Seven reasons to build a reseller channel
There is never enough money, time or resource to do everything that needs to be done in any company. So when the objective is to radically increase revenue growth, the seemingly obvious answer is to leverage the money, time and resources of a reseller channel to help you get there.
1. The direct sales model is difficult and expensive to scale.
2. Channel have existing customers, existing sales force, technology and consulting resources and marketing dollars – all of which can be leveraged at a fraction of cost of building your own.
3. The fastest and easiest sale is to an existing customer, leveraging both the ability to access them and the trusted relationship. Channel has an unlimited number of customers.
4. Geographical coverage and associated sales activities, (whether in the UK or internationally) benefits from local sales and support.
5. Synergistic reseller partners add value around a core proposition, especially in developing vertical markets.
6. A successful channel delivers “money for nothing”, particularly when the partner becomes fully self sufficient.
7. Successful channel can deliver triple digit compound growth, high double digit growth of revenue per full time employee (profitability) and very significant recurring revenues – increase the probability of a successful exit (if that is the ultimate goal).
Seven reasons why it does not work
The most common reason given why a channel strategy failed is because the resellers failed to deliver.
1. Channel is hard to sign and even harder to get productive than direct
2. You discover that you still have to do all the selling and then give away a big chunk of the licence revenue as margin.
3. The costly leads that you passed over to the reseller never got followed up and were completely wasted.
4. You learn that the channel needs a lot of hand holding to implement the solution – it would have been easier if you did it yourself – at least you would have got paid for it.
5. Channel doesn’t do support, they just field the calls and pass them on to you, but still take a large chunk of the support revenues.
6. Channel tell your people about all the things you do wrong, your people think the channel is incompetent, leading to strained and then failed relationships.
7. The 80/20 rule applies – only 20 per cent of the channel ever gets productive, whilst the 80 per cent that sell nothing take up a huge amount of resource.
The challenge is to address these problems up front as part of the channel strategy, as these common symptoms are a reflection of a poor channel strategy.
Seven steps to fix it
I would argue that few resellers fail because they are incompetent. The reason they fail is because the supplier failed to understand the challenges the reseller faces to be successful, failed to build a compelling business case that maintains commitment in the early stages, failed to set achievable expectations, failed to provide the process and methodology required to successfully build and maintain a “remote” virtual workforce and failed to make the investment to deliver a viable communications platform necessary for a channel model to succeed. Building a channel business is very different from building a direct sales business. Simply, it requires a much higher level of disciplines, especially if the intention is to build channel in the USA were expectations and levels of service requirements are significantly higher than the UK.
1. Channel acquisition is about a partnership business proposition – not just
about your product, so leading with your product is a mistake.
2. Partnership is about sharing the risks and rewards equitably, that means sharing the responsibility of building the successful relationship. Quantification of respective responsibilities is part of the business proposit ion.
3. Everyone wants a successful channel, so channel has unlimited choices in what solutions / technology they take on. What they are looking for is a business opportunity and a partner that understands their challenges, enables them to succeed with minimal upfront cost and risk, that has the potential to be more profitable than something they already do.
4. Early sales, successful implementations and happy customers are critical to achieving a successful partner. The channel induction process must be geared to delivering fast wins as the longer the partner fails; the less likely they will ever become productive. Bad experiences are usually terminal.
5. Sales staff is notoriously bad at taking on new products. It is outside their comfort zone, any new solution is probably new territory for them and they would rather do what they know than risk being embarrassed through lack of knowledge – particularly with existing customers. If you don’t address building a competent, educated and confident virtual sales force with an attractive commission structure, a partner will never sell.
6. Initial and on-going education, instant access to relevant knowledge by skill set (marketing, sales, tech pre-sales, implementation and support) is the foundation of a successful relationship. Most direct sales companies have little or no infrastructure / collateral to support an external relationship and without it, the relationships will fail and the business model can’t scale.
7. Building a channel is about scalability. It is founded on the discipline of do everything once and then publish, thereby enabling your virtual staff to be successful in their respective roles – globally.
Developing a comprehensive channel strategy, costing it and then resourcing it are the foundation to success – yet very few organisations do this. No organisation can build the ideal channel model over night, so like all strategies, it takes time. The question is which of the key components should be the initial priorities and which can follow over time. The good news is that very few companies are good at building and maintaining a reseller channel, so if you can execute on a superior channel strategy, the rewards will be immense.
Neil Robertson is director of Channel Wisdom
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