The benefits of partnering on distribution

Partnering with the right firm for the distribution of products can yield tremendous benefits for small and middle market businesses.  The right partner will be able to help you break into new markets, reach new customers, and grow your brand.  They can also provide support to existing customers after the sale and help with managing the supply chain for you and your customers.  By finding the right partner, the end-result should be more revenue, higher quality revenue, and substantial growth in profit.  When you are evaluating a potential partner or building the business case for choosing one, keep these three things in mind. '

More Revenue

Growing the top line is hard work.  Every business owner must be able to both grow existing relationships while also creating new ones.  This requires businesses to regularly engage with existing customers through training, information sharing and support.  This also requires businesses to dedicate time and resources to identifying the next big growth opportunity or that next key relationship.  Failure to do these things effectively for all customers can result in shrinking sales, dissatisfied customers, and missed opportunities.    

A good distribution partner will be capable of understanding your product and working with you to identify new applications and areas for expansion.  This could be finding new markets that would benefit from the use of your product, or by providing you the insight needed to develop that next new product.    They should also be able to dedicate the time and effort required to grow existing relationships by helping you to provide a higher level of support after the sale and bringing a focused approach to customer relationship management.  Your distribution partners should help you to build stronger, and stickier relationships which result in higher sales. 

Higher Quality Revenue (Predictability, Profitability, and Diversity)

In addition to growing sales, your distribution partner should help to reduce risk and create value by delivering higher quality revenue.  Higher quality revenue is defined by the Harvard Business Review as revenue that is predictable, profitable and from diverse sources. 

In some cases, your distribution partner may be willing to carry inventory which can help to smooth your order receipts and create more security for your customers.  Because you are not carrying large amounts of inventory to buffer against market fluctuations, this may also free up cash that can be used elsewhere.  Additionally, by partnering for distribution rather than investing in an inhouse sales team, you create the critical flexibility needed to weather the downturns as they come.  Your cost scale up or down with your business cycles. 

Finally, by investing in the resources needed to develop new and existing customer relationships, your distribution partner can help you avoid the trap of becoming overly reliant on one customer for success.  Lack of diversity in your customer base means that your fate is directly linked to the fate of a small number of customers and factors outside of your control.  If your customer succeeds, you may benefit, but if your customer fails, you will definitely suffer.    

Increased profitability

In addition to the increased profit that comes from more and higher quality revenue, a good partner can fuel continuous improvement and help you to deliver more innovation.  By implementing a methodic approach to managing customer relationships, your partner is not only delivering product, they are also receiving feedback that can be used to improve your products and identify areas for innovation.  Also, by allowing your partner to take ownership of the sales and marketing execution, the business is free to focus on its core competencies.  By focusing on the product, you are better positioned to deliver the products that customers need and want.   

Conclusion

If done correctly, distribution partnerships can deliver immeasurable benefits.  This is especially true for innovative companies in the small and middle markets that may not have the resources to invest in the needed people, processes, and tools.  Your partner can make that investment on your behalf.  By taking full advantage of the capabilities that the distribution partner brings, you can create value by delivering more, higher quality revenue and higher profits.  The right distribution partnership can secure the success of your business for years to come.      


Approvis Partners

At Approvis Partners, helping you grow your business by delivering more sales, higher quality revenue and more profit is our goal.  We are willing to invest in a Sales, Marketing and Supply strategy that deliveries value for both you and the customers that you serve.  If you are interested in taking your business to the next level, contact us to talk about how we can do that together