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Posts Tagged ‘sales channels’

By Hari Venkatacharya

Recently, I’ve met with early stage companies that have truly revolutionary technology in the mobile mapping and traffic monitoring spaces, as well as in the financial services software space.

What sets these companies apart is that not only have they spent an enormous amount of time and money developing their products, but they have spent a disproportionately low amount of time on developing effective sales channels and business models.

The number one reason that start-ups fail is that they have not fully understood customer requirements and the business model that is most cost-effective and still most impactful from a customer’s perspective.

While initial customers may need a lot of customization, the move towards standardized SaaS models of software deployment has truly matured, and is becoming the norm for most new companies. However, the question of whether companies should charge up front set-up fees, and monthly or per-seat license fees, is still not resolved.

One interesting model that I recently came across was no initial set-up fee, nominal monthly fees for the base model of the program but significant customization fees to actually help drive the vendor’s product development. In this case, the model worked because the SME customer  was willing to start with a small installation and grow the implementation with the vendor.

Primarily, I continue to see early stage companies still selling directly to end customers – brokerage firms and insurance companies for instance, in the case of the financial services software company.  But after being in development for more than five years, and being out to market for two, they have only been able to scale to $5 million in revenues.

A more proactive approach – partnering with compliance and audit firms, as well as companies involved in the processing and clearing of transactions – could be an ideal fit for such a company. With hundreds of thousands of broker dealers in North America, not to mention the significant growth of wealth management professionals in emerging markets such as Brazil and India, the time would be right for such a company to look abroad for channel partners who understand specific markets, and would be able to help scale the company’s implementation. It would be extremely difficult to accomplish this with a direct sales strategy, but most early stage companies do not engage with partners early enough to customize their solutions to the specific partner’s client’s requirements, thereby losing valuable time and market opportunities.

Hari is a seasoned entrepreneur with over a dozen years of experience in building and exiting businesses in Canada, US and India.

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