executive suite experience: Prefer? Winner?
KANITSKY
Prefer?: Winner: If Outsourcing Kanitsky; if Tech sector : Bennett
Prefer?: Winner: If Tactical Kanitsky; if Organization; Bennett
Prefer?: ability to build a business case: Winner: Bennett seems better at both
 Purely sales career vs. some executive suite experience: Prefer?: balanced.
Executive experience helps the VP understand what is important to customers but may also be a
sign you have someone who wants to be a CEO rather than a VP of Sales. (Is this a concern?)
Draw: Bennett has exec experience but may want to be a CEO?
KANITSKY
Prefer? Winner?
Purely sales career vs. some executive suite experience: Prefer? Winner?
Less vs. more experienced: Prefer? Winner?

KANITSKY
 Less vs. more experienced: Prefer?: balanced. Winner ?

More experience is clearly better, but not someone who is uncomfortable playing a role
working ‘up’ and ‘down’.
KANITSKY
 Less vs. more experienced: Prefer?: balanced. Winner ?

More experience is clearly better, but not someone who is uncomfortable playing a role
working ‘up’ and ‘down’.
Initially need tech experience and tech expertise, understanding the technology,
and able to convey nuances to SF; as firm grows & product matures, need leader
understanding the sales model, an outside sales expert. Transition timing?
VP SALES TYPES:
Evangelist:
Hunter, Enthusiastic, Must have ability to sell as well
Playbook Maker:
Can build basic processes by assimilating individual cases;
good at figuring out patterns and puzzles
Scaler:
Can work with VP Marketing to get the Lead Gen engine and the Sales Funnel working.
(Hiring someone who joined companies who were already selling billion $ deals not a match
since they have not got experience scaling from lower ACV (Annual Contract Value) deals)
Dashboarder; Boardroomer:
Metrics Builder; can work with C-suite; make presentations; get resources ($, people);
- a manager of managers
VP SALES BY COMPANY LIFE
CYCLE
 Start–Up:
 Traction:
 Growth:
 Maturity:
VP SALES BY COMPANY LIFE
CYCLE
 Start –Up: Evangelist
 Traction: Playbook maker
 Growth: Scaler – Reach for the Sky
 Maturity: Dashboard maker, Boardroomer

VP SALES: OTHER FACTORS
Other Factors to Ascertain and Match:
1) Competitive Sales Experience or Migrating Customers Up (SOW):

e.g Salesforce VPs good at closing, up-selling, increasing ACV, getting people to buy what they may start using
after a year. Not competing in a dogfight with Oracle, Microsoft and Netsuite, rather competing for
budget dollars and against inertia.
2) Experience with similar ACVs/Deal Sizes:

Those with experience of only $ xx,000 deal sizes are not adept at handling high-velocity multiple in-bound
deal sizes of $ x,000
Those handling $x,000 are uncomfortable with jet-set golf-course deals of $xx,000 and $ xxx,000.
Hire VPs who have experience of selling at similar price points and/or making similar jumps in price points before.
3) In-Bound or Out-Bound;
In-Bound experienced in managing a bevy of Inside Telesales;
Out-Bound needs to know how to hire a floor full of bizdev associates .
COMPENSATION PLANS
 What are fundamental Objectives? What are Priorities?
What behaviors does it need to encourage?
-- Maximize upfront or long-term revenues?

-- Increase client base (encourage hunting)?
-- Increase SOW of current customers (encourage farming) ?
-- Manage HR resources effectively and efficiently ?
-- Develop employees so that they meet clients’ expectations ?
--
 Some Variables and objectives to develop compensation plan;
-% of revenues,
-GM or EBITDA;
-bonuses based on achieving quota,
-increasing customer SOW, client satisfaction, customer base, y-o-y growth,
-shortening sales cycle,
-ratio of base pay to variable compensation,
-timing, duration and currency (cash, options) of payouts,
--
Challenge of balancing simplicity of the system versus perfecting behavior through incentives
LEAD MANAGEMENT FOUR LS
 Lead Generation
 Lead Scoring
 Lead Routing
 Lead Rationing
WHAT HAPPENED THEN
Presidio Solution’s new compensation plan:
 The company kept the 4% of revenue run rate as the variable compensation figure
 It paid 2% of the run rate at the time the contract closed

(giving the sales rep a significant enough reward to close new business)
 90 days later, the company looks at the account’s run rate and then pays the other 2%,
making adjustments for accounts that are performing better or worse then expected
so that after 90 days the rep has received 4% of the account’s revenue run rate.
PRESIDIO LATER
Business Performance:
 2019 Annual Revenue: $3B

 2019 Net Income: $35M
 63 locations across the United States
 Employees: 2,900
 Direct sales force: 500
Key Milestones:
 2011 - American Securities Completes Investment in Presidio Inc.

 2014 - Presidio Inc was Acquired by Apollo Global Management, LLC
 2015 - Presidio Acquires Sequoia for Cloud Services Smarts
 2016 - Presidio Buys $300 Million Cisco Partner Netech
 2016 - Presidio Inc Files for IPO (NASDAQ: PSDO)
 2019 - Presidio acquired by BC Partners in an all-cash take-private deal valued at $2.1B
 2020 - Presidio acquired Arkphire, the largest and fastest-growing Irish IT procurement and
IT managed services company

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PRESIDIO CASE AGENDA:

 Basic Business/Channel Model

 Account Managers Compensation Plan – Analysis & Suggestions

 EVP Inside Sales Compensation Plan

 Hiring from Inside Firm – Pros and Cons

 EVP Outside Sales – Bennett or Kanitsky

 Summary & Takeaways

 What Happened and Update

Presidio Clients Clients of Clients

Inside SF (Renewal Reminders)

Presidio Clients Clients of Clients

Inside SF (Renewal Reminders)

Presidio Clients Clients of Clients

Reward EVP for?

Presidio Clients Clients of Clients

Reward EVP for

 Allows company to specify and manage behavior and outcomes by accounts

 Focuses on long-term client development

-Should they incorporate their assessment while setting targets?

Would such a scheme encourage right behaviors?

 Should inside sales force be also responsible for client development?

 Should inside sales force be also responsible for client development?

 A series of other targets and bonuses could be added

- Some % of the compensation package could be based on GM growth on a

- Some % could be based on meeting hiring objectives

 Is this a “sales operations” job?

 What are the advantages / disadvantages of this scheme?

Pros for promoting from within:

 Establishing career paths is central theme of the company.

 Internal hires are materially less costly.

 Internal candidates are well vetted.

 Internal candidates more likely to be more acceptable to the sales reps.

Less vs. more experienced: Prefer? Winner?

 Less vs. more experienced: Prefer?: balanced. Winner ?

 Less vs. more experienced: Prefer?: balanced. Winner ?

 Start –Up: Evangelist

 Traction: Playbook maker

 Growth: Scaler – Reach for the Sky

 Maturity: Dashboard maker, Boardroomer

1) Competitive Sales Experience or Migrating Customers Up (SOW):

2) Experience with similar ACVs/Deal Sizes:

-- Maximize upfront or long-term revenues?

 It paid 2% of the run rate at the time the contract closed

 2019 Annual Revenue: $3B

 2011 - American Securities Completes Investment in Presidio Inc.

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