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Exit delayed? Channels can reduce your risk and lengthen your runway.

 A challenging IPO  market has many tech companies pushing out their funding  horizon and getting even more focused on the challenge of maintaining momentum while conserving resources. It’s becoming all about building a sustainable business with the funds you have.

 An article posted a while back by a well-known VC  ( http://goinglongblog.com/are-you-ipo-ready/ )   spoke to the then robust market and highlighted three underappreciatedfactors whichgreatly influence the degree of success technology companies have leading up to and beyond an IPO. These factors are also critical in today’s market for companies focused on the balance of maintaining momentum and maximizing limited resources. A well performing Channel Program contributes to each.

 Are you addressing a market large enough market to support 3x growth?

Channel and Alliance Programs are all about access to new vertical markets, new accounts and new geographies. The sooner companies can establish a Partner Strategy and Program that opens up new markets, the more effectively they can scale it to meet their growth goals. It’s similar to establishing a repeatable sales model for the direct side of your business. The sooner you can do it, the sooner you can start to scale

Do you have a single point of failure?

Expanding your reach into new areas though new partners spreads out your market risk by increasing the diversity of your pipeline. An additional and underappreciated benefit of your Channel Program is how the relationships your Resellers, ISV’s MSP’s and Alliance Partners have with their clients can mitigate your company’s risk from competitors, market sector downturns, or product delays.

How predictable is your revenue forecast?

  Missing a revenue forecast takes on a new meaning for private companies balancing growth and burn rates. The market coverage provided by Partners can provide more data points and broader insights into your revenue forecasts, especially if you’ve built meaningful dashboards and collaborative relationships early on.

Well timed Channel development and efficient execution provides executives another tool to manage through a challenging environment.  Companies that build Channels as a well-integrated portion of their overall growth plans can scale revenue faster and build a stronger and more affordable foundation to maintain the momentum they’ve established. You’ve taken some risk out of your business and increased the odds of success when you’re ready to go back to the public or private investors.

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Channel Partner Mindshare: Why it's important and how to get it, keep it and measure it.

This article was originally published at www.sandhill.com 

The enterprise software market continues to grow at a healthy rate; many analysts are forecasting between 7-8 percent worldwide growth over the next few years. That growth will create scores of startups, emerging growth companies and new initiatives within established software companies. As is the case today, they will need to direct a significant level of effort towards winning and keeping mindshare of their channel partners. 

 

Why mindshare is critical

 

The formula for getting some level of initial mindshare hasn’t changed a great deal. Demonstrated demand for your solution, a predictable go-to-market approach, and a willingness to invest in a channel partner’s success will get you in the door. Companies have partner networks that evolve over time. Some partners perform well, some do poorly and, if you’re fortunate, the majority come close to or slightly exceed expectations in any given fiscal year.

Longer term, consistent success requires a partner network that helps you enter new markets, find new accounts and keeps your competitors off their line cards and out of your mutual accounts. The more you have, the more proactive your partners will be in helping drive your business. Without it, they simply react to the short-term needs of their clients.  

The level of mindshare you have with your partners and how well you’re able to maintain or increase it will be a major factor in the success of your partner initiatives for several reasons:

·        Understanding the level of mindshare provides greater insight to your ability to withstand competitive vendor pressure within your partner community. This is increasingly critical as technology becomes increasingly service oriented and product switching costs become less of an issue.

·        A high degree of mindshare enables real engagement and execution around new product introduction, new market entry and new account development.

·        A high degree of mindshare enables you to withstand short-term issues in areas like pricing pressures, product gaps, partner program changes and competitive programs directed at your customers and partners.

·        Understanding the level of mindshare across your partner community also instills a higher level of confidence in forecast evaluation.

·        Establishing a benchmark allows you to build and measure programs focused on improving mindshare, building another barrier to entry for your competition and increasing the overall level of positive engagement with your partners.

 

How to measure mindshare

1.      You can establish a mindshare benchmark for a point in time and as an ongoing indicator of future performance. You formulate objective and measurable assessments for three elements, each designed to get at the core drivers of the relationship you have with your Partners: How does your product rank within their line card of products and services? Very few resellers carry a single product; and most only truly focus on two or three, regardless of how many vendor relationships they have in place. Keeping track of where you stand over time is key.

2.      How much of your interaction with them is conflict or collaboration based? “Easy or difficult to do business with” has become an overly convenient way to categorize the effectiveness of partner operations. It’s much less important than working towards a high degree of the dialogue being mutually goal based.

3.      How important is your product/company to the long term performance of their business? Individual transactions drive quarterly performance and get constant attention. Complementing this with an objective, long-term picture provides much needed balance.

Gathering and analyzing insight from the partner executive leadership as well as selective members of their sales team will give you a complete picture by partner and across your overall program. Significant mindshare differences will impact your performance but also provide a great road map for improvement programs.

    The level of mindshare you have with your partners and how well you’re able to maintain or increase it will be a major factor in the success of your partner initiatives, especially if you are planning on new market and new account growth. Establishing a benchmark allows you to build and measure programs focused on improving mindshare, building another barrier to entry for your competition and increasing the overall level of positive engagement with your partners.

 

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Bring us a deal......

 

Years of experience in any business always results in a more nuanced understanding of commonly used phrases or “positioning” statements. In the technology business we’re used to hearing Channel teams in larger companies say “bring us a deal and we’ll talk” when they’re approached by smaller firms looking to expand their reach. On the surface this makes sense; let’s make sure there is real business before we commit time and resources, but there’s usually more going on that emerging growth companies should take into consideration. Two of the most common sub texts which slow you down are:

·        Channel staff in larger companies often have limited influence, at least initially, with the sales teams you’re trying to engage with. The easiest way from them to get the attention of their own sales team, who are focused on the quarter, is to deliver a deal.

·        Your value proposition doesn’t resonate with your potential Channel Partner and how they relate to their end user’s and prospects so you’re a low priority.

The one off, bring us a deal approach; even if you bring one, doesn’t guarantee you can scale the success into a repeatable model that fits how your partner does business.

A “bring us a deal dynamic” can also exist at smaller companies.  An executive of one of our recent clients was proud that, several years earlier a prestigious global consulting firm, brought the company into a large deal. The success wasn’t ever duplicated because there was no consideration at the time of building a repeatable Partner initiative based on a collaborative view of the market. The deal was great for the quarter’s performance but a significant opportunity was lost.

Potentially transformative deals are always incredibly important. Emerging growth companies who have a good understanding of how Channel Development fits their overall Go to Market approach enables you and your potential partner to turn that deal; regardless of who brought it, into the beginning of a sustainable and profitable relationship.

 

 

 

 

 

 

 

 

 

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Establishing Performance Goals

This post was originally published on SandHill.com.

Establishing realistic performance goals for new initiatives is often challenging for emerging growth companies across all aspects of their business. Burn rates and time to revenue can dominate every strategic decision, including launching a Channel Partner Program. Getting it right the 1st time includes establishing realistic performance goals.  Doing this poorly can lead to unrealistic expectations, mis- matched investment levels and difficult conversations with your sales leadership and your investors. Doing it effectively helps establish an effective foundation for predictable revenue growth. The author highlights some of the common pitfalls and outlines an approach that will help you effectively establish performance metrics for your initial Channel initiative.

 

Emerging growth companies in the early stages of building out a Channel program often have difficulty establishing realistic revenue goals for the 1st year or two of their program. They have none of the advantages a more mature company has; Partner performance history and established relationships, a history of collaborative planning and perhaps a Partner Sales team with experience in the overall channel and insight into the Partners pipeline.

                     Getting Started: A foundation for predictable performance.

Emerging growth companies usually have none of these advantages but can use a well-constructed thought process with two pieces of readily available information as a starting point.

1.      Use your direct sales yield as benchmark.

This is a simple calculation but be sure to distinguish between your expected new hire yields and the goals you’ve established for the reps with more seniority.

2.      Establish the number of reps your partners will actually have selling your solution.

This is an easy, total number to establish. Companies building a Channel Program start with a small number of potential partners and the recruiting process should establish the total sales staff of each partner.

Once you’ve established these basic starting points you can apply some business judgement to the following variables to get you closer to a realistic set of performance goals.

1.      Adjust your Channel’s overall sales capacity to reflect their capacity for selling your solution.

In the vast majority of cases every one of your Partner’s reps aren’t going to be 100% focused on selling your solution. Consider how much mind share you’ll initially have compared to the rest of their portfolio. Are you the lead vendor in a new category for them? Are you the 3rd option in an existing category? The recruiting process gives you the insight into how you fit into their business and the types of questions you need to consider. Don’t be surprised if the initial capacity to sell your solution approaches 25%.

 

2.      Consider if and by how much you need to adjust your sales yield expectations.

Especially focus on the mix of solutions being sold and if there are any differences in the markets your partners will be selling to. For example, do you need to adjust the yield to reflect fewer add on’s and a lower level of services? Will your partners be focused on a segment of the market that’s extremely price sensitive and may require significant discounts?

 

3.      Make an objective estimate of your company’s overall sales maturity.

This is especially important because it related to how repeatable your sales process is and how transferable it is to your Partner’s sales teams. It also includes the degree of your solutions completeness in the eyes of the target market and the supporting Positioning, Promotion and Pricing attributes. If your company is firing extremely well on all cylinders and the necessary elements can be extended to your Partners efficiently; assign a factor of 100%. If not, reduce accordingly.

             

Once you’ve used this process to establish reasonable sales capacity and goals it’s important to establish the time to revenue expectations. The unique characteristics of your company’s sales process are a major consideration but the time to steady partner led pipeline and revenue growth is virtually always longer than initially forecast. You may see deals early on but your new partners often already have these queued up due to an already established need with an existing client. The heavy lifting of partner enablement, business development and marketing leading to new opportunity creation takes time.

              Putting all together: Achievable goals that increase the value of your company.

Let’s assume you’ve launched your program with three partners who have a combined total of 25 sales reps.

> Your direct sales yield is $2m. per rep.

> You estimate you’ll have, on average, 20% mind share with you partner’s reps, giving you the equivalent of 5 reps.

> You’re confident the $2m yield per rep is transferrable, establishing an initial benchmark of $10m in top line revenue.

> You’ve estimated the sales maturity level of your company relative to your partners at 70%.

This gives you an annualized expectation of $7m in partner generated revenue as a starting point before you factor in time to market considerations plus unique program and partner characteristics.

 

Adopting this approach helps emerging growth company executives negotiate and set the right sales targets, make the right level of investment in your Channel program and provide a foundation for collaborative goal setting with your Partners. Just as importantly, this approach encourages executives to consider all of the dependencies associated with Channel success early in the launch process.  This all contributes to the creation of a Channel Program that is predictable, measurable and serves as a multiplier to the overall valuation of your company.

 

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Roadmap for Growth by Understanding the Channel Partner Learning Curve

This article was originally published at Sandhill.com 

 

The technology investment community has long recognized the multiplier effect an effective partner ecosystem can have on the revenue growth and overall valuation of emerging-growth companies.  Effective partner ecosystems can mean greater sales coverage, increased market validation and can complete your solution for all or parts of your market. But not getting your partner initiative right the first time means missed opportunities, wasted resources and, most importantly, wasted time. You can increase your opportunity to succeed by starting with an understanding of the partner learning curve and how to accelerate it.

 

The partner learning curve

Learning curves are often used to describe the dynamics of specific functions like manufacturing, supply chain logistics or sales. The partner learning curve is different in that it reflects the relationship between three different but inter-related elements. Establishing an effective partner strategy and building the supporting Ecosystem requires an understanding of how you can fit the following three elements together.

 

1.       Your company.

An objective assessment of the maturity of your sales model, your target markets and customers and your product’s completeness all factor into the partner learning curve. Some degree of a repeatable sales process is critical if you hope to efficiently enable your partner ecosystem to sell your solution. Your value proposition and pricing promotional strategies need to support the markets you expect your partners to sell to.Finally, does your product have all the features and functions your partners and their customers need?

2.      State of the market

The state of your target market is usually an under-appreciated factor in understanding the partner learning curve. As an example, selling solutions into an early-adopter market requires a different approach than selling disruptive technology into a well-established market. Different pricing models, the use of Proof of Concept, identifying different types of customer champions and support expectations are just a few of the variables associated with different types of markets. Emerging-growth companies incorporate these differences into their own go-to-market programs but often don’t consider them from the channels’ point of view.

Your partner’s true level of interest in helping bring your solution to their customers will be greatly influenced by their view of the market, how consistent it is to yours and how well your support lines up with their sales process.

3.       Partner priorities    

Partners are understandably the trailing piece of the overall learning curve evaluation, taking a shorter-term view of markets and technologies. Put another way, the channels care about what their customers want and how to maintain or increase their margins. They view your solution through this very specific filter. Until they get a sign from their customers regarding overall demand, they may work with you on a single deal but won’t create markets or make significant investments in marketing or missionary selling.

Roadmap for accelerating the partner learning curve

The first step to building a sustainable and profitable partner ecosystem is understanding how the dynamics of your company, the market and your potential partners all line up. This insures you time your approach to the channel correctly and have the right enablement programs in place.

Part of this first step is an emphasis on determining the best sales model for your position on the partner learning curve. Partners can sell for you, you can sell with them, or you can sell through them. Each model requires different approaches and programs, and early-stage companies often don’t take full account of the varying requirements.

A roadmap also allows you to target potential partners correctly. As an example, smaller, regional firms are typically more open to taking a chance on new markets or disruptive technology and may have more flexible sales models. Once you’ve built this foundation you can accelerate the learning curve by adopting the following principles.

 

·         Turn your passion into passion for the channel’s customers. Leaders of early-stage companies are passionate about their technology and the problems being solved and can presume everyone else feels the same way. Directing that passion towards your partner’s business goals and their customers’ problems will get their attention

·         Bring a deal. Nothing gets a prospective partner’s attention like bringing them a new piece of business. Regardless of your channel sales model, priming the pump with a potential or new partner that meets all your criteria is a great way to accelerate the adoption of your solution by their sales team. Just make sure you follow up that 1st deal with a clear plan for future business.

·         Make a commitment. Commit to “We will make your first customer successful” and communicate the plan to back up your statement. Mitigating your partner’s risk and getting that initial success will grow the business with your first partner, and the proof points make it easier to build out the ecosystem.

·         Establish a predictive dashboard. Revenue, either influenced or secured, remains the single most important measure of success of your partner ecosystem, and the early success of your initial partners impacts the rate at which you can build out the ecosystem. Relying on revenue as your only metric can result in recognizing problems too late in the process. Identifying, measuring and influencing the key drivers of that revenue (i.e., demos given, outstanding proposals, etc.) help you take proactive action to stay on track.

·         Don’t rely on your partner’s sales team. Creating new opportunities with disruptive technologies is never the path of least resistance for your partner’s sales team. They’ll sell what they already know and what their customers ask them for. Find the technical leader in your partner’s organization and provide them with all the support and access needed to champion your solution.  

 

The individual pieces of the partner learning curve – your company, market and channel ecosystems – are all well known by experienced emerging-growth company leaders. The challenge is putting all three pieces together and determining your starting position on the partner learning curve. Once you’ve established this, you can build the plan to start recruiting the members of your ecosystem and adopt a few basic operational tactics to accelerate the adoption rate and profitable revenue growth.  

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The most important, and often overlooked, step in building an indirect partner sales program.

Most companies consider Channel programs to reach new accounts, geographies or vertical markets and start their planning based on potential Channel Sales volume. Planning and execution then quickly progresses to recruiting, enablement and sales activities. More often than not, one or two years into the program Channel revenue is below expectations and management is looking for a fix.

Part of the answer usually lies in the work that wasn’t done when the company decided to incorporate Channels into their Go to Market strategy. They didn’t understand that any misalignment between your existing GTM strategy and your Channel strategy almost always results in lower than expected revenue and profit. The easy way is to assume there is enough alignment to succeed. The right way is to take a close look at your Product Strategy, Marketing Strategy and Sales Model and determine what fits the Channel and what doesn’t.

1. Product Strategy Alignment

Does your product have the functionality, completeness and ease of use required by the markets and customers you’re asking your Channel Partners to address? For example, smaller companies may require less functionality and have higher ease of use requirements than your traditional markets. Understanding the differences early on in the process may lead to short term packaging adjustments or creating new service offerings for the Channel. 

2.  Marketing Strategy Alignment

How does Marketing position, price and promote your product? For example, if you’ve typically marketed to the F2000 but are expecting your Channel Partner’s to sell to medium sized businesses there will be a significant gap across all aspects of your marketing mix that need to be addressed. 

3. Sales Model Alignment

The most basic question is whether or not you have a repeatable sales model. If not, then enabling your Channel Partner’s to sell your solution will take extra time and support. If you do, make sure it applies to whatever set of markets and customers your Partners will be selling.

 

 Companies don’t need complete alignment between their existing Go to Market Strategy and their Channel program to get off to a good start. But being aligned in the most important areas for their business and their partners will increase the likelihood of hitting your revenue targets.

 

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Passion and Partner Learning Curve

Passion usually is an important driver for success, especially with emerging growth companies. Founders and members of the executive team are truly passionate about the products they're developing and bringing to market. That single minded passion helped them secure funding, attract key employees and convince early adopters to use their products.

But, that passion can get in the way of profitably scaling your business. A company's success with a small number of early adopters can lead to building a sales team before you're ready.  You may have an unformed sales and operations model or a limited view of the broader market. Adding too much sales capacity before you’re “ready” can lead higher burn rates and disappointing revenue performance The Harvard Business Review Article, "The Sales Learning Curve" provides an outstanding view of this predicament and how to avoid it.

http://hbr.org/2006/07/the-sales-learning-curve/

 The same situation can exist when companies begin to consider Channel Partner recruitment and enablement. Prospective Channel Partners and especially their sales teams don't share your passion; your potential partners are passionate about growing their margins and satisfying the immediate needs of their existing customers. Your products are simply another alternative for them to achieve these goals. So, be a little less passionate about your own business and know how your product can build their margins and satisfy their customers. Emerging Growth Companies who can translate their passion and value in programs that fit the Channel will go a long way in reducing their "Partner’s Sales Learning Curve to build profitable business for both of you.

 

 

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