Are channel partners right for your science and technology company?
Working with channel partners can help science and technology markets enter new markets, reach more customers and skyrocket profits. It’s no secret that nearly all science and technology companies use them! But how do you decide whether building a channel partner network is right for your company? And how do you start?
Sharon Eaton MBA, Managing Director of Biochannel Partners Ltd. has 35 years of experience working in the life sciences industry and 2 decades helping busy businesses find and recruit channel partners to enter new, international markets. Here, Sharon provides insight into why and how companies should build their channel partner network.
What’s the benefit of using channel partners for start-ups vs. global enterprises?
Regardless of whether you are an established global business or a new start-up, access and speed to market are the biggest benefits of using channel partners. In both cases, you can ‘hit the ground running’ with channel partners as they already have relationships with potential customers.
For start-ups who are often limited by resources, direct sales in a global marketplace is often simply not possible. However, distributors allow access to multiple markets without investing in local offices or a global sales team. Equally, established companies and global enterprises can use channel partners to make new products and services rapidly available to a large number of end users.
While the benefits might be similar, the channel partner you choose may vary depending on the stage of your business. For startups, the focus is on finding channel partners in the biggest markets while for more established companies, the focus is on the next biggest gap between sales and potential sales.
There seems to be a benefit to using channel partners whatever size organisation you are but are there any reasons a science and technology company wouldn’t use a channel partner?
Extremely niche companies with a small, easily identifiable potential customers, such as those that target big pharma, may not need channel partners in some countries.
Regardless of their size, when a company is growing, the use of channel partners has obvious benefits. Most companies would have salespeople in countries where they have a direct office, usually in regions where it is financially viable to do so, and use channel partners in other export markets.
If the number and range of end users is still vast, some use a combination of direct salespeople and channel partners, even in the same country. This mixed model can be very effective if managed well but can lead to conflict if expectations and responsibilities are not clear.
The aim is to get coverage, to make sure that all potential customers are adequately serviced. Channel partners can help to fill the gaps.
If you’ve decided that a channel partner strategy is right for your business, what’s the very first thing you would do?
One of the key factors is to nail down what the biggest gap is between sales and potential sales. This gap could be geographic, product type, or end user. Then start with the biggest gap! If you identify multiple gaps, make sure you stagger the process of onboarding new channel partners. Attempting to recruit and manage too many channel partners means your efforts will be diluted and your new partners won’t receive the attention they need to do the best business for you.
Ok, so you’ve identified your biggest gaps. What’s next?
I often find that people want to jump straight into looking for potential channel partners. But it's beneficial to sit down and put a lot of thought into exactly what you’re looking for. In other words, define your ideal channel partner What should they have in their product portfolio? What customers should they be visiting? What specialist knowledge should they have? There’s a lot to think about and write down before you start looking for and engaging with potential channel partners.
While this may take some time, it pays off in the long run. Without a solid idea of what you want from your channel partner, you’ll find yourself wasting time looking down rabbit holes that lead nowhere. What's more, you might find yourself choosing a channel partner only to discover later that they aren't the right fit, necessitating a replacement.
In addition to defining your ideal channel partner, is there anything else you would think about?
Yes, definitely. There are lots of factors to consider. But on the flip side of thinking about what the ideal is, you should also consider what could go wrong and have a contingency plan. For example, if you or your channel partner gets acquired, what should you do? Or if your channel partner doesn’t meet their targets, what happens next?
Contingency plans are a very good way of stopping conflicts happen. If you anticipate things that might go wrong and manage expectations, then everyone knows where they stand right from the beginning. Build it into your agreement and have a system in place.
What’s your number one piece of advice for science and technology companies that are looking to recruit new channel partners?
Each organisation’s situation is unique however, there is one overarching piece of advice I have for everyone who is looking to recruit channel partners – and that is to remember it is a process.
I have seen too many new partnerships start with ‘gentleman agreements’ or handshakes at trade show booths. I’ve come across too many companies who have agreed to do business together and see how it goes. Then when things go wrong down the line, getting out of those partnerships can be problematic. Therefore, having a process as well as a clearly defined and well thought out written agreement is paramount.
By having a defined process in place you are actively thinking about the decisions you make at every stage. You ensure you are being logical about your selection, you safeguard against future problems and you give yourself the best chances of selecting a great channel partner
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