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Channel Matters Blog > November 2013 > Stand Your Ground in Year-End Channel Strategy Discussions

Stand Your Ground in Year-End Channel Strategy Discussions

by Rich Blakeman
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About this time every year, an argument crops up in the executive conference rooms of organizations that sell through indirect channels. Unfortunately, too many channel leaders come to these meetings ill-prepared to hold their position and defend their strategy.
 
It’s not because their strategy isn’t sound. They’ve built a solid business case, factoring in things like cost of sales, margin, increased coverage, training costs and all the other pluses and minuses that go along with building and supporting a channel. Once the business case is approved, many channel leaders assume that the strategy is set in stone and now all they need to do is execute. Channel strategies are never set in stone. Clay maybe. Not stone
 
Channel leaders need to view their strategy through the eyes of the CFO. As with any other initiative, he is paid to look at things from an ROI perspective. As the end of the year nears, everyone looks to the CFO for his opinion on how to scale back expenses and drive up revenues in the coming year. In a channel-driven organization, your carefully laid strategy becomes fair game, and every aspect of your programs becomes a potential lever, especially margins.
 
As the CFO combs through his spreadsheets, he takes notice of the 30, 40 and even 50 percent margins assigned to channel deals. He runs a “what if” scenario and determines that by scaling back margins by a measly 5 percent, the company can earn an extra $50,000 in revenue. For a company with $100 million in revenues per year, that’s an extra $5 million. No wonder your CFO has an extra hitch in his step these days. He knows how to make 2014 a banner year.
 
If you’re a channel leader, it’s game time.
 
These annual battles over margin levels are every bit as important as the initial business case you put so much time and effort into. You should anticipate this argument, not just once, but every year, and come to these annual planning meetings armed with information.  You need to know your competitors’ margins. You need to understand your partner’s business model, specifically their cost of sales as well as additional investments they make every year in areas such as marketing and training. You need to know how your cost of sales for partner channel sales compare to the cost of sales for direct opportunities.
 
CFOs, perhaps more than any other executive, are pragmatists, and emotional arguments won’t cut it. It isn’t enough to say that partners won’t accept a lower margin. Run the numbers. Be prepared to show them why.
 
If you’re on the losing end of this battle, maybe it’s time to call for reinforcements. Reach out to me at rich.blakeman@channelenablers.com and let’s talk about how we can help.
Last modified on 11/18/2013 9:13:27 AM
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