How to hit the Sales Forecast in Channel Sales without Pain
Relevance of the Channel
In the legacy on-premise days, Independent Software Vendors (ISVs) have used Channel Sales to create extremely successful business models. The Sales Forecast was based on license and maintenance payments. The channel gave them powerful organizational leverage, adding additional sales resources, and taking advantage of existing customer relationships that the channel partners brought to the table. Given the right channel, the right people, good product/market fit, and a lot of patience, the channel sales model became one of the most profitable business models.
Turmoil in the Channel Sales
However, the cloud is disrupting this model. Software Vendors move their offerings into the cloud to remove cost and scale barriers and to build recurring revenues, higher gross margins and a more differentiated strategy.
All vendors declare It’s time to move the world to cloud. But even the largest vendors cannot assume that – because they built wonderful solutions – channel partners will adopt them easily. Channel Partners are key to deliver the cloud offerings – but they have no vision. Many questions to provide a reliable Sales Forecast remain unanswered:
- how should they make up for the big-up front payments?
- which business models can they pursue?
- which delivery models should they focus on?
- which skills do they need?
Partner channels have turned into tumultuous places undergoing wholesale reinvention. Partners are jostling for a niche in the digital economy with new solutions and delivery models. And the Vendors … they are struggling on which Partners they can still count and on which they should focus.
New Engaging Partnerships for the Cloud
All too often, partnerships have been based on wishful thinking, over-optimistic assumptions, moving goal posts, missing skills and missing alignment. A win-win-partnership must ensure that the vendor can maximize the partner’s share-of-mind and the partner can rely on the vendor’s consistent engagement
This is why every partnership program should introduce a Partner Engagement Cycle for selecting, planning, reviewing and assessing the right partnership performance.
Partners have to understand which Cloud Business Opportunities they can apply, how much money they can make,
how to plan and sell together, how to scale their business and how to jointly track progress and improve.
At the same time, ISVs must build expertise on which partners they should focus, how to plan and track jointly with their partners, how to empower their Account Manager and how to gain significant insights across all Partners.
Introducing such a program relies on providing transparency on Cloud Business Opportunities and Partnership Tiers:
- Structuring the Cloud Business Opportunities allows all partners – from managed services providers (MSPs), value-added resellers (VARs) and systems integrators (SIs) to born-in-the-cloud partners – to make choices to specialize: they can decide to embrace volume business with a larger number of customers by reselling, delivering implementation and customization services, providing management services or packaging their own IP.
- On the other hand, vendors must be able to clustering Partners into Partnership Tiers. This provides strategic focus and saves significant time and cost. While Tier-1 Partners must be actively coached like internal sales resources, efforts for Tier-2 Partner must be calibrated in a way that they can showcase the vendor’s product opportunities. Tier-3 Partners receive baseline, self-service support and knowledge to pitch the vendor’s product value.
Selecting the Engagement Model
In the first phase, the vendor and and the partner should decide which Cloud Business Opportunity might be relevant for the Partner and in which Tier the Partner would fall into. Vendors have to provide transparency which Business Opportunities they support (see picture below). Criteria cover factors such as the partner’s revenue potential and strategic relevance today and in the future, the partner’s core competence, its strategic appetite and values to bond as well as its ability to execute a major business transition to a new business model. While screening existing partners requires consolidation, attracting new partners often requires a business development approach.
Sales Forecast and Account Planning
In the plan phase, the vendor and Tier-1 Partners need to reach true common ground, outline a joint sales forecast and account plan and be comfortable with roles and responsibilities, objectives, activities, resources and investments. Being able to set aligned expectations and make shared commitments in compliance with respective company standards and laws are driving principles.
To understand the scalability of the Cloud Business Opportunities models, they can analyze the unit economics to understand and derive the viability metrics as well as the Time-To-Break-Even and Investment-Required to set up additional Sales Resources. They can also simulate the impact of input parameters like churn, cost of leads or payment terms onto profitability and cash-flow optimizing their go to market scenario.
Going to market, the vendor and the Partner can agree on a jointly envisioned Account Plan with aligned objectives and Sales Forecast goals for the period ahead.
In terms of a good decision making process you should try to support this process with bad decision making tool like Excel which forces you to re-invent the obvious with every Channel Partner. With a modern tool for Business Planning like Lean-Case, a Business Case Portal for a Company and its Customers, vendors can support this process. This takes partnerships to a different level, mitigates conflict, allows to measures success and successfully move-to-SaaS. With Lean-Case and other collaboration tools, you can also support Tier-2 and Tier-3 partners with self service functionalities.
Reviewing and Tracking Progress
ISV’s must closely work with Tier-1 partners ideally to achieve quick wins and early milestones in the Sales Forecast and Account Plan. ISV and Partners track progress against their Account Plan and adjust if and where necessary by maintaining open and clear communication . This is achieved through periodic partner meetings like quarterly business reviews and modern sales enablement tools. If Account Managers demonstrate business expertise and a genuine willingness to assist individual partners, they develop strong relationships and builds trust. Internally, with all forecasts in the same system, vendors can also optimize their internal quarterly business reviews and their annual business planning process.
Assessing Performance and Applying Insights
In the Assessment Phase, vendors can closely track the success of partners and spread the word. Assessments determine the future state of engagements with specific partners. Positive evaluations lead to follow-on opportunities, often larger in scope, restarting the cycle. Lessons learned and identified best practices from each engagement should be incorporated into program activities to improve future collaborations.
At a fingertip, vendors should leverage consistent reporting standards providing ISVs full transparency across all its Partners and Account Managers identifying top performers. They can consolidate data structures, aggregate and analyze their financial and metric data, making business analysis a piece of cake and gain insights for future decisions
Introducing a Partner Engagement Cycle with a focus on Business Model Assessment, Sales Forecasting and Account Planning leveraging a service like Lean-Case allows create shared account plans and achieve the objectives. This the groundwork for building a large network of trusted and successful partners network to jointly get to the promised land of recurring revenue.
How to get there
Working side-by-side with a Vendor, we can offer you a 8-week process to setup and roll-out a Partner Sales Enablement Process in 4 phases.
- we jointly answer the questions which Business Models you offer for your partners and model them in our Lean-Case service
- we analyze which Partners you should focus on
- we define how the new Sales Forcast and Account Planning process should be integrated into existing Sales Enablement Processes and how the Training and Rollout Concept looks like
- We train your key staff and pilot initial rollout trainings with your Account Teams and Partner
If you want to lean more how to meet your Sales Forecast without pain and get a demo about the Lean-Case capabilities, contact us and spread the word.