When a vendor says “we will do $1m”

When a vendor says “we will do $1m”
Over the last few months we have spoken to a number of vendors who are looking to either start off in the UK & Ireland or expand their market here and you wouldn’t believe how many times we have asked the question of:
“What numbers do you think you will do in the next 12 months?”
Only to be met by
“About £1 Million”
Now you may wonder why alarm bells ring when we hear this, and the reason is that this is typically a number that people think you want to hear…. It sounds respectable but all too often this number if plucked out of thin air with no real thought or “Channel Science” applied to this number…
On a recent call Ryan and I were talking to a vendor and when we asked the question around expected revenue in the next year the answer was £800k. This was worked out with genuine best intentions based upon:
  • Current Revenue
  • Current Pipeline
  • Partner interaction and opportunity creation
  • Reasonable partner growth without losing focus on existing partners
  • Ensuring current partners continue to make money from the solution
  • Market Trends
When speaking to this vendor we believe their number is accurate. For some big vendors out there, this number is a day’s revenue but if anyone has worked with a genuine fledgling vendor the first “1 Million” Dollars/Pounds/Euro’s is the hardest you will have ever worked.
In those early days it’s about building credibility, opportunities, pipeline at times without a huge marketing machine or channel strategy behind you. Having worked with some of the big channel vendors and emerging vendors I can tell you which is the most difficult. I would urge everyone at some point to work with a start-up as that experience is invaluable if you can carry that onto more mature vendors/channel roles.
On the flip side of this however only last week Ryan and I were on a call with two people from a vendor and we asked two questions…
1. What is your current UK & Ireland Revenues?
2. Where do you see them being in the next 12 months?
The answers were:
1. Well, they’ve been a bit all over due to what’s happened with Covid etc and the numbers we have done are not a true reflection on the market but I cannot give out exact numbers….
2. Well over a £1 million, possibly over £3 Million
Now, at this stage alarm bells start ringing…. If you don’t want to discuss your current numbers even approximately that may mean you aren’t overly happy with them. We understand you may not want to give exact numbers but if as a vendor and a partner in the UK we cannot discuss some high level numbers something is amiss because in 12 months’ time we will have seen the UK business anyway so will know first-hand the business levels but the second answer is even more concerning…..
£1-£3 million is quite a wide scale…. It’s amazing if a vendor can overachieve by such a large percentage and we know it has happened many times but for every time it has happened there are 30 times it has not…
When we started drilling into the numbers even based on the next years target of “£1 Million” for arguments sake the sirens were well and truly going off as this is the conversation… our comments in red…..
“What’s the average deal size?”
“Ok so that’s between 10 and 20 deals per year closed to hit minimum number?”
“Yeh that’s right, we think we need about 80 opportunities to hit this number”
“Ok great, how many partners were you expecting to work with this year?”
“Errm 15, maybe a few more”
“Ok so you are expecting each partner to close maybe 1 deal each in the next 12 months?”
“Yeh we do, some may do more some will do less but that’s our plan”
“If we do that do you think those partners will really value your relationship based on maybe doing 1 deal per year at approx. £50-£100k Revenue… Looking at that from a partners perspective assuming they retain 25% that’s somewhere between £12.5k and £25k GM per year. If a partner turns over let’s call it £10 Million per year, how important do you believe you are to their business?”
“Errrm well it’s about the partners doing the work now and they will then see the rewards in
years 2 & 3”
“Hmmm, that’s not really how this works, partners need to justify quite early in a relationship that their efforts can create tangible pipeline that will eventually turn into business, if they don’t see that their efforts will go to the next challenger vendor or existing core products. Don’t you think it would be better to focus on a fewer numbers of the correct
partner than many that aren’t correct and will make no money from it?
“No, we need to show we have recruited partners as that’s part of our strategy that we have
promised to our CEO”
“Ok but that strategy is wrong, wouldn’t you rather have a strategy that works with partners who give a shit about you than implementing a strategy that’s wrong but ticks a box at your end?”
“This is what worked for us in the past and we will do it again”
“Was that in the UK?”
“No, but we have experience of building channels in other territories”
“Ok we wish you well, let’s speak in a year when you need to rethink your strategy”
Obviously, some of this isn’t word for word but this was the general gist of how the call went and this was a good example of a bad example of how numbers are thrown together not with any specific thought as to how the channel makes money from their efforts.
As our team speaks to vendors and advises them on their strategy to grow a channel, we stress that even though the CEO (based somewhere not in the UK) probably doesn’t care about partners making money from their solution. ABCD do… we know what works, how to
get partners buy in and ultimately let them see rewards for their efforts, if a vendor doesn’t take this into account, the partners will not be partners for very long.
In the channel it’s about being honest and maintaining credibility, this takes a long time to build but can be lost very quickly.
If we knock on your door with an approach from a fledgling vendor what I can tell you is that the channel strategy has been thought out, the numbers today and for tomorrow will be accurate and part of our role is to know your business so we only approach you with vendors
that suit your profile.
This process won’t work for every vendor, but for us it will work with every vendor that wants to build a successful channel.