Onboarding your first distributor - A recipe for success
So you’ve decided it’s a good time to partner with companies to scale your company. What is the process you are going to use to onboard the distributor or partner?
We are going to lay out the process that we have used forever and makes the whole evolution as simple as possible.
Finding distributors
There are 1000’s of distributors around the globe but the difficulty is convincing those distributors to work with you when you are a new product in the market.
To find out more about distribution models see here
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Distributors
LinkedIn has always been our go to tool for reaching out to distributors but you need to do your research first.
Is that distributor able to position my products based on the products that they already have in their portfolio?
Is the distributor going to take you on and just forget about you and push you to the bottom of the pile?
If the distributor has a product that they distribute already that is in the same category, they will be less likely to take on the product. Why is this?
The distributor likely receives leads from the vendor that is the same category as yours and if they take on another vendor of the same category, those leads could be used for either vendor which isn’t ideal. Within your distribution agreement, you can state that the distributor isn’t to have conflict in product types.
You can get a lot of information from a distributors website around what products they work with, which markets they serve and usually how many partners that they work with.
Be careful not to have crossover in markets if you are new to the channel as having more than one distributor in a region can cause conflict initially. At the later stages of the journey, it becomes less of a conflict because there is already an existing market that has been built.
The initial reach out to the distributor needs to be to someone who is the decision maker for onboarding products.
A message that has worked for us previously is “Hi xxx, my name is xxx and we are currently moving into a 2-tier distribution model and it appears that we could fit nicely into your portfolio. Can we grab 30 minutes to have a chat to see if we are a good fit for each other?”
The initial meeting
The initial meeting is all about getting to know each other. You need to come away with what revenues they have, which vendors they are working with, who their biggest vendor is, how many partners they have reach into, what types of partners that they work with, how their team looks and whether they can support the products that you sell.
NDA’s can be signed before this conversation but it’s rarely been required for us in the past.
They will likely want to know what traction you have in their regions, what targets you are looking to set for the region for revenue targets and partner recruit targets as well as what support they will have in place.
You can take them through your partner program, your team and the processes that you are working with in the channel.
After all points have been cleared up on the call, it’s time to setup a call with the technical team at the distributor to showcase the product. In the meantime, you can send the draft contract to the distributor so they can be looking through this until the point of the technical call.
The technical call
Here we have a call with the technical people from the vendor and the technical people from the distributor. The idea is to show what they product does as a demo session and answer any questions that may arise from the distributors team. After the demo has concluded, if possible, you can provide them with a POC licence or time limited trial of the product for them to have a play around with it themselves. Expect more questions during the testing of the product which should be dealt with in a timely manner to show the levels of support that you provide.
At the end of the technical call, you can also chase the contract to see if there are any points that need clarifying before moving ahead. You will likely be referred to the person that you sent the contract to so it’s time to chase that.
The contract modifications
It is alright to modify a contract to suit someones requirements as long as it is fair and for good reasons. We have been asked for exclusivity in the past but always come to the agreement that exclusivity can be granted for set periods of time and can be maintained as long as targets are hit in line with the contract and business plans. A new market with no distributors on the ground and no existing business will likely request exclusivity for a set period of time because they need to build the market. If you have two distributors in place and one distributor is building the market, then the work they do could mean that the partners can buy from the other distributor…. Which isn’t really fair.
After contracts are signed and sealed it’s time to move into the onboarding cycles. This consists of:
Business planning
For business planning, you to create a joint plan on the targets that you have set out in the contract and how you are going to meet those targets. This is a two sided thing and not just left to the vendor or distributor to do.
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We have always used spreadsheets in the past for business plans but there are tools in the market that can help with this now.
Our spreadsheets consisted of a 12 month plan split into months with the annual target spread over the 12 months but not at even intervals. It takes time to build a market and to give a large target for the 1st month is unrealistic. We could be looking at up to 6 months to build a market and get interest.
If the distributor doesn’t hit the target for a specific month, you carry the remainder over to the following months and spread it so that you are still on for the target by making up the difference. It just means that you need to work harder for the remaining months and are playing catch up.
The plan consists of partner recruitment and revenue targets. You can incorporate other targets into the plan such as pipeline, prospective partners, campaigns run etc but the main two you want to concentrate on are the revenue and partner recruitment ones.
The marketing call
Setting a call with the marketing teams from both sides is very important as it lays out the plan for what needs to happen to hit the targets from the business plan. You can discuss joint marketing campaigns, events, MDF utiliation, webinars and so on.
Having targets set for each of the activities conducted is important and measuring ROI on MDF activities is key to ensuring that marketing spend is put in the right places.
MDF is marketing development funds which are provided by the vendor to the distributor to build a specific region. It is generally provided after a year of a distributor being in place from a percentage of revenue attained in the previous year. You can have a seed fund for MDF though which you can use for new distributors and regions.
Marketing campaigns are typically run on a 50/50 cofunded basis where the distributor submits a request to the vendor to say they want to do a specific activity, states an ROI, the vendor agrees to fund 50% of it and the distributor gets reimbursed upon proof of execution. We will do an article on channel marketing and MDF in a later article but just know that that this is an option.
Training for sales and technical
Distributors need to be trained to the same level as what you, the vendor are. Think about this like taking on a new director for your company. They will side by side with you to see how things are done and eventually take the reigns themselves.
Initial training can be broken into two parts. The sales side and the technical side.
The sales side should introduce the sales team to the concept of licencing and billing, how to raise an order, how to register deals, how to use the portal of the vendor as well as how to access sales resources and other materials needed to build the market.
The technical training is the same as taking on a new engineer internally. You are going to enable the distributor to be able to implement, support and maintain the customer in the same way that you would internally.
Training the distributor to the same levels as you will reduce the support required to give to the distributor on a technical basis and make them self sufficient quicker.
There are always going to be support inquiries but if the distributor has a solid understanding and ability, they can answer most of the partners questions below them without having to reach out to the vendor at every opportunity.
As time goes by, these support questions become less and less as they learn the text book answers and methods within the solutions.
Training extends to further than the initial training.
Side by side management of first deals
The quickest way to ramp up the distributor is to do things side by side initially. If you have a lead that is from their region, you get them to be on the call with you and one of their partners and transact that lead through the distributor and partner. You are essentially selling direct to the end user but in conjunction with the distributor and partner.
Do this multiple times with multiple different partners belonging to the distributor and you are creating the foundations for their business with you whilst training them up. The more times they see the demos, the more they are going to be confident doing it themselves and the more chance they have of onboarding partners for you as opposed to with you.
Regular calls with the distributor
A reasonable call schedule to check in at the initial stages, alongside the working of deals through them is weekly to ensure that the rhythm of business is maintained.
After the distributor is fully trained and able to work with your products, cutting this down to bi-weekly is acceptable from a channel development perspective and then to monthly once things are fully in process.
This doesn’t mean that the sales team isn’t going to be in regular contact. Instead these check in calls are to ensure that there are no requirements from them to help them to do what they need to do.
Monthly business reviews are in place for a longer call to go over KPI’s set for the month past and month following and QBR’s are in place to go over the entire quarter just gone and the plans for the following quarter.
You can’t just take on a distributor and leave them to do their thing because it’s a joint effort…. A partnership.
Summary
This has been a brief overview of taking on a distributor for the first time. There is a lot more to it than this which we will expand on in later articles but the basis of how to get things going is here.
If you have any questions about distribution of your products, you can always reach out to us directly and we can likely help you out. We are not consultants but we can likely point you in the right direction to distributors as well as provide you with the infrastructure you require to get this setup smoothly.