Determining the ROI of Your Channel

Everyone is looking to get an ROI read on their indirect sales channel, especially those organizations that are just starting out with a partner program. If you’ve been tasked with managing this initiative, odds are your CEO is regularly asking, “what are we getting out of the channel?” This is true especially for CEOs who weren’t huge believers in it to begin with.

Considering today’s cost-conscious climate, that focus is understandable, but usually not wise, at least not in the early stages of a channel program. In this nascent stage, ROI can be quite a misleading metric.

Understanding Cycle Time

What’s the ROI of an office building? Developers don’t bother measuring return on a construction project in the first year. It takes a year and a half just to build the building. What’s the ROI at the end of those first 18 months? If ROI is all you consider, you could easily conclude “Wow, we spent $20 million and had no revenue. Guess we should get out of the office-building business.”

To accurately measure the results of any business undertaking, you need to understand that initiative’s cycle time, and in those terms, the channel is more like an office building than a sales campaign. It’s a long-term endeavor. Focusing on ROI too early can lead to pulling the plug before the channel program has had the opportunity to start producing.

ROI Has Two Parts to it: Revenue and Investment.

Too often, the fact that significant investment has to happen before the revenue flows is lost on companies that are launching their channel. Leadership may not truly support the indirect sales channel program – they just hire a person and give them a limited time period to generate meaningful revenue with little to no resource investment. Sales aren’t immediately apparent, and in the meantime, market conditions change and making next quarter’s numbers becomes a priority. Now the organization is  focused on the short term and the channel program languishes.

What’s the quality of that organization’s ‘I’ in the ROI equation? Has leadership made building the channel a priority? Have the right partners with the right contacts in the right geographies been recruited? Have those partners been trained? Have sales and marketing tools been developed and shared with partners? Are market development funds being spent wisely?

If it takes six months to get an internal salesperson good at selling your product, most likely it’s going to take a partner just as long or longer. Trying to measure ROI before partners have gotten into the swing is going to give you a bad reading. Too much credence put in that reading could lead to faulty choices based on bad information.

Before embarking on your channel program, be sure to fully map out your complete channel marketing strategy, including realistic recruiting, on boarding, and training periods to empower your partners to effectively sell your products or services.  With this roadmap, you can have realistic expectations for success.