The greatest difficulty in setting up a channel system is for many companies finding the right partners. They are often difficult to find, which can result in frustration, lost opportunities, and potentially dangerously, a need for a rethink and a new strategy.
These are the two most important factors in selecting channel partners.
Find exactly what you are looking for
– Make sure you give enough time and effort to get the desired result
Once a company determines that it needs channel infrastructure to reach customers in different markets it should continue to follow the process until it finds the right partners. TrainingPACT requires that 14 prerequisites be met in order to make it possible for each channel partner to be found. These pre-requisites should be defined at each tier of the pyramid and each market.
What location should the channel be? It must have multiple locations. This is crucial if it plans to sell to large geographical markets, such as the US, France, Germany and France. It is difficult to limit channels to specific regions in the EU. This is why it may be a good idea to find a partner who has reach.
Your partner should be large enough to represent you, but small enough that you can influence it and gain their attention. We generally look for distributors or divisions of companies whose year-two revenue on your products/services is 3% to 5.5%. 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
You need to determine in which vertical segment your channel’s bulk business must be located in order to ensure it is already dealing with your target customer groups.
4. Years in Business
It might be crucial that the channel partner is well-established in the segment and has a track record. This is critical in the financial sector, but it might not be necessary for leading-edge technology products.
5. Financial Strength
Do you believe the partner is trading profitably What amount of working capital is required to finance receivables, inventory and sales promotions? What equity structure is desired? Does the VC have any involvement? Is this good? No matter what the criteria may be, they need to be clear and clearly defined.
6. Customer Base
Please briefly describe the customer types that your channel should serve from the target customers list (section 2). Find out how many customers from your target customer list (section 2) they have in business. This is a key indicator that you are looking for a partner.
You might think about whether you have any brands or products that are particularly complementary to your offer. These should be included in the portfolio of your target partner.
8. Written Agreement
Even smaller channel partners are often slow to sign formal agreements. They prefer to do business first. Note if a written agreement is not an option for you and remove channels that don’t meet this criteria.
9. Stock Order
Is it necessary to have a reseller in order to place a stock purchase? It can prove to be a deal-breaker in the future, so it must be a pre-requisite.
10. Joint Business Plan
Channels must do more than simply react to opportunities. To jointly develop and grow your product’s business, you will need to put together a plan. Channels that don’t want to cooperate and aren’t willing to make commitments or invest resources should be eliminated.
11. Existing business
If you want to keep these customers, it can be difficult to acquire new business. Most likely, the partner will see all customers on the market as “his” and won’t want you to cherry-pick. Clearly state your position regarding existing business and stay true to it.
Only agency agreements within the EU can enforce exclusivity. The TrainingThe PACT program provides detailed guidance and information on how to deal with exclusivity.
Are you looking for only channel partners to sell your brand? Or will you be open to the possibility of private labelling as well?
You must ensure that the target partner(s), can agree within the agreed timeframe.