If you are a technology vendor that relies on channel partners for a sizeable percentage of your revenue, then partner productivity is the single most important factor affecting the growth of your business. Unfortunately, the dynamics of the marketplace make it difficult for channel partners to stay focused on selling any one vendor’s solution. Many of them are transitioning their business model from VAR to MSP to CSP. At the same time, many vendors are changing their own business and technology focus away from hardware and packaged software toward more cloud-based services.
So the challenge of maintaining a channel of productive partners having the right profile (size, market focus, technology skills, vendor commitment, etc.) and the right business model is that much harder. And, of course, channel partners always struggle with their own sales and marketing operation – there are never enough leads and consistent customer acquisition is always a struggle.
So how can you manage a consistently productive indirect sales channel? By establishing a baseline for existing partner productivity and taking proactive steps to consistently improve the factors that drive higher levels of performance. Have you established a baseline for channel partner productivity?
Here’s how. Start by assessing the monthly revenue generated by each partner and their average rate of customer or deal acquisition. Use a statistically significant sample size and rate your partners as low, average and high performers.
The average performers determine your baseline while the high performers are your source for understanding how to improve upon low and average performance.
Look at five productivity factors as you build your plan for raising channel partner productivity:
- Average Contract Value
– This is usually a function of revenue-per-user
– And the average number of users-per-customer
- Customer Acquisition Rate
-The number of new deals a partner closes each month
– A function of the size of the pipeline and the efficiency the partner’s sales function
- One-Time Revenue vs. Monthly Recurring Revenue
– OTR has greater short-term value but requires higher deal volume for consistency
– MRR has a lower short-term value but predictable, long-term value to the business
- The Total Number of Productive Partners
– How can more productive partners be developed and/or recruited?
– How can partner productivity be increased from average to ideal?
- The Revenue Sharing Strategy
– How can partners be incented to sell more?
– Do all partners earn their share of the revenue?
Now build a model to project the long-term growth of your business based on your existing channel partner productivity. Then use the same model to measure the impact of productivity improvements you can make in each of the five areas outlined above. Here is an example of a Partner Productivity Model that I have used over the years to do just that.
Once you input the values for existing and ideal partner productivity, use the model to crunch the numbers for you. Here are the 3-year vendor and partner revenue streams based on the productivity assumptions in the illustration above. They provide a detailed view of the improvements resulting from each of the five productivity factors .
A detailed view can be hard to read, so here is a quarterly summary of the results in table form and as as a graphical chart to more clearly see the impact of productivity improvement during the 3-year time horizon.
The table shows the combined impact of simultaneous improvements made in several areas of partner productivity. Using the inputs provided in the sample scenario described above, the model shows a 350% increase in channel revenue each year! Graphically, you can see the impact of channel productivity improvement as an accelerated revenue line – the blue columns and trend line are based on existing productivity factors while the green columns and trend line are based on ideal productivity factors (click to enlarge).
Of course your results will depend on your baseline data and the productivity targets that result from your own low/average/high partner assessment. Suffice it to say that the payoff in accelerated growth can be well worth the effort to assess your own channel productivity and then developing a partner productivity plan based on that analysis. Here is a summary of the methodology I use to build a Partner Productivity Plan:
- Establish a partner productivity baseline
– Gather historical partner performance data
– Conduct partner interviews and analyze findings
- Set achievable productivity improvement targets
– Identify areas of productivity improvement from partner assessment
– Gauge the revenue impact from the five productivity factors
- Determine the required programs and actions
– Design partner-specific lead generation programs
– Launch a targeted partner recruitment program
– Create upsell/cross-sell/pricing/bundling programs
– Develop partner resources and training programs
I have captured these concepts in a slide deck that is available for viewing on Slideshare.
If you would like to have a copy of the Partner Productivity Model spreadsheet used in the illustrations above, drop me an email (firstname.lastname@example.org) and I will send it to you.