Distribution is the Only Thing that Matters

Quick Summary: : Identifying prospects and turning them into customers on a large scale can be quite difficult.

Abstract:

Products sitting on the shelf or application servers with no users do not generate any revenue.  Getting the right product or service to the customer is critical. Invariably, it takes longer that one thinks to place products or begin services.  Business plans must take this reality into consideration.

Perhaps the title of this article overstates the issue.  Great products or services that fulfill a clear customer need that customers are willing to pay for do not matter if you cannot get the product or service in their hands.  Several years ago upon the sale of a company I was running, a friend asked me what I was going to do next. I replied that I would either retire or find a company with a Cracker Jack distribution organization and then find a product for them to sell.  All potential investors will be interested to hear about your initial traction and feedback from those customers.  Assuming that those results are positive, the next question will revolve around how you intend to reach the broader market.  You need a well thought out, logical answer.

Obviously, there are many methods and channels you can choose to place products in customers’ hands or methods to provide services.  Multiple approaches such as direct sales, sales through partners, and sales through the Internet may all be possibilities that can be used individually, sequentially, or simultaneously.  Each method will, however, place different demands on the organization that must be carefully examined.  Sales team training, the sales cycle, customer service, product/service support, warranty repair, billing, and on-going customer relations are a few of the factors that could significantly differ from channel to channel.  Of course, product simplicity or complexity may dictate the distribution model.  All of these factors will significantly vary.  Also, initial sales made by the entrepreneur to local prospects with personal relationships exist will be markedly different than sales made to long distance, anonymous prospects.  New companies often extrapolate their initial success to be applicable to mass scale introduction, sales, and support.  In most cases, that assumption is not correct.

Another factor that is often overlooked is the time it takes to fill the sales funnel and develop a consistent order flow.  Hiring a sales team, establishing new remote offices, getting the team up to speed, and then calling on prospects, all takes time.  Similarly, significant delays can occur when dealing with distribution partners who will need to “fit you in” to their existing methods of doing business.  In most cases, third-party distribution is only effective if the demand for the product is already present.  Channel partners are best equipped to fill demand but not to create it unless the new product or service is a simple and natural extension to their current product offerings.

Even Internet-only sales will take time to develop while you implement plans to make prospects aware of your existence.  You should probably spend as much time crafting a plan to make people aware of your website as you do in its actual creation.

Complicating this situation is the fact that many of the required activities are beyond the direct control of the company.  Investors know this.  They also know that revenue always seems to be delayed while expenses occur right on time!  Showing that you know and understand these issues and have built your business plan accordingly are table stakes for attracting any investor.  Nail down your distribution strategy before you schedule your first investor meeting.

Article Number : 3.040206   

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