Should startups have a channel?
I am running sales/marketing for a small software company (6 employees) and we are selling direct, for the most part. We now have been contacted by a few companies who want to distribute our software.
A part of me thinks it would be great, given that these companies seem to have alot of contacts with the type of people we would like to do business with.
Another part of me thinks it wouldn't make sense right now, given that we are still learning and discovering our market, working on our pricing and delivery models, etc...
One thing seems to be certain, we seem to have a pretty solid "complete" product. 95% of the demands/objections/questions I am faced with by prospects, can be supported by our software.
What do you guys think? Is there really a specific time when companies like us should focus on a channel? Is that time now? Later? Any of you been in my shoes before and have some "lessons learned" they'd like to share?
THANKS!
-Danny
Sales Resellers Leads Marketing Channel
3 Answers
We're a company about the same size as yours selling a B2B software product for a few hundred dollars online direct -- people find us through Google, etc. We hired somebody with experience in sales & business development to look into establishing a reseller channel for us, but our progress was disappointing. Lots of companies like to talk, sound interested, etc., but really it has to make economic sense for it to really pick up. We learned:
- If they're doing direct selling, your price point probably has to be at least $1,000 or so for it to be worth their effort to do 1-1 sales.
- If they're something like a retail store, there has to be strong consumer demand out there already. They're not going to try hard to push your product when they could just sell somebody else's.
- If they're an IT consultant, expect volumes to be quite low and to do a significant amount of hand-holding. This can be an important factor for deals to large companies though -- they want somebody on the ground they can talk to and hold responsible.
We also learned to watch out for channel conflicts. If you're selling online, this might complicate the relationship with your reseller. How do you avoid undercutting your reseller? Will the lower margin reseller sales hurt your direct sales?
The potential rewards were enticing but we found that going after reseller channels was unproductive. We're putting this on hold for now and concentrating on product & direct sales.
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Polemarch, I appreciate the feedback. I haven't had the opportunity to do a complete analysis like you have but my gut feel has told me this may not be the right time to build a channel. For instance, We recently upped our pricing, and we are still even considering upping it again in the near future, because we still keep being told we are too cheap. Lot's of pivoting, shifting etc.. taking place, I think if I had a channel in place they would go nuts with all of these changes, but these changes need to happen.... – Danny 14 years ago
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.....The only tough thing to swallow is some of these distributors that we already have relationships with have some great contacts with very well established businesses. I'd like to get in the door with those prospects, so I am trying to figure out how to do it, in the best way for all parties. Perhaps I can offer a referral fee, but I am not sure if the distributor would see much benefit in that. Time will tell.... – Danny 14 years ago
Software business is a lot like a stamp. You create the stamp once and then use it over and over agian. meaning that the investment is up front.
I think you should allow anyone who wants to sell your software. This revenue can fuel future growth, and development. Also the revenue can boost your internal sales ability. Last the more clients use your software the more opportunity for you to get feedback and get your legs.
I would go for it.
Go for it! Clearly they think they can sell your product, which is good for you. Growing your customer base doesn't prevent you from adjusting course along the way. Just the opposite, more revenue gives you more options for how your company and product will evolve in the future.
