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Partners, Vendors: Quit Obsessing Over Short-Term Financials

Young businesswoman biting nails

It’s a fact: To make money, partners need vendors and vendors need partners. Sometimes, though, the two still struggle to make the most of the relationship on the financial side. Maximity founder and managing director Tracy Pound boils much of this down to the wrong mindset. Too often, vendors and partners alike act out of fear, especially when eyeing short-term financials. Pound, a consultant and training expert, will tackle this issue at the upcoming Channel Partners Virtual 2021 event.

Maximity's Tracy PoundOn Thursday, March 4, Pound will lead the first keynote, “Financials Are Scary. Get Over It.” For one thing, she contends that vendors and partners need to understand what fear-based decisions look like and how avoid them. That way, when business leaders in both categories can spot how they’re sacrificing quality for cost, they can buck damaging trends. Channel Partners sat down with Pound to learn more about what she intends to discuss.

Channel Partners: What particular aspects of financials and fear will this keynote address dive into and why?

Tracy Pound: It’ll cover pricing strategies and their impact as well as the need for both vendors and their partners to be clear about what financials they are measuring (revenue, gross profit, net profit, average selling price, volume). It will look at why they are important, plus the consequences of not meeting expectations – whether the consequences are agreed or go unsaid. I will also cover the impact financial decisions have on customer experience and how that drives loyalty or disengages customers. Account managers and business leaders need to fully understand the impact their financial decisions have in the longer term and should not sacrifice this for short-term decisions only.

CP: When it comes to fear-based decisions and financials, what are you seeing vendors do that you’re going to talk about in the keynote?

TP: Think they can sell better than their partners, so they start to disregard partner value. Not have the financial discussion at all because it could be contentious, or they don’t have the knowledge to have the conversation. Drop prices, which undervalues their products – especially at quarter-end and year-end sales points.

CP: The same question, but geared to partners – what are they doing in terms of fear-based decisions and financials?

TP: Overprice on the basis that people need what they have, which creates animosity and disloyalty in the long term, or do the opposite and offer too much for free so they don’t cover all their costs. Listen and make decisions based on what they’re hearing from other people, rather than what they know about the performance in their business. 

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CP: What has created these fear-based mindsets as they relate to financials?

TP: In terms of vendors not having the financial discussion, it’s often a fear of being told that the topic is off limits. But most partners value external business advice and need to know how working with a particular vendor will positively impact their bottom line. For partners, sometimes it’s business consultants telling them all they need to do to have a better busines is raise their price!

But pricing and profitability need a strategy, and all businesses should know what margins they’re operating with on all product or service lines. A lot of smaller partner owners don’t have a financial background. Their experience is largely technical and they just don’t know what they don’t know, so financials in general create fear. Right now with the pandemic, it’s easy for fear to drive any kind of decision to stay in business, and the danger is business owners making only short-term decisions.

CP: How can – and should – vendors shift their mindsets?

TP: By building financial planning into onboarding and making it an integral part of QBRs and annual reviews. Understanding that it’s not a cultural issue of not being able to have the financial conversation; rather, it’s a mindset issue, so having it as part of a set process that is monitored will help bring about a shift in mindset, along with regular training and support for account managers. Often, too, it’s about strengthening the relationship between account managers and internal finance staff.

CP: How can – and should – partners shift their mindsets?

TP: Partners owe it to themselves to learn about financial management starting with understanding their breakeven point, which costs are fixed and which are variable, what their margins are and how much money they want to make. There are several MSP support groups like CompTIA and IT Nation Evolve that offer training and peer learning through meetings and events. Being part of groups like these helps partners see how well other businesses can perform.

CP: What do you expect to change as vendors shift their mindsets regarding financials?

TP: Improved account management and understanding of the capabilities of their indirect sales channels. Clearer forecasting. Perhaps partners will use deal registration systems properly if there’s a clear value and the vendor has a transparent strategy for managing prospective sales! Ability to pivot more quickly when needed based on factual financial information around partner performance. Weeding out of partners who aren’t really invested in vendor programs in order to provide a better level of account management relevant to the partner.

CP: What do you expect to change as partners shift their mindsets regarding financials?

TP: That they will grow sustainable businesses, which can only benefit their vendors by bringing in more sales with more stable margins. That they will have realistic growth strategies, and better internal investment resulting in staff satisfaction, which shows in a better customer experience.

CP: Why is now the time to have this keynote conversation with Channel Partners attendees?

TP: Because the pandemic is driving different behaviors, some of which are good and some are not. There’s always an element of risk involved in a changing business landscape and it’s easy for any business owner or leader to take their eye off the ball. Tech companies in general have benefited from the need for people to work remotely, and created opportunities that didn’t previously exist to support remote working and selling online. Cyber threats have hugely increased, presenting an opportunity to sell more protection products and services. Cloud is now the starting point for end-user strategy, rather than on-premises.

But growth needs to be sustainable and not solely driven by short-term customer demand. It’s highly likely we’ll head into recession, and 2021 looks set to see many more companies cease trading. Some end users – whether new or pre-existing – will not survive this, and if a company’s pricing strategy has changed to a volume model, it may not work in the longer term. Equally, more end users are asking for price reductions. If you don’t understand your break-even, fixed and variable costs, you can easily get into financial trouble.

This is all about raising the awareness for the need to not make knee-jerk decisions that have a financial impact, but instead to look at the data and use it to look at different scenarios so that financial decision-making is more rounded.