#17: Hold Off on Indirect Sales Channels With These Clues

Chip Royce, Flywheel Advisors

When forming a B2B company today, the founders’ first instinct is to put in place a direct sales model.

Selling directly, aided by internet marketing and fulfillment has become the norm.

This situation isn’t isolated to tech companies. You may often see your local services company or manufacturing company with a similar go-to-market mindset.

Either due to a deliberate strategy shift or by chance, companies often consider adding new indirect channels of distribution to their go-to-market strategy.

In this newsletter, we’ll cover:

• Why companies today prefer a direct sales strategy
• The compelling reasons for adding indirect channels
• (Most Important) When you should avoid adding indirect channels

Why Companies Prefer Direct Sales

The reasons for a direct go-to-market strategy are understandable in today’s digital-first economy:

• Maintaining control over marketing & sales execution and product fulfillment.
• Collecting data from customers to inform customer behavior, trends, and preferences
• Monitoring the customer relationship to capture feedback and insights.
• Maintaining higher profit margins by eliminating discounts to distributors and resellers
• Avoiding human interaction. Selling online is somewhat robotic and data-driven. Those who dislike uncomfortable situations find direct sales less intimidating.

As a company matures, opportunities to add indirect channels often emerge.

Adding Indirect Channels is Attractive And Often Compelling

Some companies plan to always sell via direct channels. Others wonder if there are indirect channels to supplement their core sales strategy.

We advocate that our clients build a portfolio of distribution channels when possible. This may mitigate risk and provide a dynamic foundation for future growth.

Successful or promising companies that sell directly are often approached by a 3rd party with an opportunity to partner.

Many companies like the idea of ‘dipping a toe’ in the water. Executives like the idea of experimenting on channels with a compelling partner.

When should you avoid going indirect?

In a perfect situation, your company will deliberately plan an indirect go-to-market strategy. They’ll then test, iterate, and grow if successful.

Often companies will start indirect channels without a proactive strategy. The concept may be a reaction either to an external proposal or difficult economic conditions.

In these situations, adding an indirect channel may not be advisable.

Four Clues That You Should Hold Off On Indirect Sales Channels

This is the important part, please read this section. Then read again.

Without a clear strategy and with any of the issues below, a company should pause any indirect sales efforts.

1. Limited Resources: When your company has limited resources and capacity to support an indirect sales channel.
2. Alignment: Lack of alignment with your current business objectives and goals.
3. Unclear Demand: Unclear indications of customer demand or maturity for indirect sales channels.
4. Uncertainty in your Business: The success of your indirect efforts starts with confidence by you and your partner in your offer. Issues with products, inability to build a compelling marketing message, or successful sales process are indications of business problems. Few partners can solve these and likely shy away from cooperation.

In closing…

Indirect sales channels provide revenue diversification and mitigate risk to the business.

Implementing new channels requires resources, company alignment, and a quality offering.

If your company has at least one big issue, the success of your channel strategy faces an uphill battle.

Two or more likely guarantees failure for your alternate channel efforts… while you consume valuable time and capital that’s better used to revitalize your core business.