“Things are going well,” said CEO Michael Alam modestly.
The company, founded in 2010, developed an automated schematic review tool to evaluate hardware boards for telecom companies, providing up to hundreds of thousands of checks per design.
So far, the software has been provided as a service, but later this year Valydate – one of OBJ’s Startups to Watch in 2011 – plans to sell its tool directly to users. Instead of assembling an internal sales team to market the product, however, the company is going a different route.
By using sales channels with well-established contact lists to market its product across North America, Valydate can focus on perfecting its review tool, said Mr. Alam, a former employee of Nortel Networks and Fidus Systems and past OBJ Forty Under 40 recipient.
Beginning with Canadian electronic component sales company Tech-Trek in 2010, Valydate recently also hired Arrow Distributing Inc., which has a presence in both Canada and the United States.
“Being a small company, somebody in, say, Boston may not know us, will not know us,” Mr. Alam said. “With Arrow, it’s a softer introduction and they’re more open to listening to our pitch. It’s the reputation and the size of them that enables us to better penetrate those accounts.”
WHY SALES CHANNELS?
For companies marketing to average consumers, potential buyers are everywhere. Customers are harder to find for more specialized business-to-business products such as Valydate’s.
“Our projects tend to be $5,000, $10,000 in size, and there might be 150 executives we want to target. There aren’t thousands of them,” Mr. Alam said.
Using sales channels and their existing connections, Valydate can gain access to those potential clients while paying less in commission than it would hiring its own sales team, he said.
The sales reps introduce Valydate to clients, then the Ottawa company takes over the interaction. If the introduction leads to a deal, the sales channel receives a commission as a representative, not a distributor.
“It works out best for everyone. They don’t have to worry about the finances, and we’re involved in all stages of the process,” Mr. Alam said.
The Valydate team in Ottawa chooses not to conduct any sales in order to avoid competition. This also means there is no product markup that would give customers an incentive to buy directly from the source.
“I think it’s a terrible mistake to undermine your sales organization,” he said. “If you’re competing with them, you’re stealing accounts from them.”
HOW TO CHOOSE A CHANNEL
While a good product or service is essential for success, Mr. Alam said that picking the right sales channel is just as important.
Even after investing significantly into those channels, the company won’t know if it has made the right decision until months later, when sales do or don’t begin to roll in.
To determine the best option for his company, Mr. Alam said he met face to face with anyone being considered for the job.
“It’s worth it to hop on a plane or get in your car and drive,” he said. “If they don’t reflect your company’s character, they won’t be a good sales channel.”
Although no one can describe its product better than Valydate can, Mr. Alam said that he regularly goes into one-on-one meetings with his sales reps so they can observe his pitch and the way he answers questions until they are able to do the same job on their own.
“They’re never going to have as up-to-date knowledge as we do, but it’s the closest thing,” he said.
Meanwhile, Valydate will work to expand its current client list of 30 from mainly telecom customers to include defence, military and medical equipment companies who require a high level of product verification before manufacturing.
THE UPSIDE OF A SALES TEAM
While Valydate targets a group of specialized clients, other firms have a larger pool of potential customers.
Promomedia Group, an Ottawa company established in 1998 that sells promotional items to businesses, isn’t convinced that sales channels are the best option for small businesses. Its staff of 15 includes seven salespeople.
Martin Weber, vice-president of business development, said that this gives the company more control over the message it sends to the public.
“We do want to have a consistent customer experience, and obviously a good one,” he said. “That only really happens if we have people that we can train.”
By investing in talent and offering comprehensive benefits and pension plans, Mr. Weber said, Promomedia Group staff are hired for the long term.
Contract workers have less of a connection to the company, and if they leave, they take the client list with them.
While an internal sales team works exclusively for your company, there is little way of knowing how hard channel contractors are working for you, he added.
“You’re at the mercy of what that external person is putting in,” he said. “If that outside contractor has other sales lines, how much time is devoted to your product and services?”