5 March, 2013
Startups that are in the phase to grow revenue can do so much more quickly and at lower cost by selling through distribution partners. Selling directly in unfamiliar markets are risky, costly, and time consuming. On the other hand, innovative products from startups cannot be sold effectively in just any distribution channels.
To sell through partners, therefore, one of the most crucial activities is selecting the right partners, which can separate great success from abject failure. This article reviews four important criteria that startups should look at in selecting the right distribution partners.
Coverage: The first factor to look at in partners is whether or not they are already selling something to your target market. The ideal partners are those who have established trust with your intended target market. Because they already sell to the target market, they know very well about them and can assess the degree of interest the potential customers might have on your product. They can pinpoint the accounts that have the highest probability for you to focus on. In addition, as a trusted supplier, they are in a position to recommend new innovative things to their customers much more effectively than an unknown upstart.
Skills: Good distribution partners should be able to also help you with front-end technical work that comes with each customer project. This type of work grows with the number of customers and projects. If they cannot help on this, startups with minimal resource will be drowned in front-end work and all resources will be taken away from the core development. You will end up doing projects instead of building products. You will end up in a vicious circle I explained in a previous article on project vs platform.
To be able to help startups with front-end technical work, the partners should have sufficient in-house technical skills. Startups should focus on training and enabling the partners to do the front-end technical work instead of doing it for them.
Resource: Besides coverage and skills, your partners should also have enough resource, both in terms of personnel and finance, to help bring products to a wider market. The more resource each partner has, the fewer partners you need to have to penetrate the market. In turn, the fewer partners you have, the more efforts you can put in each partner to help them succeed in selling your products.
Focus: Last but not least, the ideal partners should focus on your products. No matter how good they are in other factors, coverage, skills, and resource; if they do not put their focus on your products, then they will not help you grow the revenues. From my experience, partners will focus on your products if they perceive the products as strategic to their businesses. This can be because they believe the products will become a major revenue source in the future or because the products help enhance their existing products into a leading position. Whatever the case might be, you should ensure that your partners have focus that justify putting in your scarce resources to support them.
Jay Jootar is CEO of The VC Group and Lecturer at College of Management, Mahidol University.
Posted on The Nation