Are channel partners right for your business?

Are channel partners right for your business?

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 nearly 40 years of experience working in the life sciences industry and 3 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?

Access and speed to market are the biggest benefits of using channel partners for start-ups. New companies are often limited by resources and so making direct sales in a global marketplace is simply not possible. Distributors allow access to multiple markets without investing in local offices or a global sales team. The fastest way to make a product available to the highest number of end users is by finding reliable channel partners.

For established companies and global enterprises, the speed to market is not so much of a concern. But access to certain geographical regions can be an issue, even for the most established businesses. Channel sales help larger companies scale and access new distribution channels. For example, many European companies find it difficult to access the middle east where culture, ethics, regulations, and ways of doing business vary significantly. Local channel partners provide a point of entry alongside knowledge of local trading.

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 start-ups with a small target audience, such as those that target big pharma, may not need channel partners and so choose to solely sell directly. However, the overwhelming majority of science and technology markets are far too large and diverse for companies not to reap the benefits of using channel partners.

Terminating channel partners in certain locations can be a strategic business decision. When a company starts out and is scaling, it will need distributors everywhere. However, when the market is big enough in a specific location, they may choose to set up a local office. In the meantime, companies will always need channel partners to sell in locations where it’s not financially viable to have a local office.

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.

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.

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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