Partner Profitability – Show Them The Money

April 9, 2009 at 10:41 pm Leave a comment

Ingrid Krivin

Ingrid Krivin

One of the hottest issues right now in the channel is Partner Profitability.
In other words, showing your partners that by selling your products you can make them more profitable than if they sell other vendors’ products.

But how to do this with credibility? And who has the time to think about your partner’s profitability?

Well, I say, who doesn’t have the time considering that if you want your partners to sell your stuff, you’d better start thinking about what drives them – bottom line profits.

So how to make your footprint larger in your partner’s business, and how to drive more revenue out of the partners that you have?

The important thing to keep in mind, that a partner is an independent business entity. Sounds obvious, right? But it’s simply astounding how many vendors forget that their partners are independent and can sell any vendors’ products they like. In their management and sales meetings they talk about how they can maximize profitability by working with those vendors who best impact their bottom line.

And it’s more than just who gives the biggest margins. It’s about which vendors are less costly to work with (time spent struggling with partner conflict and unwieldy partner systems is time better spent on revenue generation); and which vendor’s products create the best professional services opportunities (the blended gross margins from products combined with the services they attract can be very persuasive to a partner).

But let’s think about it in some other ways. Flexible payment terms can create a huge impact on a partner’s overall profitability. The difference of a single extra day in accounts payable can make a significant impact on their overall return on invested capital. In fact, most vendors do not realize that, even at the best of times, access to credit is very difficult for partners who are viewed as high risk having neither capital nor intellectual property. Most partners are funded using private investment – which on the one hand is more risk-tolerant, but on the other demand much higher returns on their investment than say, a bank.

So partners need to focus their activities around those vendors who present the best opportunities for driving up blended margins, lowering costs, minimizing their accounts payable and delivering the highest return on invested capital to their lenders. It’s all about the numbers. And the partners who manage by the numbers are the ones who typically drive more profitable businesses. They are the partners that you want on your side, pushing your products. If you can talk their language and show them the money, then they are much more likely to drive a business around your technology.

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Entry filed under: Partnering Tips. Tags: , , , , , .

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