Evaluating the value of a VAR

Throughout this article, we have used the term partner management to refer to the vendor personnel who work with partners to help them make sales of the vendor’s products and services.

As we move forward, we are all wondering if we are doing the right things to build or maintain our businesses. Many of us struggle with a methodology to structure the right questions . . . if we only knew the right questions to ask we could determine if we are going in the right direction.

The purpose of this article is to provide CEOs with a battery of “transition proven” diagnostic checklists for you to use to evaluate various components of your business strategy and relations with your vendors’ channel organizations.

In total there are five checklists presented in this document:

Ideal Partner Checklist

It is impossible to have excellent financial performance without being an excellent business. At the beginning of this year, half of the IT industry’s channel partners are technically insolvent, 40 per cent are in worsening financial condition, and only 10 per cent are top quality businesses.

The “ideal partners” represent the top 10-to-15 per cent of the available business partners in the IT industry. They sell up to 70-80 per cent of all of the product sold by the channel. The following checklist is provided to help you evaluate your business. Are you an “ideal partner” for your vendors? Are you an excellent business from your perspective, the perspective of your employees and the perspective of your bank and credit granters? If you are not an “ideal partner”, what are you going to do about it? If you don’t do anything about it, what do you expect is going to happen?

Use this checklist to guide the Transition Planning process in your organization. This checklist is best used by senior management teams, board members and/or advisory board members:

Ideal Partner Checklist: Yes/No

Financial strength

1. Has your business enjoyed revenue growth, unit growth and profit growth in the last two years?

2. Does your business currently have 10 per cent or more of prior years sales in cash/near cash (unutilized lines of credit)?

Sales strength

3. Does your business have a well-trained salesforce, that is well paid, certified appropriately with low turnover?4. Does your business have strong sales skills and technical skills?

Product lines

5. If your business sells competitive products, have you made the commitment to invest enough resources to get into/stay in the various businesses of your key vendors?

6. Does your business have a sound line of compatible/complimentary products/services/solutions?


7. Does your business have above average market/industry knowledge?

8. Is your business well established?

9. Does your business have strong community standing?

10. Does your business have key executives with strong backgrounds?

11. Does your business have high levels of business, technical, and industry expertise?

Sales performance

12. Does your business exhibit strong sales performance with solid profits?

13. Does your business exhibit strong sales growth prospects?

14. Does your business exhibit the ability to retain and acquire accounts?

15. Does your business exhibit success in reaching new target markets?

16. Does your business exhibit strong account management/planning?

Management strength

17. Does your business have systematic business planning?

18. Does your business have solid employee retention?

19. Does your business have dedicated marketing resources?

20. Does your business have a clear strategic direction?

21. Does your business have a commitment to training?

22. Does your business have equitable, competitive sales compensation programs?

23. Does your business have appropriate facilities? Willingness to invest?

24. Does your business have the willingness to allow vendors to train your people?

25. Does your business have the willingness to commit resources to vendor-specific brand and category programs?

26. Does your business have the willingness to co-operate in joint vendor/channel partner programs?

27. Does your business have the willingness to share data with vendors?

28. Does your business have the willingness to accept quotas?

If you answered No to 14 or more (50 per cent) of the questions on the Ideal Partner Checklist, then you should think hard about the quality of the business you are running or working in. It is difficult to engineer a successful transition without strong foundations.

Channel Functionality Checklist

Channel functionality is the complex set of attributes that a channel possesses and a vendor covets. Channel functionality is what vendors pay for. Channel functionality is at the core of all partner Transition Plans. Channel functionality is comprised of physical capacity, technical capability and financial quality.

Without all three components of functionality a partner will fail to deliver the required results. This checklist is most effective when completed by a senior management team as part of an annual Transition Planning exercise. The Channel Functionality Checklist is comprised of three separate questions:

Channel Functionality Checklist: Yes/No

1. Does your business currently have the physical capacity to sell the required number of units of product to meet your business plan and your vendor’s unit target?

2. Does your business currently have the technical capability (“technical IQ”) to market, sell and service the products that you plan to sell this year?

3. Does your business have the financial quality (investable cash flow) necessary to make the investments that your business will require this year?

If your organization has any No answers, then capacity, capability or quality problems in your business will be a big problem and a constraint on your efforts to transition your business. Problems with Channel Functionality often stem from inadequate investment in your organization’s Functional Underpinnings in prior periods. Incomplete businesses often have shortcomings in channel functionality, which eventually result in profit and cash flow problems.

Vendor Relationships/Vendor Management

Partner Manager Checklist

How good a job are the vendor partner managers doing working with you? At the end of the road are the vendor’s channel managers, the account managers and the partner managers. If these individuals are not capable of assisting you with your transition, all of the fancy partner strategy and attractive business propositions won’t help your organization make its numbers. We have undertaken extensive research on partner manager competencies. We know that in order to function in the top quartile of partner managers, the following competencies must exist.

Partner Manager Checklist Yes/No/Unsure

1. What partner management competencies do the partner managers who have been assigned to your organization currently have?

2. Are you getting the best people your vendor has to offer?

3. Do they have the ability to critically review your business strategy and clearly comprehend your direction and how to build/sustain your business?

4. Do they have the ability to talk finance with key managers in your organization and understand partner finance?

5. Do they have the knowledge of how to create a compelling ROI scenario for your organization using their organization’s products, services and programs as the return catalyst?

6. Do they have the ability to connect their company’s products and/or services with the investment are return needs of your CEO?7. Do they have the ability to understand the different business models that your organization is executing?

8. Do they have the ability to articulate to your organization how and where you can make money selling the products and services of their organization?

9. Are the current number of $ discussions that your channel managers are having with your CEO sufficient?

10. Are the number of channel managers capable of having a business discussion with your CEO sufficient?

11. Do your channel managers have the ability to do an in depth review of your business strategy?

12. Are your channel managers skilled business people?

If your partner manager doesn’t score Yes on eight or more of the Partner Manager Checklist, you should talk to your vendor about getting another partner manager. It is very difficult to execute a successful Transition Plan without a first class team all the way around. In the alternative, you might suggest that the partner manager attend the ChannelCorp program Channel Management: the business dynamic.

Business Proposition Checklist

The Business Proposition Checklist is designed to be used by senior personnel in business partners. The checklist questions represent the three fundamental questions that business partner senior managers have of their partner managers and vendor channel programs. Again, are your vendors part of your transition problem . . . or your transition solution? The Business Proposition Checklist is three simple but very powerful questions:

PBusiness Proposition Checklist: Yes/No

1. Do you know how much will have to be invested in 2003/2005 to pursue your vendor’s programs and strategies?

2. Do you know how long will it take for the investment that you make to be paid back?

3. Do you know what the long term rate of return is on the program investment?

Should your partner managers not be able to answer these questions, you will have a great deal of difficulty making investment decisions that will positively impact your transition plans next year.

Channel Program Checklist

Channel Partners require some very specific deliverables from their vendors.

Do the deliverables that you are getting from your vendors meet the basic requirements of your business? Are the programs part of the problem . . . or part of the solution? The Channel Program Checklist is designed to help you determine whether or not your organization is receiving channel programs that meet the financial needs of your business.

Channel Program Checklist Yes/ No

1. Do your vendor’s channel programs result in increased partner revenue?

2. Do your vendor’s channel programs result in increased partner margins?

3. Do your vendor’s channel programs result in in reduced partner expenses?

4. Do your vendor’s channel programs result in reduced partner asset investments?

5. Do your vendor’s channel programs result in reduced time to break even?

6. Do your vendor’s channel programs result in accelerated time-to-sale?

7. Do your vendor’s channel programs result in accelerated time-to-cash?

8. Do your vendor’s channel programs result in enhanced long term rate of return?

If the partner managers that you work with are unable to answer Yes to four or more (50 per cent) of the questions on the Channel Program Checklist, then you need to get them focused on your transition plan and business needs immediately.

Questions for contemplation

1. Are you an “ideal partner” for your vendors?

2. What are your key weaknesses?

3. How does your business stack up in the areas of capacity, capability and quality?

4. How good a job are the vendor partner managers doing that are working with you?

5. Are you getting the best partner management people your vendor has to offer?

6. How strong is the business proposition that your vendors want you to invest in?

7. How well do the specific program deliverables from your vendor impact your business?

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Jim Love, Chief Content Officer, IT World Canada

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