Christmas is around the corner and I wouldn’t have to go too far out on a limb to guess that the vast majority of Orthopedic and Spine executives are hoping Santa brings them more high quality distributors this year. Why is that likely the case? Well, finding good distributors to sell your products is one of the biggest challenges of developing a business.
Distributors offer your company a lot of real value. First, you only have to pay them a portion of their success. That obviously lowers your cash burn by not having to spend millions in hiring direct sales reps. However, companies are often stuck in mud when it comes to a non-producing distributor. With direct reps, you are forced to make a decision every 2 weeks. You constantly compare their worth to their costs because it’s so obvious. With an independent sales organization, that often makes for difficult math. If you aren’t paying them they aren’t really costing you anything other than…. OPPORTUNITY!
Also, if you have a non-producing distributor without integrity concerns, you likely don’t want to make a change until you have a better option to bring on. Perhaps there are some ancillary things they are selling or you are just hoping that one morning they will make a sales call that will turn the whole thing around. I learned years ago that I can handle the disappointment; it’s the hope that kills me.
One of the main reasons distributors have chosen independence is because they hate to be managed. Likely you will find that a Distributor Principal was a sales rep for a larger organization. I’d guess that two things drove them to go out on their own. The first is that they realized they were making 6-12% of their sales as a direct rep vs. 25-40% as a distributor. It’s not very hard to determine which is more lucrative. The second thing is that they likely hated to do things like sales reports and business plans because the tedious work took them out of the field and away from their customers. So, with that knowledge, we realize that a distributor is independent so that he can be independent, got it?
So if you have a non-producing area what do you do? Most distributors don’t advertise themselves by having a flashy website because they may not even have a real logo as evidenced by their all text business card from VistaPrint. Distributors are sales people not marketers. Most of them have great relationships with a few key doctors in their area. They can give you immediate access to these doctors with a simple call or text. That is a BIG DEAL for a company looking to commercialize in a new territory. You can be a 3-year-old company with credibility that took 30 years to establish.
So how do you find them? How do you build a bench of possibilities so that you can quickly move on from a Distributor that didn’t deliver the results they said they would? I have a few ideas that I will share in the coming weeks on how you can expand your network of these “unicorns.” Until then, I would challenge you to think about your value proposition. Due to the way hospital approvals work these days, just adding a few points to a commission percentage doesn’t cut it anymore. Here are a few things to think through as you evaluate what you offer the distributor over your competition.
- Can you offer support and internal resources to reduce their involvement in the rigorous approval process?
- Are your expectations reasonable and achievable?
- Have you been able to develop meaningful relationships with distributors outside of business as usual? (Remember that we all like to work with people we like, so if you only care about the next case, you will see that reflected in the numbers that are generated.)
As we all know, growing a business is not easy and it is definitely not for the faint of heart. I have learned that there are two really good opportunities for us to reflect on our past year and attempt to make adjustments for the future. One of those times is our birthday and the other is the start of a new year. It is that time of year again.
Coming this January, we will be launching a new website that will help you identify distribution talent around the country. The questions listed above will help you determine if your strategy and opportunity need to be tweaked to maximize your results.
Until then, have a Merry Christmas and a very Happy New Year!
– Josh Sandberg
Originally Published 12/19/2014