Yesterday I spoke to a regional economic development association whose mission it is to help their local companies expand internationally. When asked what the typical company’s biggest challenge was with regards to internationalization to far away markets the answer was clear:
By far the biggest challenge for our companies is to find the right distribution partner
What was specifically meant was finding a partner who is able to actually sell product on a consistent basis, at a level satisfactory to market demand and within a reasonabletime frame.
This challenge certainly resonated with me (although I don’t necessarily buy into the distribution model as the default for US-market entry. More about this below).
I’ve personally experienced multiple failed attempts to engage what companies from Europe or Latin-America considered relevant partners. Most attempts failed at the early stages, some were consummated but never generated any significant revenue.
Why it is so extremely hard and time-consuming to find the right partner and what can you do about it?
It used to be a mystery to me also. I do believe I’ve cracked the code however, here is my advice:
Finding and engaging the right US-distribution partner is like hiring a top-performing sales-executive
- A top-performing sales-executive is highly motivated by financial incentives. Can you show him how he will make money? Attracting a strong sales-executive requires you to have a well constructed sales playbook gjat is proven to generate revenue. Most sales people would prefer not having to invent this, i.e, take the risk, they want to walk in, execute, and start seeing revenue (so they can make money). Your distributor is a business just like yours. They are here to make money. They don’t have cash-flow nor is the leadership supportive of “experimenting” for you. Experiments burn money. They want a clear recipe that is proven to work.
- Is your comp plan attractive to engage a true top performer? Forget about attracting a sales-person that’s used to selling million dollar enterprise deals if your average deal-size is USD5,000. Why? No way is he going to be able to take home the same kind of money. Is your distributor a billion dollar entity with a sales team carrying quotas in the millions of dollars per month? We recently worked with a small software manufacturer whose problem was exactly this dynamic: their chosen reseller had to generate millions of dollars of revenue per month; our clients average deal size was less than 10,000 and did not require much installation or support. Why do you think the reseller relationship never produced any results?
- How will you compensate him for the time it takes to generate his first sales. Do you have a pipeline in place for him to work? What are your plans for your distributor?
- Do you know who your perfect customers are, what value proposition they are buying and how you are different than your competition? This is part of a good playbook. Don’t expect your reseller to tell you this. They probably carry at least 5 other products, typically more, and don’t have bandwidth to consider this.
- Do you carry a recognized brand. Aside from making it easier to sell your brand, or lack thereof, provides prestige and identity. Most sales people value this element. Branding matters just as much to your re-seller, even if you do OEM. It is a sign of quality and trust.
- Are you able to give him an attractive title and ensure him of “power” and impact. While a playbook is what he wants to start with he is likely interested in improving it. Your distributor wants to be listened to for product and service input. They want this to be considered for the roadmap.
- Have you clearly defined a territory plan? Your sales person wants to know the total addressable market and will be calculating his expected sales and what type of compensation he will take home. How important do you think it is for your distributor to know what their territory is?
- Your sales-executive wants to know that you have a well oiled marketing machine behind him to push leads into the top part of the funnel and marketing activities that make it easier to move deals through to close. Research shows that CTO’s today are 61% of the way through the buying process before they engage a sales person. Now: How important do you think marketing is?
- You need to make sure your compensation plan is structured so that your sales-executive is correctly incentivized. Incentive-structure is the strongest correlation to performance. What kind of behavior are you incentivizing for your distributor?
- Have you clearly defined what success looks like and do you have data to back it up? KPI’s, key-activities and a budget for your sales person is required to de-risk performance issues. How are you de-risking the distributor relationship.
- As part of the performance metrics, have you clearly defined the consequences? What is your way out if the distributor does not live up to expectations?
- Do you have a clear feedback loop and monitoring process set-up? As part of a good sales playbook is a feedback loop to ensure that your sales people perform and that market input is looped back into the organization. For your distributors you need to have a similar process in place.
- A top performing sales-executive will look to your CEO for a strong and clearly articulated vision for how your company will win in the market place. What long term vision do you have. A top-performer will want to see proof that it’s not all talk but you’re also executing. And most importantly your sales-person will want to buy in and be aligned. They must believe. Alignment and a shared vision is crucial in regard to a strong distributor relationship.
- There must be a good personal and culture fit. You must respect one another. What type of reseller culture is a good fit for you?
It’s been my personal experience that creating results through a channel strategy is similar to what it takes to driving performance through your own sales force.
Perhaps considering your channel activities through this lens will help you improve performance. I hope so.
As always I’d welcome any feedback. Please contact me via: hello@KatapultGroup.com