Sales Channels – options aplenty, but what’s the right choice for your firm?

There are really two times that it is appropriate to make a decision about what channel(s) to use for your selling efforts:  1) before you launch your training/consulting firms, and 2) every day that ends in ‘y’ after your company is open for business!

Of course your ‘switching costs’ will rise in terms of changing your sales channel model after you are in business but, as history has shown, the right sales channels for a training firm change as the company evolves.

When I am asked what the right sales channel is for a training company I give the age old consulting answer of “it depends.”  Since that makes for a cr@ptastic blog entry, let me share some of the thinking I go through after that initial answer.

I will also point out that a similar but slightly different thinking should constantly be considered for your delivery channels (ie using employees, independent contractors, or partners to deliver your training and consulting).

You might use this list of “critical questions” to guide your decision making process.  For many of these questions you should peer through two lenses – first, your business today, and second, your business as you are thinking of evolving it.

  • What is the makeup of the sales force in terms of their demand creation, business development, and general selling ability?
  • What quality and quantity leads are your marketing efforts generating?
  • Describe your current client base: industries, original lead source for the account, level/title of economic buyer, sales cycle length, etc.
  • How would you describe the owners appetite for risk and amount of finances planned for investing in the business?
  • Who are your primary competitors and what is their sales channel model?  Do you know how and how much they pay their channel?
  • What are your typical messages of differentiation against those competitors?  And if any element of it highlights the difference in sales, delivery or account coverage model please highlight that.
  • If you are one of the many training firms that typically says “We’re kinda different and we really don’t have competition on most deals” then please describe your typical selling message to convince prospects to not “do nothing.”
  • How well can your owners handle a salesperson who is absolutely not ‘managed’ as much as they are ‘herded’?  You might have to stick to employee sales channels just to prevent “Founders Ulcer”, a common and painful malady second only to “Crazy Founders Syndrome”1 in the training industry.

Feel free to call me if you would like to have a preliminary (no charge) conversation about what to do with these answers.  In addition I would encourage you to review your answers with your sales, marketing and product development department heads – and compare answers.

To help in that conversation here are some pointers on what other training firms have done, using a typical example of a US-based training firm founded by 2 former sales people.

  • Startup phase: US-only sales force consisting of the founders only, ie a direct sales force.  The founders are also doing all the workshop delivery worldwide.
  • Startup + 1 year: Founders are still selling and now independent contractors (ICs) are doing some of the delivery for ~US$1,500 per day
  • Startup + 2: Independent sales agents (also ICs) are added in the US and probably getting paid commissions of about 40-45%
  • Startup + 3: An international distributor is added who is likely paying 25% or so royalties back to the firm (ie they are keeping 75% and responsible for selling, teaching, and printing and translation of materials).  Distributors are often in non-English speaking countries
  • Startup + 4: Independent sales agents are added in English-speaking locales like Australia and the UK.  Direct sales people are added in the US, one at a time with a fairly low base and high commissions upside.  Because of the small size of the firm there is little channel conflict between direct sales reps, US ICs, non-US ICs, and global distributors however people ‘plant flags’ on their sales funnels for big account names near where they live, even though they have no active account penetration for them.  Your stomach hurts a little about this but you assume you’ll be fine because you recruited good, ethical people
  • Startup + 5: Because you have invested a lot of money in operations infrastructure as well as marketing, you’re now paying ICs commissions of about 30-35%
  • Startup + 6: Because margins are so much higher with good selling agents than distributors, a decision is made to terminate all distribution partners and replace them with ICs in those countries
  • Startup + 9: Because margins are so much lower with selling agents outside the US in every but the largest markets, a decision is made to terminate most international ICs and replace them with distribution partners.  New distribution partners though as the people that were terminated 3 years ago are still not on speaking terms with you.
  • Startup + 10:  Because you now have a good brand recognition and have continued to build up your infrastructure you are now paying ICs commissions of about 25%.  However you are still about 10 points lower in margin than you were in year 2.

Clearly there are a lot of different variations that I have seen that aren’t reflected here, but I’m hoping that this was good food for thought.

1 While I haven’t written about Crazy Founder Syndrome (CFS) yet, anyone who has ever talked to me for more than 30 minutes about the training industry knows I feel the problem is rampant.  I’m not sure if I coined the term but for now I’ll take credit for it … I should also point out that “crazy” has many definitions (though no, I don’t mean ‘crazy like a fox’) – so when I refer to a founder as having CFS I sometimes mean that they are intensely passionate about their own firm but have some blinders on about their firms weaknesses and that they also think that because they have such an easy time selling their wares, any half-decent sales person should be sell exactly how they sell and be successful.  Another version of CFS is the founder who is generally referred to with 4 letter words (and not the nice ones) by most former employees and partners.