Channel Partners How to Find Them

http://www.qupact.com
For many companies the greatest challenge in setting up
a channel network is in finding interested and appropriate
partners, companies that are looking for just such a supplier
at that point in time. Failure to find them often results in lost
opportunities, frustration and dangerously, a rethink of and
change in strategy.
The two critical factors in channel partner search and
selection are:
- Know exactly what you're looking for
- Dedicate enough time and resource to guarantee the
result
Once a company has decided it needs a channel
infrastructure to reach its target customers in different
markets, it has to stay with the process until it finds and
engages the right partners. trainingPACT provides 14 prerequisites which should be defined for each channel
partner being sought - that's at every tier in the pyramid and
in each market.
1. Location: Where should the channel be located? Must it
have multiple locations? This is particularly important if it is
expected to sell to customers in large geographical markets
like Germany, France or the US. Remember here that
restricting channels to regions, especially in the EU, is not
always possible, so finding a partner with reach may be the
best solution.
2. Scale: The partner needs to be big enough to represent
you but small enough for you to be able to influence it and
gain mindshare. As a rule of thumb, we look for distributors
(or divisions of companies) for whom the year-two margin
they will earn on your products/services represents 3% to
5% of their revenues. So, if for example, at 40% GM they can

earn 500k in year-two as margin from your products (i.e.

sales of 1,25M) we're looking for companies or divisions of
companies with revenues of between 10M and 17M.
3. Segment: Establish in which vertical segment the bulk of
the channel's business needs to be in order to ensure that it
will already be dealing with your target customer group(s).
4. Years in Business: It may be important that the channel
partner has been established in its segment for some time
and has a track record. In the financial services sector, for
example, this is often considered critical whereas with
leading edge technology products it may not be.
5. Financial Strength: Should the partner be trading
profitably? How much working capital must be available to
fund receivables, inventory, sales promotions, marketing.
What is the desired equity structure? Is there a VC involved?
Is this good or bad? Whatever the criteria are, they should
be clearly thought-through and defined.
6. Customer Base: From the target customer list (section 2),
briefly describe the types of customers the channel should
have. The acid test when you find a potential partner is to
find out how many of your list of fifty targets they're already
doing business with.
7. Synergies: Consider whether there are particular products
or brands that are especially complimentary to your offering
and that should therefore be present in the portfolio of the
target partner.
8. Written Agreement: Many channel partners, especially
smaller ones, are slow to enter into formal agreements,
preferring to do business first. If a written agreement is a
non-negotiable for you, note it here and eliminate early on,
channels that do not meet this criterion.
9. Stock Order: Do you need a reseller to place a stock
order? This can be a deal-breaker later on, so if it's vital to

your business model, it has to be a definite pre-requisite

from this point.
10. Joint Business Plan: The channel will have to do more
than just react to opportunities. You will need to develop a
plan to jointly develop and grow business for your products.
Eliminate channels that want to work at arm's length and are
not prepared to invest resources or make commitments.
11. Existing Business: Existing business can be a problem if
you want to retain these customers. The partner will
probably see all the customers in the market as "his" and
will not want you cherry-picking. Clarify your position with
regard to existing business and stick with it.
12. Exclusivity: Exclusivity is only enforceable in agency
agreements in the EU. The trainingPACT program discusses
exclusivity in detail and provides in-depth guidance on how
to manage this issue.
13. Branding: Are you seeking only channel partners who will
sell your brand or will you also consider private labelling?
14.Timing: Make sure that the target partner(s) can move to
an agreement within the timeframe demanded by your
business.
If you would like to know more about way to find channel
partners, please follow this link.