Why Don't Resellers Sell?

Properly structured and supported, indirect channels are often the fastest, most cost-effective way for a company to scale its business overseas.? But the fact is – most resellers don’t sell.? And the reason they don’t sell has much more to do with your approach to partners than your technology.

The motivations behind a reseller’s interest in your technology will vary.? But, regardless of their motivation, once you have the contracts signed, they are supposed to get to work marketing and selling your technology and you can wait for the international orders to come in.? And you wait … three months, six months, twelve months.? Nothing.? So, what happened?? Why didn’t all of those partners go out there and sell?

There are many dynamics at play in building a successful channel – the needs of the channel partner, the needs of the end user, and last, and perhaps least, the needs of the vendor.? All of these have to be balanced properly in order for a channel program to succeed.?

The purpose of this article is to explain some of the fundamental reasons why channels don’t work.? Armed with that understanding you will be in a much better position to build a channel program that does work.

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“So why did they even bother to sign a contract to represent our product if they are not going to actively sell it?”

The main objective for many resellers is to take care of their client base, and you may have had the right solution at the right time for one of their clients – the sale was purely an opportunity.? They really had no intention of committing to an on-going sales and marketing program to drive a sustainable revenue stream, but are happy to add your solution to their “bag of tricks” if you are willing to sign an agreement.

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“But I negotiated directly with the owner, he agreed to a year-end target of $500,000, he promised to put money into a marketing program, and he said he would dedicate a full-time salesperson.? What went wrong?”

What very often happens during the recruitment and negotiation process is that you will be dealing with the owner, let’s call him Johan.? Johan really likes the product, and he sincerely believes that it is a good fit with his other strategic products.? So, Johan signs the contract, agrees to targets, a marketing plan, etc.

Johan then takes the product to one of his salespeople, Klaus, and says, “Klaus, I really like this product, and I want you to spend 75% of your time building a market for it.”? Klaus sits at his desk, knowing that 90% of the revenues he generates comes from two products he already knows how to sell; 50% of his compensation comes from commissions; and he has a Porsche payment due next week.

How motivated is Klaus going to be?? He is more likely to put the product to one side and go back to doing what he is comfortable with.?

This is one of the main reasons you don’t get any sales.? Companies don’t sell products, salespeople do, and if they are not on board it doesn’t matter what the owner promised.

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“We have spent 60 man-years building our product.? We have risked everything, sweating blood to build the world’s greatest widget.? We have done all the hard work, and now the reseller has the easy part – all they have to do is sell it.”

Too many ISVs are technical organizations that think that all of the magic happens when they develop the product – they underestimate how difficult and expensive it is for a partner to sell a new solution.

The truth is that resellers have one of the worst jobs in the food chain and if a vendor doesn’t fully appreciate the difficulties and risks the partner is taking on, the relationship will never get off the ground.?

?Resellers take on three levels of risk:

?1. Sales and marketing.? Resellers are expected to invest in a sales and marketing program with no guarantee of success.? They have to build a pipeline and live with a sales cycle that can be 6-12 months long.? If they have misjudged the market they will have nothing to show for it.? But this is a risk that they accept as part of the business model.? They get a discount from the vendor to justify the investment and risk.

2. Being too successful.? At the point that Johan and Klaus are sending you millions of dollars in payments, one of two things is likely to happen:

You decide to set up a subsidiary and terminate the agreement.? If Johan is sending $2-3 million in payments, it means that he is probably keeping the same amount as his margin, and you could use that money to hire a small staff of your own.? Of course, this ignores the fact that Johan has most of the client relationships, and when he is terminated he will find another product to sell to his clients.? Most companies that terminate a reseller in order to set up their own office see a drop-off in revenues, along with the very real likelihood of having to make indemnity payments to the ex-partner for loss of future earnings;

You sell the company to Microsoft, Oracle, Symantec, etc., and they terminate the agreement because they have their own distribution networks.? This is especially true for SaaS vendors, who often get acquired before the partner has had time to make a profit from the Annual Recurring Revenues they have built up.

In either case, Johan is left out in the cold.? When signing the contract with you, he knows that this is likely to happen at some point.? In his mind he expects to have a 2-4 year window of opportunity during which he can make money.? During the first year he might break even as he invests in sales and marketing; in years two and three sales ramp up and he sees some profits; in year he has the potential to make a significant return.? But anything beyond that he will not count on.

Which brings us to the third level of risk, which is:

3. You.? That’s right, you and your company are probably the biggest risk Johan has to evaluate.? When he takes your product to his key accounts such as Deutsche Bank, will he get the support he needs from you?? Your company name is simply a name on a brochure, and probably doesn’t mean much to Deutsche Bank.? They are only looking at your solution because it comes from a trusted source, a reseller that they have been working with for many years.? It is Johan’s relationship and reputation that are on the line, not yours.? The first time he sends you an e-mail with a technical query, and doesn’t get the response he needs, you become a greater risk than an opportunity and your product ends up on the shelf or out the door.

So, What Is a Vendor to Do?

Recruiting a channel partner is a sales process.? You will be asking your partners to invest their time, money and resources in you.? Channel partners have a choice of vendors that they can invest in, why should they invest in you?

Having a great technology is not enough - the quality of your channel program will be a key factor.? When you first walk in the door, or speak with Johan on the phone, he will know whether or not you are likely to be a good partner. ?Using the direct sales process as a parallel, you have to give your prospect a reason to buy; you have to close the sale (get a commitment); and you have to provide good after-sales support.

Professional resellers like to deal with professional vendors.? They have no objection to a rigorous qualification process (in fact, this is usually a good sign for the reseller), as long as it is not a one-way street.? By showing them that you have their best interests at heart with strong marketing programs, structured training, reliable technical support, and a fair and balanced reseller agreement, they will reciprocate by making your product a success, with growing and sustainable revenues year after year.