Should you be a distributor or sell your own products?
When I launched my consulting business in 1995 I had no actual product to speak of, other than myself. I didn't know much about the world of distributorships nor did I know how long it would take to build my own product portfolio. In hindsight I had many lessons to learn. Lessons about being a product distributor, lessons about being a product manufacturer, and lessons about trying to do both at the same time.
Back to 1995 with no tangible product of my own to speak of but with the intention of building my own product range, I was approached by the SPQ*Gold assessment) creators who asked me if I would like to become a distributor of their product. As a new business it seemed an offer too good to refuse, especially as I had experience using their assessment before. I knew that this product was a quality product and would give me a competitive edge. I also felt that it would give me the revenue boost I needed to get further more quickly and buy me some time to build my own product content. So I signed the distributor license even though it favoured the product manufacturer more than it favoured me.
Because Barrett did such a great job distributing and selling SPQ*Gold we were approached by other assessment providers to sell their products too. So in and around 1998 I was faced with the opportunity of being specialist in assessments and becoming a distribution business. It seemed attractive because money was coming in, and we knew a lot about assessments which our clients and sub-distributors valued. Yet something didn't feel right for me. While everything seemed to be going well I revisited business goals, ie. the desire to build my own product and brand. I then looked at my distribution arrangements and agreements and realised I was trying to be both and it wasn't working.
The demands of being a distributor had certain obligations while the demands of being a product developer had other requirements. I then had another realisation. I could be both. I also realised that in my haste to sign those distribution agreements I hadn't protected my future earnings because at any time these product suppliers could come in and take over my distribution channels and I would be left with nothing.
What would I have to show for my efforts if I went the way of distribution or product development? While harder in the short-term and less profitable I chose the path of product development.
The challenge of productising knowledge
Like many consultants before me, my challenge has been to productise my knowledge, processes and experience, making them tangible, salable and able to be transferred and taught by others. My experience in doing this has proved to be a very time consuming and difficult task, although well worthwhile. Many consultants before me and many since have achieved this and captured their wisdom in the form of books. In 1995 there was no such thing as online learning, blogs, apps and other ways to capture content so I began building my own product content in the form of sales programs and sales management training programs which then expanded into things like Australia's very first Sales and Service Competency dictionary (2006), Sales Recruitment Kits (2006), Sales Performance Management System (2007) and many more products since. Now Barrett has an IP assets register with over 200 product items. However this has taken me 16 years to build and refine into salable and commercially functional products.
I still use other people's assessments but not as a distributor. I use them to supplement my work but not BE my work. As it turns out in 2006 one of those assessment companies did what I predicted; they came in and took over mine and other licensed distributors territory. It was a bitter pill to swallow. I'm glad I trusted my instincts and began building my own product portfolio because if I hadn't, Barrett would not be the business it is today. I would have been left empty handed with nothing to show for my 11 years of hard work. It may not be fair but in business things like this happen every day. So what lessons can we learn from this?
Some questions to consider and lessons learnt:
Being a distributor
If you're selling and distributing other companies' products make sure you check your licensing agreements and contracts. Also check the type of people you are dealing with and make sure you know what you are getting yourself into. Some questions to consider about distribution licenses and arrangements:
- Does the licensing arrangement allow the product owner to come and take over your licensing and sublicensing arrangements without warning?
- Can they secure your client base off the back of your hard work with no compensation?
- Are they set up so they can access your client data base? If so, can they make direct contact with your clients to try to win them over?
- Does the distribution license fairly balance your needs with their needs?
- Can they guarantee supply and quality?
- Are they open to new ideas and suggestions and are they willing to work with you in your market space?
- Are they open, consistent and easy to deal with or difficult, inconsistent and secretive?
- Is pricing clear and easy to work with or overly complicated or subject to change without notice?
- Is the product supplier competing directly with you in the market place?
These are some of the questions I wish I knew to ask when I first went into distribution arrangements.
Building your own product
Don't underestimate the time it takes to build new product, especially in the knowledge space.
- Create an IP assets register from the start and make sure you keep a log of all the products, ideas, and processes you develop. I wish I had done this from the start as it's much harder later on to recall everything and document it. Truth be known I probably have 500+ items that could be on my IP assets register.
- Create employment contracts that ensure you protect your IP. I did do this from the start and this has been worthwhile. They can't protect you completely but set the expectation with employees from the start.
- Be wary of constantly innovating – you have to get something to market and it will never be perfect. Develop different versions as you upgrade just like they do with software.
- Know how your product can be made to work across various applications, ie. online, physical product, publications, apps, etc. You need to learn a lot about how products can be made in different formats especially in the consulting and learning space.
- Know that it will take some time for your product to get traction and become a standard or benchmark. This is especially true if you're up against international brands. They may not be as good as yours but have the cache or brand presence.
Remember, everybody lives by selling something.
Sue Barrett practices as a coach, advisor, speaker, facilitator, consultant and writer and works across all market segments with her skilful team at BARRETT. Sue and her team take the guess work out of selling and help people from many different careers become aware of their sales capabilities and enable them to take the steps to becoming effective and productive when it comes to selling, sales coaching or sales leadership.To hone your sales skills or learn how to sell go to www.barrett.com.au.