Category Archives: Commercialization

Building a Powerful Contact List: Key Tactics for Making the Random Walk a Little Less Random

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By:  Andrew Johnson, Ph.D.

red leader of blue group

Build a powerful contact list by focusing on key individuals first.

Building up a substantial contact list is crucial to any startup especially as they approach the commercial launch of their first product or service.  This list will be used by your commercial team to recruit alpha and beta evaluators, find strategic partners and of course uncover customers.  One of the key things to keep in mind as you create this list is that it is the quality of the people on this list rather than the ultimate number (although you need this list to grow very large eventually) that is most important.

Why quality is crucial
First, what do we mean by a quality contact.  This is an individual that has shown some interest in your product or service by asking you to:

  • Put them on your mailing list to keep them informed
  • Exchanged business cards with you at an event you both attended (they asked for yours first)
  • Has reached out to you via your website, phone or perhaps by visiting a poster or vendor booth you hosted at an industry event.

People that you connect with in one of the ways described above will have a higher chance of being valuable to you and your company in the future including becoming some of your first customers.  Simply scanning the badge of everyone that visits your booth at a tradeshow to grab some free swag might provide a big number of contacts that you can put on a spreadsheet but now you will have to sort through all of them to find the quality contacts just described.  You have better things to do with you time.

The Random Walk
The highest quality contacts that you could have are those that you have had a chance to sit down and connect with on a one-on-one basis.  If you establish a strong connection during these meetings, these folks can turn out to be your strongest advocates and will go out of their way to help you with referrals, advice and other valuable inputs.  However, the problem here is that you need a significantly larger number of contacts to insure that you have a broad enough reach that will ultimately return the kinds of contacts that will become satisfied customers.  It is not possible to reach all of these people individually.  Reid Hoffman (Cofounder and Chairman of LinkedIn) and Ben Casnocha provide an excellent discussion of how to successfully build your network of contacts with sufficient depth and breadth in their book ‘The Start-Up of You’.  All of the people that we would consider high quality contacts would be rated as first degree connections (depth) on LinkedIn.  The contact lists of your 1st degree connections represent your extended list (breadth) that will have the size you need to drive your commercial efforts.  In LinkedIn parlance, these are 2nd degree connections to you.  As an example of the reach of this extended network, a list of 300 – 400 direct connections (LinkedIn 1st degree connections) gives you access to over 6 million indirect connections (LinkedIn 2nd degree connections).  Whether you use LinkedIn or not, the compelling size of these indirect connections is real and worth the effort to cultivate.

This is Doable
It is likely that between the founding team members, your advisors and other strategic partners that you will be well on your way to developing a list of hundreds of quality (1st degree) contacts.  Be sure to seek out opportunities to meet with new people on a ‘one-to-one’ basis as much as possible.  You never know who these people are connected to and what valuable introductions they will provide.  Looking forward, that is can look like a very random process and it is.  You can increase the likelihood of making meaningful connections by attending events that you think will attract the people you would like to meet (industry events, tradeshows, lectures, CEO groups etc.).

Selected Tactics for Building your High Quality Contact List:

  • Reach out to friends and family.  Not all of these will be relevant but this is an easy first step.
  • Review the alumni contact list from your alma mater and professional school and reach out to prospects via e-mail, phone or ‘face-to-face’ (best).  Remember, don’t just stack you list with names; you need to know that they are at least a little bit interested.
  • Ask for referrals from those you meet.  Always ask the people you connect with who they would recommend that you meet and ask if they can introduce you.  Be sure to return the favor as much as possible as well. Give and take here can really pay off in the long run.
  • Be prepared to make connections anywhere and everywhere by being sure to keep a few of your business cards with you at all times.  You never know who you might meet at your spouse’s business party or at the grocery store.
  • An effective Marketing effort will bring in a number of high quality connections as well as leads for your sales force.  Don’t confuse a quality connection with a sales lead.  Sometimes a sales lead will also be a quality connection but that is not always the case.
  • Host or sponsor events in your industry.  Providing a technical talk, hosting a workshop or having an Open House event at your facility are excellent ways to quickly build your list of contacts.

Picture Credit:  © Suravid | Dreamstime Stock Photos & Stock Free Images

The Next Two People You Need to Start Up Your Startup

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Business leader and team

It’s a lot easier to figure out the startup puzzle when you have the right team!

By: Andrew Johnson, Ph.D.

It seems that every week there is an article or post that bemoans the shortage of innovation in America.  However, this is not due to a lack of great ideas and the pace of discovery in the labs across the nation.  The problem is getting the right team to lead and to grow these ideas into commercially successful endeavors.

Don’t go it alone
Having an exciting technology or scientific discovery on hand is not enough to form a successful company.  You need a team of talented people to help you realize your vision.  However, going from one person (you) with an idea and a passion to assembling an effective team and moving forward can seem daunting.  The answer to this is not complicated.  The first thing you need to do is assemble your first board members.

Who are they?  Early Advisors vs. Active Board
Whatever you want to call them, you need others to help you take your idea to the next step along the way to a successful company.  The best way to begin is to gather a small, but powerful group of people that you can rely on to help you develop a realistic strategy, identify productive tactics and complete the critical efforts needed to get this off the ground.  You will find that there are many that will be more than happy to become advisors but far fewer that will become valuable board members.  You need both but you need the active board member more, especially in the early days when this is still an idea.  Here are a few ways to distinguish the two types of people: Table of advisor traits

Your board may typically only have 2 or 3 other members in the beginning which is fine.  You will likely have significantly more advisors at the beginning but some of these may migrate over to the board member column as things progress.  Your advisors allow you to get a breadth of guidance and ideas and your board will provide the depth you need to sort through all of the ‘suggestions’ and actually help you with the heavy lifting of launching your new startup.  In addition to this, it is a lot easier to share the burden of this effort with a committed team than shouldering it all by yourself.

Next Steps:

      1. Identify 10 people who have the experience, resources, talents and connections you need and ask them to be on your board.
      2. Schedule a kick-off meeting to discuss your ideas with them and to identify what commitments you might need from them.
      3. Agree on a regular meeting schedule
      4. Parse this initial group, using the table above and your intuition, into Active Board Members and Advisors.
      5. Continue to recruit until you have at least 2 – 3 board members.

Picture Credit:  © Suravid | Stock Free Images & Dreamstime Stock Photos

What You Can Learn from an Orchard about Growing your Business

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Apples

Approach building your company like planting an orchard. Be sure that you know what your customers want today but also a few years down the road as well.

By:  Andrew Johnson, Ph.D.

What does growing apples have to do with building a life science company?  It turns out that there are a lot of similarities if you look closely.  A successful orchard requires a huge investment in planning (what variety of trees, how much of each, etc.), effort (a lot of work before the first harvest), finances (cost of land, labor, farm equipment etc.) and time (trees need a number of years to mature before your first harvest) to become successful.  The successful orchard keeper needs to have a good assessment of what types of fruit his customers will want in a few years and also how he can differentiate his own business from other orchards in the area to compete successfully.  The leadership of a strong life science business needs to think in the same terms.  What need will your offering(s) fulfill in the future and why will customers come to you rather than to your competitors?  With an orchard, once you plant the trees, you are now committed to your view of the future market for your products and now everything is about nurturing your trees until you have your first harvest.  With a startup, once you have selected a product and/or service, all of your efforts will be to get it successfully to market.  The orchard keeper cannot rip up trees next year if he thinks that the market for his fruit has changed.  Likewise, most startups do not have the funds (or time) to scrap a product offering once they are working to get it to market.  The lesson here is, make sure to spend enough time to understand your market, your customers and how you will successfully sell and then commit to a laser-like focus for getting that offering to market as soon as possible.

Tips for Building a Strong Startup:

  • Plant Trees:  Build your company for strong and steady future business.  Whether you are offering a platform, service or a one-time sale of a large instrument, referrals are the key to efficiently growing profitably.  Winning new customers is costly so getting referrals from happy customers is like harvesting apples in the fall.  The time, effort and investment you put into winning strong early customers will pay off as they share their experience with your future customers.  Building a scalable infrastructure that consistently and efficiently delivers the goods that delight your customers will insure success in the long run.
  • Build a Barrier to Entry:  It takes a while to plant and nurture an orchard.  However, once your trees have matured, you will have happy customers coming on a regular basis.  Building strong relationships with key opinion leaders, establishing preferred vendor status with organizations and establishing your company as a market leader in the technology is a lot like planting new trees.  There is a lot of prep work up front and the rewards are not immediate but once you have done this, this makes it very difficult for competitors to come into the market later.
  • Plant some Pumpkins Too:  As a startup, you need to start generating revenues as soon as possible to prove out your business.  Your team will need to put a lot of focus on getting your first sales and creating happy customers.  Many startups make the mistake of neglecting to build in some time for creating a scalable and profitable business.  You will be planting and harvesting an annual crop like pumpkins to do this. Developing a product road map that contains both near term (pumpkins) and long term (apples) offerings will allow you to get to market faster and get the insights you need to insure a better outcome with your later prospects. However, the key here is using what you have learned about your customers, their wants and needs and enthusiasm for your offering to build an infrastructure that will allow you to maintain the high level of customer satisfaction that will lead to referrals from your customers (See first point – Plant Trees).

Take Home Points:

  • Start building relationships with key opinion leaders and strategic partners early (even before the launch of your first product or service).
  • Use the insights you gain of your customers’ wants and needs from early sales to guide your efforts as you scale the business.  (e.g. if you will start selling using distributors, make sure that you build in an infrastructure (tech support, technical inside sales, social media outreach, etc.) to maintain the level of support and service that your customers valued in the early days).
  • Everything you do and every interaction you have with the public will shape your brand.  A strong positive brand can be a powerful barrier to block your competitors.  Clearly identify the brand identity you would like to have and make sure that you and everyone in the company reinforce this in everything they do and with every interaction with the public.

Picture Credit:  © Sofiaworld | Dreamstime Stock Photos & Stock Free Images

Google Glass: A Primer for the Life Sciences Market

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By:  Chris Cullmann

Google Glass

Google Glass

Your rep is in the lab because your customer is tweeting his 2000+ followers that the $300K sequencing system your company just installed is “a piece of garbage.”

“Poor resolution. Unreliable reproducibility. Low reads. I might as well do this manually” says your customer, the director of a regional sequencing center.

The rep picks up the vial of polymerase from the ice bucket long enough to tell her Google Glass (AKA “Glass”) to scan the lot-number bar code and check the corporate database for manufacturing date and for other complaints. Moments later, her Glass display indicates that 4 labs in the US, 3 in London, and 6 facilities in Italy reported similar issues. The rep verbally tells Glass to add her complaint to the database and to e-mail her manager and the director of quality control about the issue.

Your rep replaces the suspect lot with the one she brought to the lab and tells Glass to add to her calendar a follow-up visit to the same lab in 2 days to check on the performance of the new enzyme prep, and then moves on to her next account, but not before she tells Glass to e-mail her manager that she’s on the way.

Google Glass can accomplish some of these functions today. Now is the time to prepare for what Glass will accomplish tomorrow.

Google Glass: how it works
Google Glass is the most recognizable example of a new generation of connected devices—wearable computing. When paired with an Internet-connected smartphone, Glass provides users with information delivered via the Internet and stored in the paired phone. Glass also records images, video, and audio from the user’s perspective.

The concept of Glass is brilliantly simple—provide information to users in a discrete heads-up display in the wearer’s peripheral vision. The computing elements and display populate an eyeglass-like unit that the user wears like standard eyeglasses. Via audio prompts, users access information from search engines, personal files, calendar events, text messages, and beyond.

Much of this functionality is available on our smartphones right now. Why is this so exciting and such a noteworthy change?

Glass delivers on the promise of science fiction writers and IT department heads—a near-neural implant putting all your company’s (and the world’s) information available on command.

Today: a capabilities showcase
Out of the box, Glass provides seamless integration with Google’s own services. Text messages, search, calendar events, video-chat service “Hangouts,” and social sharing via Google+ all are integrated into Glass. It’s a demonstration of capabilities and integration above all else. But keep in mind that the product is still in beta testing and not commercially available.

If you’re searching for a broader context, the message from Google is clear: “Glass is coming.”

Tomorrow: a new interface for information management
At face value, the most powerful feature of Glass is the ability to share, on command, photos and video from the point-of-view camera. Imagery captured via Glass documents and details an activity or event, and does so in real time. Sharing experiences and creating a new genre of digital first-person media are key components of the Glass value proposition.

Sharing information in real time
From a commercial standpoint, the ability to simulcast makes it a tremendous utility for the scientific, healthcare, and education communities. What makes Glass so powerful? Unlike smartphones, wearable technology records, transmits, and receives audio and visual feedback non-disruptively.

Scientists can gain the insights of peers or groups of peers and spawn symposia of in-the-moment discourse. Clinical researchers can leverage expertise from the other side of the globe to diagnose and treat patients. Sales teams can get in-field feedback and tips from sales veterans or support teams to provide the expertise of an entire company—on the spot.

As described at the beginning of this article, the love would flow in both directions. Field information from the user’s point of view—images, video, and audio—could be captured, stored, and made available for distribution throughout the entire business enterprise.

Making Glass work in the business world
Glass has been a toe in the water for wearable computing, and it’s not difficult to envision how something so integrated can change how we apply information and technology to our daily business lives. Does Glass become a new interface for the infrastructure we already use?

Yes. Good or bad, enterprise will quickly adopt Glass or it’s next iteration as a way to provide workers with access to the spectrum of corporate information and wisdom, including but not limited to:

  • Inventory
  • Up-to-the-minute pricing information
  • Product identification
  • Customer information

Let’s take a closer look at customer information, but with a focus on context.

Glass can provide a discrete vehicle for information about our contacts. Who are they? Who are they connected to? Do they have decision-making ability? Are they eligible for discounts? What is the financial status of their account?

It doesn’t take long to see how tools like Glass can evolve business practices, but there are real-world issues that need to be addressed.

Etiquette and legality
Our social construct is changing quickly. Consider the issues raised by existing mobile technologies. Is it acceptable to take a phone call during a conversation or to rely on a tablet for note taking during meetings? The agreed-upon norms are changing daily and without much perspective on generational differences.

So what will be the social implications of Google Glass and subsequent wearable computers? How will the ability of Glass to capture information at any time be received? At meetings will Glass be as acceptable as open laptops and tablets, or will its use be restricted?

Confidential information and privacy. These are critical issues for academic and commercial research in the life sciences and for the public at large, so much so that Google is unsure what functionality to include in Glass and how much data should be made accessible to Google or other parties. For example, Google has developed facial recognition technology, but doesn’t include it with Glass (or its Android operating system). The technology would enable a Glass user to capture an image of any person at any time, identify them, and deliver as much information that is publicly available to the Glass user without the observed person’s knowledge.

Your customers might consider the above an invasion of their privacy.

But similar recognition technology applied to bar codes or other labels could also benefit life science researchers:

  • By identifying hazardous materials and providing safe-handling instructions
  • By recognizing equipment and providing instructions in the heads-up display

Many commercial life science businesses bar their employees and vendors from bringing image-capturing devices into their facilities. Despite the many benefits of data capture and recognition technologies, rules have to be developed that will impact Glass deployment and use.

Can Google Glass become a crystal ball?
Currently, most everything that Google Glass does is reactive. You command, Glass acts.

The vision for Glass is to predict your needs and provide the information—before it’s needed—which might be its greatest challenge and most significant accomplishment.

In this capacity, Glass would analyse your digital activity (e-mail, product ordering, journal-article downloads, visits to help forums such as Scientist Solutions and Biocompare) to search for patterns. Over time, such trends would comprise a large information fabric that would be mined for insights that inform accurate predictions.

Google Glass is a bellwether
Relevant information that is ubiquitous, accessible on demand, and rapidly shared is central to business success. Glass advances this cause by speeding the evolution of information management from desktop experience to the Internet.

Glass isn’t in final form, but a first glimpse. Like viewing the first television, it provides a view of something very important to your business world. Glass isn’t commercially available and registration for beta trials closed, but you can sign up for Glass updates.

The Startup Business Plan: Charting Your Path to Success without Wasting Time

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Treasure Map

Your startup business plan will be like a treasure map to show you and the team the shortest path to the gold while avoiding dangerous traps.

By:  Andrew Johnson, Ph.D.

It might seem trendy to ‘just do it’ but it is pretty difficult to make sure that you are ‘doing’ the right things if little forethought has gone into what is critical for your company’s success.   There are those who propose skipping this step, calling it a waste of time.  The reasons given are that as soon as the plan is ready it is already out of date or “we know what we need to do already”.  Many of these views come about from a misconception of what a business plan really is and what it can do.

A business plan is…
A good business plan gives founders the opportunity to clearly state and communicate their vision of the company with the rest of the team,  investors, key opinion leaders and other VIP’s that are critical to the success of the company.  The founder, his senior team and trusted advisors will be able to use the exercise of preparing a solid business plan to simulate how the proposed company will ultimately achieve success.  Think of it as a dry-run.  Gaps in the business model, feasibility issues with the underlying technology, manufacturing scale-up issues and other key elements that are critical for success will easily be uncovered during this effort.  Since this is essentially a simulation of how you envision things to go, any gaps and pitfalls can be identified early before any time, effort or money is wasted.  In addition to this, the business plan will allow the senior team to get valuable feedback from outside industry experts that will have a direct bearing on the company.

A business plan is not…
Having a clear understanding of what does not constitute a good business plan will not only help you in the preparation of the right plan for your organization but allow you to avoid wasting time.

  • Needed only to attract investors:  Yes, it is true that most investors will insist on reviewing your business plan (often they only read the executive summary) before deciding whether they have any interest in a further relationship (never mind making an investment).  However, the real value here is that you will have a detailed strategy mapped out to guide your progress and even a detailed task list for the team.
  • A long, boring document for ‘business types’:  Nobody wants to read or review anything that is boring or valueless.  If you can cover all of the essentials of your business in 5 pages then that is how long your plan will be.  In fact, it is better to start with a shorter plan in the beginning and then amend it as you make progress and learn more about the things that are most important for your success.
  • A static document:  The preparation of a business plan it not something that you complete and then file away for posterity.  It should be a living document that changes as your company grows and as market conditions that impact it are uncovered.  The key here is that with a good plan in place, you and the team will make conscious decisions to make a change rather than just changing course every time something new comes along.  A business without an ‘Evolving Business Plan’ is doomed to run out of time and money by constantly chasing issues that really should be ignored.
  • Something that can be outsourced:  Some of the hard work here can be defrayed by hiring an experienced consultant.  The founder and the senior leadership team will need to work closely with this ‘hired gun’ to make sure that the final product is a business plan that will drive the success of the company rather than a generic business plan (a true waste of time and money) that has little to do with the particulars of your company.

Spending your time creating the world’s best business plan is a waste of time and money
You don’t need the world’s best business plan.  You need the business plan that will provide you with the details and guidance to chart your company’s path to growth and success.  It should be no longer than that and it need not be fancy looking or printed on heavy bond, acid-free paper.  Spend the quality time you need with your leadership team (and consultant if needed) to draft up the best plan you can in a week or less.  You will need to keep updating it and filling gaps but get at least a reasonable one in place early.  The leadership team will frequently make changes to it as progress is made and new findings are uncovered.  Someone with expertise in creating effective business plans can be a great asset to your team in terms of creating a version of it that will be most appealing to potential investors in your market.

Take Home Points:
You need a right-sized plan to help you avoid wasting time and money and…

  • Avoid creating a great product that does not have a ready market
  • Discover that a huge need in the marketplace does not have a viable business model for growing a profitable company
  • Identify what  the next most important tasks are
  • Reveal underlying risks and opportunities that may not be obvious at first

Resources:

Picture Credit:  nicora via photopin cc

No Lab? No Problem! Leveraging the Power of the Biotech Incubator for Startup Success

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Cracked eggs graphic

Get more bang for your buck! Biotech incubators not only free you from the expense, time and effort of establishing a lab but also can provide access to technical expertise and fellow entrepreneurs that can give you a powerful competitive edge.

By:  Roger Frechette, Ph.D.

Business incubators are loosely defined as supportive environments helping entrepreneurs to launch and grow successful businesses. Whether for-profit or non-profit, spawned by commercial real estate firms, state/local governments, academic officials or entrepreneurs, business incubation on the rise with an increasing variety of offerings to suit virtually any aspiring entrepreneur.  The National Business Incubator Association, and numerous state and local affiliates, offer loads of information for incubators and entrepreneurs alike.

Why this works
A critical advantage that business incubators offer is the availability of fully functional infrastructure – enabling entrepreneurs to focus on their fledgling businesses without having to worry about time-consuming operational bits like setting up permits, licenses, internet access, waste disposal, meeting space, security, vendor negotiations etc.

Successful companies paying it forward
As an active member of the Massachusetts biotech community, I’m delighted that biotech incubation is experiencing a significant growth spurt within the already prodigious life sciences ecosystem.  I wish this had been the case when we started MaxThera in the last decade.  Beginning with an idea in 2003, we landed at Inotek Pharmaceuticals, along with other startups, including Smart Cells. Inotek happened to have a bit of extra lab space and equipment available, and was willing to lend a hand to startups.  Other companies have offered shared space to startups as well, but such arrangements can be difficult to find are not always well-suited to the incubator role.

Massachusetts biotech incubators: A model for success
The Massachusetts Biomedical Initiatives (MBI) is sort of a granddaddy of biotech incubation – launched in the 1980’s, MBI provides office and laboratory space, including some basic lab equipment.  Centrally located in Worcester, MBI has grown considerably over the years, is housed in several buildings and has tenants ranging from innovative biotechs to research service providers. The Cambridge innovation Center (CIC) is another mature entity that offers amazing office facilities and resources to startups of every kind, and is located in Kendall Square (for any readers from another planet, that’s in Cambridge, Massachusetts).  Until now, CIC has not had direct access to laboratory space, but that is going to change soon with the launch of Lab Central expected later this year.

The future of biotech incubators is now
A few new breeds of biotech incubator are on the rise though.  A leader of one such new breed is North Shore InnoVentures, with thoroughly equipped biological laboratory facilities and a host of added value services (Note: NEPA is actively involved with NSIV as a sponsor and advisor).  As is the case with MBI, NSIV tenants include service providers, such as Hepatochem and Cell Assay Innovations, but here, both share the space with other startups, creating a unique environment for collaboration.  Joel Berniac, Founder and CEO of Akrivis Technologies, a recent NSIV graduate, described his experience in this incubator as follows:

“Being part of North Shore InnoVentures during our critical start-up phase proved to be a key success factor in our transition to commercial operations. The collaboration opportunities we received, along with access to world-class facilities, mentoring and a network of business and investor contacts, gave us an enormous advantage.” – Joel Berniac, Ph.D., MBA

Contract Research Organizations (CRO’s): Mixing business with startups to help entrepreneurs
Another new approach is incubator space offered by a contract research organization (CRO).  TGA Sciences and Cambridge BioLabs are two examples of companies that provide varied biological and/or pharmacological research services as well as offering shared space for startups.  For entrepreneurs, this is a great deal because their teams work in close contact with experienced scientists from the CRO, and they can readily expand their staff capabilities by engaging the CRO for services.

With my background in chemistry, I’m particularly interested in the launch of the CreaGen Chemistry Incubator (C2I) (Note: NEPA is also an advisor to CreaGen).  For entrepreneurs starting a chemistry centric business, C2I offers a unique office and laboratory space that includes access to experienced chemists as well as a full array of chemistry equipment instrumentation and automation equipment.  Biology driven companies might also like this space, especially if they are planning to develop small molecule products or to use chemistry based tools for their work.

Accelerating great science, entrepreneurship and financial outcomes…
Biotech business incubators, both new and established (I have mentioned just a few here), offer amazing facilities and resources with cost structures that cannot be matched by any stand-alone company.  In a world where financing great ideas is increasingly difficult, these facilities give entrepreneurs funding their dream with savings accounts, grants or friends/family a chance to get up and running fast.  Professional investors occasionally find gold in incubators, but anecdotal evidence suggests that incubator residents still represent an emerging opportunity for investors to find the next breakout success for their portfolio.  Some investors might also benefit from exploring incubators as low cost options for developing assets they have already funded. Word is getting around:  MassBio recently launched their Incubators in MA page to make it easier for anybody with an internet connection to find them.

This post was originally published by New England PharmAssociates (NEPA).  Click Here to read other posts from the NEPAblog.

Picture Credit:  New Business Image, Renjith Krishnan, FreeDigitalPhotos.net

Distributors Demystified: Use These Insights to Help You Help Them Sell More

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business people and world map
Using distributors can be a key part of scaling up your sales reach. Be sure to budget the time and effort to make this tactic work for you.

By: Andrew Johnson, Ph.D.

Working with Distributors can be a great way to expand your sales reach as you grow.  This can be a very effective way to ramp up sales especially when you look to sell internationally.  It is important to have a good understanding of how best to support, motivate and manage your distributors prior to your product launch to make sure that you get the biggest bang for your buck here.

A few myths

  • Hire them and forget them.  Your distributors will require training, sales collateral and on-going support to be successful.  Whether you have a direct sales force or a distributor, they both require the same level of sales and marketing support.   In addition to this, you will likely need to plan on refresher training and customer visits with your distributors over time as there is turnover in their sales team and also to keep them motivated.
  • They will be excited to sell your new innovative product.  The business team that sold you on the contract will be excited about your product and its business potential.  The distributor’s sales team, not so much.  An unfamiliar new product takes time and effort to learn how to sell effectively.  When the distributor’s sales team member has a choice of selling an existing product versus a new one, everything else being equal, they are more likely to focus on what they already have confidence in selling.  Consider offering cash or other incentives for early sales for a period of time.  Once the distributor’s sales team has some success with your product, this challenge will become less of an issue.
  • Distributors will be less work than a direct sales force.  (see the first point in this list)  You will need to plan regular update meetings with your distributors to monitor progress and help them to succeed with your products.  In the early days, you will find that you need to provide more support to your distributor’s sales team as new sales people call with questions or issues.  With a direct sales team, you will not have to constantly deal with the same questions and issues.
  •  If you sign on with a big distributor, you will instantly have hundreds to thousands of sales folks selling your product.  The distributor’s business team will brag about the enormous size of their sales force, in practice the number of sales people that will actually learn and sell you product will be a fraction of that.  If you are lucky, you will have a few talented sales people that will have early success with your product.  They will tell their colleagues about this and interest in selling your product will increase throughout the sales force.  However, you need to make sure that you are not taken in by pronouncements of how ‘thousands will be selling your product every day’ this just is not true.
  • You can count on the experience, reputation and size of a distributor to mitigate some of your sales risk.  You can never outsource risk!  This is as true of sales as it is with any other risks that your business will face.  You will need to work with your distributor to help mitigate the risk of poor sales.  It doesn’t really matter if it is your own sales force or the distributor’s that is not closing sales.  In both cases there is a problem that you will need to address.

The number one thing that you can do to insure a good experience with your distributors is understanding that you will be expending a significant amount of time and effort (especially in the early days of the relationship) helping them to be successful with your product or service.  Whether you have a direct sales force or not, you will still need to plan on producing teaching materials and conducting training sessions so that your distributor’s sales force has a good understanding of your product and confidence to sell it successfully.  You will also need to provide them with a clear point of contact in your company that will handle all questions, concerns and technical issues in a timely manner (recommend that this be the Product Manager not one of your Sales team members).  You will also need to plan to travel with your distributors on a regular basis to insure that you are meeting their customers.  This will allow you to get critical customer feedback as well as motivating the distributor through demonstration of your commitment to support them.  Traveling with your distributors also allows you to further strengthen your connection with them and show them that you are not only actively managing them but are open to helping them be more successful.  In time, a supported distributor will put increasingly more effort into generating the leads and winning the greater numbers of sales that you expect.

Other advantages
Not all products are ideal for distributor based sales.  If your product is truly ‘game changing’ and requires a very technical sale, you will likely be better off with a direct sales force, at least in the early days after your product launch.  Once you have established enough sales with your direct team so that you have a good understanding of your ideal customer demographics, the most successful tactics for discovering and reaching them and the value proposition that has proven to be most effective, you are ready to consider bringing on a distributor to augment your sales efforts. 

There can be many other advantages of brining in a distributor other than expanded sales reach.  Keep the following in mind during your negotiations with prospective distributors.

  • Forward stocking locations:  This can be a particularly valuable asset to have when you start selling overseas.  Having your product warehoused in the same country where it is sold will insure timely delivery to your customers without the unpredictability and delays caused by getting through customs.  Being able to maintain stock at your distributor’s overseas warehouse will also allow you to take advantage of cheaper (and slower) shipping options like having your product delivered to them by ship rather than by air.
  • Shipping and handling services:  Distributors, especially larger ones, will be able to use their size and expertise to significantly reduce the costs of shipping and handling.  Your distributor already has the infrastructure and expertise in place for this, better to take advantage of this in the early days and save your money for other business expansion activities than customer fulfillment.
  • Marketing and Lead Generation Services:  Many distributors have their own Marketing Communications teams.  They can promote your products in their own marketing literature, at tradeshows or generate literature that has been translated for use with international customers.
  • Localized Promotions:  A good distributor knows the regional and cultural cues that will be most effective for your customers in their territories.  Work closely with your distributor to prepare custom promotions that are designed to appeal to their customers.   Discount and loyalty programs that are prepared for local and regional audiences are always more effective than a ‘one-size-fits-all’ global campaign.

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