Welcome to Tuesday!!
Continuing from my channel sales development blog post a few weeks ago, let’s move on to those early days with a prospective partner. Obviously we will need to discuss how we actively get potential partners and I will discuss that separately in a later blog. Firstly a recap…
Routes to market………. how do we sell our “stuff” whether into new territories (state, country or continent) or different industries? A question that at some point most companies will ask themselves. Whether you sell tangible products, services or intellectual property; you will need to consider carefully how to get your products to customers and most importantly from that create happy repeat customers. You could do it directly if you invest (but you better know the market before you go) or you might not even need a local presence. As well as being a “gung ho” entrepreneur, you may also notice that I am an advocate of the 6 Ps generally and especially with indirect channel management – Proper Planning Prevents P*ss Poor Performance. Now continuing with the good stuff……..
By now (hopefully) we have established that we have a good candidate for expansion into new territories or customers, we understand the “Big 3” – Our Product, Our Customers and Our Competition. We have a reliable product and have developed enough business processes to scale our business and be able add some complexity. In case you missed it, refer back to Part One for an overview of what I believe it means to be ready for indirect channel expansion. So now you might be in the fortunate of having potential business partners chasing you for rights to sell, or you might be starting the search for potential partners. The dynamic is very different in each of these cases; you will have a far stronger position if they approach you, obvious really. Have it in mind even from this early stage the position you want to get to is where potential partners are knocking at your door, perhaps even defecting from your competition which can be perfect. So what are sales channel partners looking for? Putting the specifics of your product to one side for a moment – this very simple formula sums it up…..
A little harsh, too black and white? Perhaps, and of course that’s not 100% of their motivation – but please take away the fact that it’s a very big part. Your potential channel partner wants to make money – duh, and if they have competing lines of products – they will sell whichever one generates the most profit for the least effort in whatever timeframe. It’s really very simple….
Bear in mind depending on your sales cycle you will have to give the partnership at least 1 year and perhaps even 2 years to properly gauge performance. If it doesn’t work out, the best case to get another channel partner up and running is another 6-12 months, if you still leave it to chance you run the risk of a never-ending cycle of missed opportunity – and the real cost could be your brand. After all, unless they are rebranding your products, to customers in their territory they are you. You are trusting them with your reputation, there are many multinational customers, and they may have multinational suppliers, and some of them may be your competition – and according to my research – Bad News travels 10 times faster and farther than good!! Remember your objective in business should be to create happy customers – by my definition a customer who will buy again and will recommend others to do so.
Either way the very first thing to be aware of with every communication, everything you do in future with these partners will be set by how interact with them now. It will pay dividends to have much as possible ready now to demonstrate your organization’s competency and professionalism. I am not advocating not building a personal relationship, because you absolutely should do that, but you must create the impression that you are professional to deal with. You should have price lists established, training identified, partner types, documented discount scheme, delivery time expectations, support expectations, some customer data, payment terms, draft contracts, merchandising, marketing plan etc. etc. I know you’re thinking “Meh…….we can do that later, most important thing is time to market, getting started.” I am telling you from experience – get as much you can ready upfront – seriously. Laissez faire or ad hoc management doesn’t work, and it’s too important to take chances with- isn’t it??
Sales Channel Development is an Investment
Be Realistic – I can’t stress this enough, talk about your expectations for success and growth in the territory, in keeping with your experiences not dreams. Explain any issues that crop up regularly, demonstrate how you can mitigate them together. Remember they have an expectation of making profit from your products, if that will take a year or two – be honest, don’t sell it as it get rich quick scheme if it isn’t…..I read some research somewhere that patients who are told the truth regarding recovery and how much pain and how they will feel following surgery recover twice as quickly as those receiving little or no information up front. Exactly the same principle applies to business development using indirect channels – better results when you keep it real. Don’t imagine for a moment that
Let me relay a few examples of what can happen if you aren’t properly prepared – (all of these are real). I am not saying any of them can’t be worked with or managed, but it definitely helps to understand what you might be getting into:-
Scenario 1 – Profit Piranha – this potential partner doesn’t have much experience in the grass roots of the business, but is an out and out killer sales company and might have great connections to local customers. No customer service to speak of and operates on a purely transactional basis. Loves suppliers who put low importance on contracts and process – claiming that they are a waste of time. Relationship is everything to them. They will say whatever they need to close the sale. When it all goes wrong you will foot the bill for their lack of attention to detail. Your brand will suffer and they will continue with their other products or find new ones. They will make some spectacular sales, but leave things undone, turnover will be good and they want to develop the market. They will make money no matter what, discount will be a flexible term to them and they will expect you to pay for marketing and service.
Scenario 2 – Time Trapper – This potential partner wants to learn the business from you, keen and eager, perhaps not enough experience but plenty of enthusiasm. He wants you to develop the market for him and spend time and effort doing it. You will end up paying twice, once in a discount to him and once to your own employees supporting him and his customers. Training and investment on his side is the key to driving more self-sufficiency.
Scenario 3 – Destructive Defector – This potential partner sees you as stepping stone to something better…..he will take the experience, score some success, blame you when things go wrong and jump to your competition when it suits him. Very low loyalty and minimal investment from his side, you will never get a sales forecast from this partner, they are very protective.
Scenario 4 – Market Mauler – This potential partner will cause a real mess in the market for you. They don’t understand (or don’t want to understand) the requirements and expectations and you have done a poor job explaining. They have sold using their efforts but the territory is a cluster and your products have a generally poor reputation. Perhaps poor service has left end users feeling like they have no local support, or maybe they simply over sold. The largest customers are aware, you have maybe refunded and taken products back. The pipeline might have dried up with little potential for recovery. Will need a large investment on your side.
I realize these are extreme examples, but they do happen and it’s possible that a potential partner may be in more than one category at the same time – (oh shit). The indirect channel needs management and attention and I don’t want to scare you off; it can be incredibly rewarding done right. Whatever happens make sure YOU are in the driving seat. Remember that as you introduce more steps and more distance from you to your customer, the more attention you need pay it. I will share much more in terms of finding and evaluating partners and also some tips and tools for ongoing development in further posts.
I hope you take something from reading this, as ever if you have anything to add, any comments or any questions – please post below or drop me an email.
Cheers from slightly stormy Dallas – Terry
Terry Woolford, Bizblot, Dallas TX.
Email: email@example.com, Tel +1 972 957 7923