New Business: Direct Sales or Channel Partners?

There are only two ways to sell - Sell directly via in house sales force or sell indirectly via channel partners. Organizations choose channel sales for the only important reason - wider coverage and local support with less overhead costs. Auto makers, consumer product firms, software gaints and many more organizations have seen extraordinary successful in channel sales. 

If it was so simple, then common sense says sell indirectly. In reality it is not so. The decision to sell directly or indirectly is like maximizing an objective function after considering a variety of parameters like organization's size, brand value, market size, value of the offerings. In fact for a organization to be successful in indirect sales it should score high on majority of these parameters. This will make it very easy to recruit new partners. In fact organizations will line up to be your resellers. All the examples cited above - Microsoft, SAP, Coca Cola etc. fall into this category.

Focus of my discussion here is for new businesses. Hence considering the examples of these giants in current state as a yard stick is a crime. Do you think it was so easy for them when they started new? Definitely not.

A small and new company will find it difficult to recruit good partners. Especially the existing big players will be very skeptical in joining hands. After all every shrewd businessman wants to invest  resources on money making ventures. So this company may want to go to small players. Yes this may actually work out well, but as I said in my article - Factors Contributing to Successful Business Alliances - the vision and success factors of the relation should be frankly and sincerely discussed. One important element which is commonly missed in these discussions is what customers prefer? In my experience I have seen that the CXO's of few large accounts seldom trust the small players. In fact in most cases the small players just play the role of contractors doing some outsourced work at low cost. In these circumstances, do you think customers will buy from these small players? I dont think so. Hence as a Channel Manager you end up investing lot of energy and time in training and planning but not a dollar is earned.

What is the way forward in such a precarious situation? One approach which I strongly recommend is selling directly atleast in those territories where you are physically present, in a better time zone difference and where language is not a barrier. Get some new customers on board quickly who can serve as good references for not only direct sales but also in building partner network. The biggies will then lend an ear or two to know about your offerings.

A new business development is quite similar to building a startup. Every investment you make has to be substantiated with results or potential revenues. Start with one or two people in direct sales who not only sell and but also look for potential partners. Relying on only channel partners will be a grave mistake.