Critical First Steps…
Combining economy of actions with a clear vision of the end point is the fastest and shortest route to the finish line.
Not every product or service sold in and through the IT marketplace is a Channel viable solution. In short, you might waste a great deal of time and cash attempting to establish a reseller program when, for a number of quantifiable reasons, there’s a slim to zero likelihood that the results will justify the effort.
The most important first step you will take is to confirm, as much as you possibly can, that the product or service you will be asking your partners to recommend or sell to their customers provides sufficient appeal and motivation to engage.
You may be thinking now – well, that’s obvious. But, as it turns out, it’s not. In fact with every request for services we receive we perform a quick evaluation of the solution’s viability before accepting the project. Approximately 3 of every 10 meet our minimum viability requirements.
Here’s a simple summation of the primary elements we review:
- Existing customers and industry.- references and case studies
- Product price point and average sales cycle – Sales expectations and profitability time line – realistic?
- Budget – Reasonable and realistic for task at hand? (More on this follows below)
- Commitment – Sales/Marketing Staffing,3rd party solutions (PRM), budget (again), SE for region served, long term plan or experiment to test waters
- Services opportunity (high margin revenue) for the reseller or referral partner
Here’s another simple test you can apply – Look at your product price point and the average sale size (multiple licenses) for that product and the time it takes to close and deliver the deal. Now, convert the amount of the sale to the VAR organization’s cut – usually about 20-30% of MSRP. Multiply that number by the number of sales in one year based on your sales cycle. Calculate this serially to best simulate the real sales environment. What you’re now looking at is the best case annual “product” profit that the reseller organization will receive. Multiply that number by .3 to get a generic idea of what the sales person will receive (30% commission) for these sales, less any SPIFFs or other MBOs. Give yourself bonus points if working with your organization delivers new business opportunities (incremental customer acquisition) and high margin services revenue.
Ask yourself, if I’m a salesperson under heavy quota pressure at the ABC VAR Company with many established profitable and long term vendor relationships – is there enough new business and revenue opportunity for me to slice out a chunk of my time to pursue this new “untested” vendor relationship?
Remember, VAR sales people don’t work for you and they are truly “coin operated”. You need to be aware and prepared for this as you leave the starting blocks.
There are too many variables to offer up a budget planning formula. I’ve tried many times over the past 30 years to come up with some clever rule-of-thumb recommendation, but the best I can share with you is to mention a few items and roles that are typically under budgeted.
Partner Account Manager – A full time seasoned partner account manager.
Sales Engineer – Most ISVs will have a dedicated SE to support their direct sales. In today’s cash stressed marketplace this is the best case, and the SE will also be called on to provide stand-in SE support for partners. In a perfect partner world there will be a Partner SE or solid plans to add one as soon as the demands on the Direct Sales SE become an availability and scheduling problem.
Partner Sales Engineer – Primary roles typically include: co-developing the technical on-boarding training track and delivery, delivery of perspective partner pre-signing demos, delivery of pre-sales demos (in many cases) to partner’s end-user prospects, pre and post sales support. Assist the Partner Account Manager as needed.
Marketing – Similar to the Direct Sales SE, it’s most likely that the organization has a marketing person on staff. In the early stages of a new partner program roll-out there’s huge demand on the person in this role to create marketing collateral. In most cases the collateral content development requires significant interaction between various channel stake holders and the marketing person.
In my experience, due to the high volume and unexpected requests for new materials with partner-centric content, this has often been one of the greatest bottlenecks and delay factors in the delivery of sales and marketing collateral, training materials, HTML emails and website modifications.
Be prepared to take on extra budget costs for outsourcing of (partner) campaign materials, co-branded (html) marketing pieces, partner related web site modifications, business/case studies.
3rd Party Solutions – Adding a Indirect Sales Channel to an organization’s business model requires additional staffing to support the new effort; and, most likely, some kind of 3rd party software solution(s) to address this new type of business relationship. Very few CRM solutions I’ve worked with have the capacity to manage sales, marketing (mailers), pipeline, forecasting, lead management, MDF and other functionality unique to the partner experience. Most organizations will adopt and integrate a Partner Relationship Management (PRM) solution to feed into their corporate CRM.
Please – no SF.com and Dynamics flame throwers. They’re both good CRM solutions, but a little heavy and convoluted for an emerging ISV with channel aspirations Additionally, from a budget perspective, you can expect extra costs for 3rd party developers on these platforms. .
Clarity of Vision
I feel compelled to mention this based on past conversations with executives and team leaders regarding their new channel aspirations, their vision and goals.
What I’ve heard is a solid verbal commitment to have a channel, but very little idea just what that means. For example, when I would ask how they plan to mark success at the end of one year, the response was “Hmm? Good question.”. I’d probe a bit deeper by asking if they had a number in mind.- Annual Sales, Number of Partners signed…just exactly how will they know if they’ve succeeded?
Sometimes I’d get an answer, like $300,000. So, I take them on my price point/sales cycle tour. What we discover, to their uncomfortable surprise, is that they’d need 100 resellers all closing at their annual goal rate. Anybody familiar with the 80/20 rule realizes how infinitely unattainable this goal is.
After working through their initial shock, we move on to budget and I’m still surprised to hear how unprepared they are for that discussion. And then it’s their turn to be surprised when I share the above points with them.
To summarize this chapter in our series – as the Project Manager for your organization’s new partner program it will serve you well to validate your solution, stuff the budget and corral unreasonable expectations.
Previous sections in the Channel Executive’s Survival Guide Series:
- Introduction: A Channel Building Schematic
- Concept 1.0: Channel Executive’s Survival Guide- Concept Framing & Course Plotting