5 Signs You’re Ready For An Indirect Channel Strategy

Jessica Baker by

One of the most popular questions I am asked is, “How do I know when my business is ready for the channel?” No doubt, adopting an indirect channel strategy is a big step for any company. There are many things to think about and consider before you move in that direction. How do you know your organization, culture and offerings are ready for the channel? And, more importantly, how do you make sure you are successful the first time out of the gate?

It may seem like a daunting decision, so, let’s break it down. It should go without saying that most companies maximize profits by maximizing revenue. But what if adding more direct sales resources is not a practical approach? That’s usually the first sign that you may be ready for an indirect strategy. However, there are other, somewhat less obvious signs that you may be ready. Here are my top 5 scenarios that should be on every CEO’s radar.

1. You need to get to the mid-market to sell your product or service.

Enterprise is great. But it is finite. Mid-market, however, has vast opportunities. Mid-market is loosely defined as a company between $100M and $1B in annual revenue. As you can imagine, that wide definition includes a very large number of businesses. It is a large enough number to know that the only cost effective way to target mid-market is by leveraging channel partnerships. Looking to get to small businesses? The same logic applies. More often than not, small and medium businesses will have a supplier for all or part of their IT Services.

2. Your product or service is not a stand-alone offering.

If your solution requires other products, services or other companies in the mix during an end user sale, and you do not provide them as a company, then the channel is the way to build your solution for customers. The breadth and depth of partner expertise and complementary technology solutions add to your offering and improve the “whole product” offered to customers. This means partners can offer your components within a combined solution sale.

3. Your growth strategy includes opening new geographies.

According to CompTIA, outside of North America channel and indirect business models represent 80% of the IT industry. So, if you’re looking to go abroad, channel should be your plan. Not only can an indirect strategy help you get to revenue faster, partners will also mitigate the risk, taking on credit and collections for their business and navigate the local culture and language.

4. Your growth strategy includes new vertical markets.

Entering new vertical markets or industries can be challenging because they require you to understand the dynamics in that industry. To be effective quickly in a new vertical, you need to know the exact customer profile, the media, press and events that the vertical client’s participate in, the detailed business challenges, and industry governance regulations – national, state, (province) and city. The right channel partnerships can help you navigate new verticals and build much stickier and differentiated value offerings for your client base.

5. Your product/service is bought by someone outside of IT.

According to a study by IDC, 61% of the current IT projects are funded by Line of Business (LoB) buyers, and LoB decision makers have additional influence in another 20% of IT projects. This new category of buyer and influence is very important in a sales cycle. If you don’t already own this level of relationship, a channel strategy may be the right fit. Investing in that sooner than later makes sense, as LoB decision makers will make significantly more of the software and solution decisions over the coming years.

Chances are if you identify with one or more of the above scenarios, a channel strategy is the right move for you. Once you’ve decided to move in this direction, you’ll need the guidance of a channel expert to help you execute properly. The only thing worse than missing your channel opportunity is missing the expertise to do it right the first time. With the right strategy, channels can be a wealth of opportunity.

Looking for information on spinning up a channel sales program? Be sure to check out the Ultimate Field Guide to Building a Channel here.

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  • Great summary – I wish had read this a few years back

    It took us a while to figure why channels was right for us. This could really help others in these shoes – so in case it’s of value I will quickly tick off the points that I agree with – And as a bonus add two more that I think are very significant.

    1. You need to get to the mid-market to sell your product or service.

    The more targetted your beach head (which is a good idea) – the more this pays off

    2. Your product or service is not a stand-alone offering.

    We sell interpretation of smart meter data – extremely scalable – but the data is a barrier to entry / moat . There are few big players and they compete on price (a commodity) in a compliance driven market – so if your product differentiates a complementary commodity product – this is true 10x – your differentiation value for your partners is greater than to yourself !

    3. Your growth strategy includes opening new geographies. We analyse energy data – most companies use it 😉 Globally.
    We started in UK (though a Swiss company) because they are ahead on energy efficiency and automatic meter reading data The large commercial meter market for Gas in the UK is a around 1.5 mm meters SaaS giving a UK subscription TAM of say 175MM USD but the UK is not the only country to use Gas and Gas is not the only utility. As a bootstrapped co. selling to the major utilities (our four person team would be held back if we had to do all the direct sales ourselves)

    4. Your growth strategy includes new vertical markets. – Did I mention smart metering ? – current global penetration in B2B is below 20% but growing fast. It helps even more if you have long term consultancy experience in your sector(s)

    5. Your product/service is bought by someone outside of IT. – And resold or seen as a Corporate Resposibility Issue
    Energy efficiency – all companies need it – but most companies sell dog food, hot dogs, lipstick and shoe-leather (and some other things)

    Big Fat Bonus * 2

    Your channel partner has a large field sales force, has very wide coverage for their complementary essential commodity product in or to a growing oligopoly market that is immature, and enjoys access to high echelon buyers in your end-client market.

    Your channel partner has a marketing budget !