Partnerships are formed for a variety of reasons, from commercializing undeveloped IP to reducing the risk of entering a new market segment, to creating new sales channels. In all cases, clear objectives are a must. In the case of channel partners, none should get the green light without first establishing formal sales targets, but all too many do.
Those without established targets are partnerships built opportunistically. They’re treated as pure upside, like finding coins under couch cushions: found money. This is bad for business and ultimately unhealthy for the longevity of the partnership.
Smart partnerships are built to reach markets or customers that you can’t or don’t wish to reach directly, whether for limited resources, higher cost or strategic choice. Whatever the reason, without targets, you can’t measure and pay for performance.
Bottom-up or top-down?
As with direct sales, there are two ways to set sales targets: top-down and bottom-up. If you’ve worked for an established company with a direct sales team, you’re familiar with the top-down approach. It goes something like this: Historically, we’ve grown sales 20% year over year, and considering factors X, Y and Z, we think we can grow 23% next year.
The resulting target is then distributed across regions, down to teams and so on, until each individual seller has their quota.
Bottom-up is arguably less aspirational, but often more accurate. Each seller’s historical performance, current customers and the overall opportunity in their territory are taken into account. Then the negotiating begins between sales and sales management until targets are settled on and rolled up.
It all comes down to the individual.
If you’ve been selling successfully direct – and if you haven’t, it’s too early to recruit others to sell for you – you should have a grasp on conversion and close rates, individual sales quotas and sales cycle lengths for your product and customers.
Using these data, you’re ready to set sales targets for a new channel partner, approaching each partner and their sales team as an extension of your direct sales team.
A key step in negotiating and planning with a new partner is determining how many of their sales people will “carry” your product and be responsible for a target. As a rule of thumb, assume a six-month period before a new partner sales team will ramp up fully. You should start with a top-down plan based on the partner’s insights and commitment into how many of their customers they can initially sell combined with their desire to capitalize on the attractive opportunity your partnership represents.
Marry this with a plan to ramp the right number of their sales people over the first year in order to achieve that target. If the two don’t meet in the middle and make sense, you aren’t ready to launch the partnership.
As you gain experience with more channel partners, you’ll build data and insights into the ideal profile, what they need to succeed, the nature of how they operate and ultimately their sales performance. Remember that a partner’s sales team will do what’s best for them and their company first. Even if your product is truly strategic — completing their whole product, enabling them to reach new customer segments or helping them beat a competitor — they won’t have the performance curve of a direct sales team. They may need additional training, support or content to really hum. Internal problems and politics may cause lack of focus. Their end of year scramble to meet quota could take their eyes off your prize.
In short, stuff happens. But with the right sponsorship and agreement in place, tied to performance and clear sales targets, you’ll have what you need to get back on track and get back to selling.