How Tech Companies Double Annual Sales with Three Words
This piece was originally featured in Mattermark Daily on January 26, 2017.
It’s January, which means increasing sales and growth targets for emerging technology companies for the new year. With more venture capital funding comes higher expectations. How do private B2B tech companies keep up with the ever-increasing revenue expectations?
The successful ones — particularly mid-stage, enterprise-focused companies — meet their lofty targets with three words: “channel sales & distribution.”
Three words that help achieve three key goals
Implementing a successful channel sales and distribution strategy helps a tech company accomplish three key goals: (1) reaching and closing more enterprise customers, (2) closing these added sales faster and more efficiently, and (3) fundamentally improving the company’s sales growth trajectory, with the potential to boost projected revenues 2–3X within 12 months.
During a recent channel sales and distribution webinar entitled “Channel Sales 101” with Alex Ryals, Vice President of Security & Networking at Avnet Technology Solutions, and Mike Nowlan, Director of Channel Sales Programs at Nutanix, we discussed three steps in executing a successful channel sales and distribution strategy.
Sell direct first and then work backward
Before even taking steps to add channel sales, sell direct first. Ryals states: “We like to see a new ISV or startup sell directly to their end user for a little while, just to understand the customer segment they want to focus on and how they want to go to market.”
After this, consider your channel strategy by working backward. Define your target end customers, and then figure out how they like to buy their solutions.
“Are these end users buying their products through systems integrators, like Accenture or Cognizant?” asks Nowlan. “Are they using large national partners like CDW, SHI or Insight? Or using more traditional solution providers like Presidio, Sirius or Foresight?”
Defining a strategy is not always simple. A software container solution company recently told me their current customers consistently buy from small-to-mid-size systems integrators (SIs). But their larger prospective target customers are buying from much larger SIs, which are difficult to close during a company’s early stages. So, their channel sales strategy must reflect the realities of whom they can get the attention of — and work with — in the short-, medium- and long-run.
Step 1: Be selective in targeting and committing to initial channel partners
After considering your partner types and options — including value-added resellers (VARs), managed service providers (MSPs), SIs, OEMs, consultants et al — develop your channel sales strategy with an eye toward potential competitive issues. For example, as an early-stage company, your partnering with CDW, Verizon or Infosys may affect your ability to simultaneously partner with SHI, AT&T or Wipro respectively.
For emerging companies, the key gating factor will likely be limited focus and resources. So, limit the initial channel rollout to a few key initial partners as you sort out the What, How and Who of the channel support process with these companies.
“We commonly see ISVs and start-ups invest in a channel manager and start to sell to just a few direct value added resellers,” says Ryals. “That helps them learn the motion of training someone else to sell their product.”
Step 2: Achieve channel success through MIST
There are four aspects to a successful channel rollout: Marketing, Incentives, Support and Training — or MIST for short.
Channel marketing includes defining the products and services that the partner should focus on reselling, pricing (both channel and recommended end-user pricing), as well as promotion and communications resources. With these marketing efforts — and the other three parts of MIST — everything should be greatly simplified. Why? Your channel partner’s employees are far from obsessed with your company and your solution. In fact, many are inclined not to care much at all — particularly when encountering an emerging company with a new solution they hardly know. So keep everything very clear and simple.
Incentives are also critical, which include monetary as well as recognition. When negotiating pricing with your channel partner, discuss the commission structure for the sales team. Also discuss details, such how your sales may count toward partner reps’ monthly quotas. Consider offering additional bonuses early on to inspire initial attention and early wins.
“As you drive early success with these key partners, the key is to get them some wins sooner,” says Nowlan. “That way they can close business…and see some sales volume from commissions as well as build the pipeline.”
Next, be prepared to fully support your channel partners. This means being completely responsive in handling calls, questions and objections. Consider initially funneling some direct deals to early channel partners to generate channel momentum — even if you’ll lose some dollars in the short-run by going indirect.
Finally, training is critical and should be woven into the agreement and planning with the partner. “Training activities are key to making sure the partner community knows how to sell an ISV’s product,” says Ryals.
During the training process, identify potential champions on the partner’s sales team. Find the sales superstars that have better understanding and motivation to sell your product — and focus initial efforts on them for breakthrough sales. Then publicize these breakthroughs to the entire channel sales team to inspire others. In many cases, 10–20% of the partner’s salesforce drive 80–90% of channel revenues from that partner, so look for these top performers.
Step 3: Channel expansion and distribution based on what’s working
After successfully engaging a small set of partners, start planning how to expand your channel distribution efforts. Be smart. There will definitely be some patterns with what has and has not worked, which will help drive your strategy.
One tactic is to double-down on the types of channel partners that have been successful to date. Another tactic is to focus on leading partners in each major reseller category. This depth vs. breadth consideration is critical.
With overall sales and channel sales growth both accelerating nicely, and your strategies succeeding, consider distribution strategy next. “When the ISV or supplier is ready to scale,” says Ryals. “That’s a perfect opportunity for an IT solutions distributor to connect and help design scalable marketing plans, financial programs and sales strategies, to help the ISV grow at a rapid pace.”
Examples of technology distribution partners include Avnet, Tech Data, Synnex, Arrow, Ingram Micro and others — each with different strengths and characteristics. So, choose wisely. Selecting the right distribution partner at the right time will help you grow channel sales with more scale and efficiency, helping meet ever-increasing revenue expectations.
Philip Levinson was the first Marketing & Sales executive at TigerText and first VP of Sales at WaterSmart Software. His recent articles include pieces on Uber, Cloudflare, Nike, enterprise sales and enterprise marketing.