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I often hear from companies that their initial market expansion strategy is channel sales (VAR, SI) but later they had to add direct sales because it didn’t bring the expected results. Here’s my take on that.
Yes,
- Channel partners can provide you with a much larger reach.
- You don’t need to struggle with local talent acquisition, local management and cultural differences.
- Your upfront investments and initial costs are lower then setting up direct sales force.
But,
- Channel partners are not good for complex solutions. They are ideal for high volume/low margin business but not vice versa.
- They usually on board too many new solutions but can only support few.
- Their reach stays within their known verticals, I haven’t seen many channel partners actively reaching out to new verticals, industries or territories.
- You can’t provide a realistic business plan for your investors because you don’t get commitments from your channel partners.
- Channel partners are absolutely risk-averse; even if they say they will not invest their time and money into a new market if you cannot prove that there’s a bright light at the end of the tunnel.
“A good channel partner can be a perfect fire accelerant but you need to have a flame first.”
My recommendation:
If you have a complex low volume/high margin B2B product and want to enter a new market you have to start with direct sales. Do it on your own or get local support from a market expansion expert who bridges your gaps of talent acquisition and local management. You’ll learn fast about market specifics, be able to align your value proposition and close your first 2-4 reference sales.
After that you are in the position to engage the right channel partners and provide them with necessary sales tools like local references and sales messages to mitigate their risks and to overall achieve expected results.