Building a channel means you’ve reached a point in your company’s growth when it’s time to expand beyond the startup and move into multi-tiered selling strategies. Besides support for your customers, you also have the potential to penetrate your existing markets more completely while opening new doors that were unable to be opened before.
To determine if you are ready to add a channel, let’s first examine the underlying business.
Your company is growing at double-digit percentages every year. You are adding paying clients, and they are happy, if not thrilled, with your service.
- You have prospect flow and a sales process for conversion.
- You have an active sales force, inbound and outbound. You are properly staffed, and your closing percentages are within industry norms, always working to improve them.
- You have after-the-sale service so your customers can get assistance with their purchase.
- Things are going well, everything is working and you can finally say you have a stable growing business after all the work you’ve done to get here.
You could do nothing at all, your company is already growing, but the opportunity to grow faster, dig deeper into your core markets and dominate your competition faster and more completely are still viable options.
1. How Do I Know If I Need a New Sales Channel?
If you dependent on one main revenue stream, it’s a good time to consider adding another. This is where an indirect strategy may become attractive if it doesn’t cost a lot to implement and if it’s going to be profitable quickly.
Is there a market segment you’re not serving? And if you were, what would that mean to the company? Simply put: What sales are you missing and how can you get access to those buyers?
In most companies, we believe our customers are served best by us, but in reality, there may be entire segments of our customer base that have very little contact with our company; they may have acquired a license or be a user of our services through a corporate entity.
There are many good reasons to use these types of relationships, but the downside of that arrangement is the distance from your end user. If you can’t make sure they are thrilled with your solutions and you can’t guide them to your up-sell, then they can’t reach the next level of what you provide.
That’s one more reason to add a layer between your sales force and your customer base, or possibly your prospect base that isn’t as available to you as it would be to your new channel partner.
2. Should I Work with a VAR?
What if your market incorporates your products into a suite of products and then crafted into a “solution” that is sold to the end user? That’s quite common with tech companies and the VAR channel has existed for decades to serve that role well.
Working with VARs is like working with a sales team, except you only get a fraction of their attention. Instead, you are competing with every other product line manager in every other company who is pushing hard to motivate them to sell their product and not yours. VARs are a good solution if you have top of mind positioning and a quality team.
VARs also have credibility inside their own existing client base, where your product can be easily introduced, if the VAR is motivated to do so. Remember, VARs have a trusted authority position inside their client businesses. If you have a substantial product base and can forecast your revenue for each individual VAR, then you have a better chance of convincing them to work with you.
Powerful VARs can request marketing funds or sponsorships to help launch the relationship. How much they ask for may be part of the negotiation.
When I sold semiconductors for a Silicon Valley company, they moved all their outside relationships inside. Then, 18 months later, they re-engaged with VARs and reps. It’s not easy to figure this out, so consider carefully your next move.
If you can identify whom you need to reach, another solution might be to build separate sales force focused just on that market. This may be a good choice if… you have the time and resources to build, train, test and then deploy them. But at what expense?
3. Would I benefit from Having a Local Presence in Every Major City in the U.S.?
Opening satellite offices may be an acceptable solution, but at what expense? Who’s going to manage that effort, and how much will it cost before each location becomes profitable? These are difficult questions to answer unless you are opening your 32nd office out of the 120 that you plan on opening; in other words, you need to know if it’s worth it. What have other companies in your space done this? Start with a projection based on the geographical map of your existing customers, and see if having an office in selective cities would grow your base in areas where you are already well known and entrenched.
4. Are there Geographical Markets I’m not Reaching with my Current Sales Infrastructure?
If you don’t know the answer to this question, look to your competitors. Their website leaves clues about whom they serve and may surprise you. Identifying their market is only half the job; the other half is uncovering how they are serving that market efficiently.
Sun Tzu says: “If he sends reinforcements everywhere, he will everywhere be weak.”
Those competitors, who set up many remote locations, must support them no matter if they are highly productive or not. As Sun Tzu implies, projecting a company’s resources to many external locations can stretch a company thin, particularly if the marketplace of strategy changes. It may be better to find another way to reach local markets.
That’s where a great channel strategy can help.
5. Is there a Market Segment where you want to Focus that Requires Specialized Access that you don’t Currently Have?
To be successful before entering a market, knowing the exact customer avatar is a must. It’s also important to know the vernacular and nomenclature. It would be ideal to understand their business challenges, their legal restrictions, and their trade shows.
In every industry, there’s a decision process for making larger scale purchases, and that’s something that must be understood before trying to approach this new market with old systems and practices.
Someone skilled in selling into that market will ease your path and help you make progress far more quickly than you could on your own.
When I became the CEO of a furniture web shopping portal, I had never been in the furniture industry. My first week on the job was spent in North Carolina at Market, which is a trade show for furniture manufacturers that opens several times a year.
I had no idea who the major players were, what their problems were, what their dreams and aspirations could possibly be and how I can best serve them in my new role. When I asked about their business practices or how they viewed the technology we were presenting, their answers almost made no sense to me.
Many were 3rd generation business owners, having built and expanded manufacturing in the US for decades and were completely unconcerned with Asia as a competitor. Just 2 years later, the wholesale market was devastated by high quality and lower cost imports, and that resulted in almost a quarter of all U.S. manufacturers shutting down.
Most had no use for the Internet and many didn’t see the need for a website, let alone attracting customers from the web. Were they about to do it again? I needed specialized access or I could never have succeeded.
If it weren’t for my partners who were brought up in the furniture industry, I never would have had a chance bringing our services to market. Like any vertical market, very specialized language, access and deep understanding of how they do business is essential to success. If you can get that access through a channel, then it may make sense to head in that direction.
6. Is there a NEED for your Product Before you Enter the Market?
Let’s use CRM as an example. How would you integrate a CRM system into the wholesale diamond marketplace in NYC?
My mom was a jeweler all her adult life and told me stories of men in black suits carrying crumpled paper bags in the open, through the streets of NYC filled, with millions of dollars in diamonds. That still happens to some smaller extent, but their business has nothing to do with software.
Similar to my furniture business experience, I found that I had to first educate my potential client on why they wanted a website and an integrated marketing environment before I could convince them to use ours.
I realize the world is different and there probably are CRM systems in use in the NY diamond market, but it took someone on the inside to make that happen. That’s called the missionary sale, like the missionaries who traveled through the jungles of Africa looking to convert tribal members to their religion. Difficult? Absolutely. Impossible? Not exactly. Waiting for the market to catch up, making small moves to constantly test the marketplace before diving in may be best for now, while you prepare for your massive entry at a later date.
Prepare your staff, learn their nomenclature, understand how they do business now, not after you have committed to a major move and spend substantial funds.
7. Do you have the Internal Staff to Support a Channel?
If you don’t have the internal staff, then doing this will only tax all of your existing resources to the max and leave you with a lot of stressed-out people. Worse, some won’t stay while you figure this out.
It’s going to take time, people and money and preparing in advance by involving your staff, getting their buy-in and helping them see the opportunity for everyone is the best approach.
Great people rise to the occasion when they are part of the decision to make it happen. Get everyone involved, find out if anyone else thinks how you do and then, together, build the case to make it happen. The amount of work, money and time depend on the type of channel you want to create or access. It could be the best decision of your life and it may change the trajectory of the company forever.
Great CEOs see what others don’t. With these 7 questions, you now have the ability and insight to see that, too. Let me know if I can help.
My company builds 3rd party Certification Channels for all types of businesses. Using certification as a tool, people become certified and pay my clients to support and sell their products. Think InfusionSoft or Salesforce. Once in place, the costs are minimal, the benefits are unlimited.
We also fix broken channels and we help companies maximize their effect by using this alternate channel strategy. To learn more, go to www.MyPowerTribe.com.
Mitch built a $10M software company in the 1990's and sold it for 8 figures. Then he built a venture capital firm and ran a dot com. Shortly thereafter, he build a company with Tony Robbins and Chet Holmes and grew that to $25M. Mitch wrote an Amazon Best Seller: The Invisible Organization and now helps great leaders build great companies with his proprietary systems and processes.
Latest posts by MitchRusso (see all)
- Seven Questions to Ask Before Switching On a New Channel - October 16, 2017