Channel Partners - How to Find Them
Channel Partners - How to Find Them
Channel Partners - How to Find Them
For many companies the greatest challenge in setting up a channel network is in finding interested and appropriate partners, companies that are looking for just such a supplier at that point in time. Failure to find them often results in lost opportunities, frustration and dangerously, a rethink of and change in strategy.
The two critical factors in channel partner search and selection are:
- Know exactly what you're looking for
- Dedicate enough time and resource to guarantee the result
Once a company has decided it needs a channel infrastructure to reach its target customers in different markets, it has to stay with the process until it finds and engages the right partners.trainingPACT provides 14 pre-requisites which should be defined for each channel partner being sought - that's at every tier in the pyramid and in each market.
1. Location: Where should the channel be located? Must it have multiple locations? This is particularly important if it is expected to sell to customers in large geographical markets like Germany, France or the US. Remember here that restricting channels to regions, especially in the EU, is not always possible, so finding a partner with reach may be the best solution.
2. Scale: The partner needs to be big enough to represent you but small enough for you to be able to influence it and gain mindshare. As a rule of thumb, we look for distributors (or divisions of companies) for whom the year-two margin they will earn on your products/services represents 3% to 5% of their revenues. So, if for example, at 40% GM they can earn 500k in year-two as margin from your products (i.e. sales of 1,25M) we're looking for companies or divisions of companies with revenues of between 10M and 17M.
3. Segment: Establish in which vertical segment the bulk of the channel's business needs to be in order to ensure that it will already be dealing with your target customer group(s).
4. Years in Business: It may be important that the channel partner has been established in its segment for some time and has a track record. In the financial services sector, for example, this is often considered critical whereas with leading edge technology products it may not be.
5. Financial Strength: Should the partner be trading profitably? How much working capital must be available to fund receivables, inventory, sales promotions, marketing. What is the desired equity structure? Is there a VC involved? Is this good or bad? Whatever the criteria are, they should be clearly thought-through and defined.
6. Customer Base: From the target customer list (section 2), briefly describe the types of customers the channel should have. The acid test when you find a potential partner is to find out how many of your list of fifty targets they're already doing business with.
7. Synergies: Consider whether there are particular products or brands that are especially complimentary to your offering and that should therefore be present in the portfolio of the target partner.
8. Written Agreement: Many channel partners, especially smaller ones, are slow to enter into formal agreements, preferring to do business first. If a written agreement is a non-negotiable for you, note it here and eliminate early on, channels that do not meet this criterion.
9. Stock Order: Do you need a reseller to place a stock order? This can be a deal-breaker later on, so if it's vital to your business model, it has to be a definite pre-requisite from this point.
10. Joint Business Plan: The channel will have to do more than just react to opportunities. You will need to develop a plan to jointly develop and grow business for your products. Eliminate channels that want to work at arm's length and are not prepared to invest resources or make commitments.
11. Existing Business: Existing business can be a problem if you want to retain these customers. The partner will probably see all the customers in the market as "his" and will not want you cherry-picking. Clarify your position with regard to existing business and stick with it.
12. Exclusivity: Exclusivity is only enforceable in agency agreements in the EU. ThetrainingPACT program discusses exclusivity in detail and provides in-depth guidance on how to manage this issue.
13. Branding: Are you seeking only channel partners who will sell your brand or will you also consider private labelling?
14.Timing: Make sure that the target partner(s) can move to an agreement within the timeframe demanded by your business.
If you would like to know more aboutway to find channel partners, please follow this link.
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