3 Things to Avoid Killing your Channel Program
For most CEOs of startup technology companies, effective channel strategy and execution is the X factor, the home run, hockey stick, or otherwise the path to that little glass statue to adorn the offices of their VC’s
To set the stage, my experience and thus comments and opinions herein are applicable to technology sales in a B2B market. I have been the founder and CEO of multiple high growth technology startups. I have both built channel programs and been a channel partner. I have succeeded and more importantly failed at both. Today I am the CEO of a company called Channeltivity, a leading Partner Relationship Management platform for emerging and mid size enterprises.
So, if you are a CEO of a technology company who’s last round was predicated on the launch of a B2B channel or you think you are going to substantially scale your channel, here are some lessons from the edge.
1. Premature anything is rarely a good thing!
The first mode of channel failure is premature launch. The channel will not figure out, what you have not, when it comes to selling and implementing your product. Some key indicators that you are not ready for channel:
a. Your customer base looks like Noah’s Ark. You have two of every kind and the deals are slightly different and require some modification or enhancement to the core of the product. In short you haven’t really found a scalable niche.
b. Your Price List is like an Escher drawing: If your internal people cant follow your pricing or clients find it confusing and it requires explanation by someone with an advanced degree, your not ready for the channel.
c. Your proposals are one of a kind masterpieces of sales art: This occurs when you haven’t really dialed in pricing to what the market will bear and your customers are helping you refine your model. Maybe you are still selling to the first 15% of the market (innovators and early adopters) or maybe your VP of Sales is just A.D.D. Either way, your not ready for the Channel until creating proposals is an administrative task.
2. A zero dollar investment will get you a predictable result!
Too many times I hear from Channel people with no budget. Its pretty clear, they were the budget. This is just a waste of 6 months of someone’s life. So don’t bother hiring the poor bastard. You’re not ready for channel. Some key indicators that you may be about to do this or are currently doing this:
a. Magic Hockey Stick: If you have a revenue line called “Partner Revenue” and it is the cause of your hockey stick growth curve, but you don’t have a separate matching expense department. Hopefully your investors caught this early. If they didn’t catch it and you still haven’t done the deal, RUN!
b. Magic Partners: If you do have expenses tied to your partner revenue line but your cost of customer acquisition is less than your historic direct sales, out of the gate. You are likely underestimating the investment. Your cost of customer acquisition in the channel should be higher than direct for the first 2 years. Beyond that point you, if you continue to ramp up new partners you should have a good feel for the investment to revenue lag. Remember, economies of scale first require scale. Building that requires investment.
c. No Tools for You!!! 50% of my sales leads at Channeltivity are from what I would call the User Buyer. The poor bastard tasked with building the channel with no budget. I’ll keep this short since it is not an ad for Channeltivity. You didn’t tell your CFO or controller to make due with spreadsheets or have IT build them an accounting system. You didn’t tell your VP of Sales to prove the ROI of a CRM system. You just took it as axiomatic that they were needed to conduct business effectively and in a measurable way. Partner Relationship Management is no different. Don’t deny your channel people tools to recruit, enable and manage the programs. Don’t tell them to get revenue going first to justify the tools they need. That’s like saying, “show me you can build a house first then I’ll buy you the tools.”
3. People, People, People!!!
Most people don’t know how to hire a good channel person to launch a channel. The wrong hire will kill your
program and you wont likely get a chance to recover. Here are some common mistakes in selecting and managing channel leaders.
a. That dog don’t hunt: You know the guy in sales that everyone likes. He knows your product really well and all of his prospects just love him, but he can’t close. Don’t fail him laterally to run the Channel. If the dog don’t hunt, get rid of it, or you’ll be cleaning up piles.
b. Virtual Channel Chief: Along the lines of point two, under investing, companies will distribute the accountabilities to the VP of Sales or Marketing. When there is no single champion driving the program it will falter.
c. Seat at the big kids table: All to often I hear channel people that are struggling to be heard by the executive team. There is conflict with sales and they always seem to prevail in order to get the short dollar. If you don’t treat your channel people as equals, they wont perform as equals. Level the playing field internally. If there is not channel representation in your Top Management Team Meetings then you are not serious about channel success.
Clearly there is more to channel success than avoiding these three pitfalls but I know that entrepreneurs tend to want to hear about the landmines and will make decisions accordingly. I’m a CEO and have been guilty of just about everything above and have applied these lessons to create success for a growing number of emerging companies.
If you focus on these three areas you will shift the odds of success in your favor.
1. Ensure your product offering and implementation process is channel ready
2. Ensure your investment aligns with the revenue you expect to derive
3. Get serious about hiring the right person and supporting them
With only lagging metrics in their toolset, customer success leaders can’t really drive strategy at the executive level. Here’s Chris Hicken, former president at UserTesting, on how to change that.