Distribution: the partner who knows your number better than you do

One distributor was half the company's revenue. I built that from a standing start, no distributor, then one, then that one was half the number, and it was one of the best decisions that company made while I was there, because it let a small engineering-heavy company sell into places it could never have staffed.

It was also the most dangerous thing on our balance sheet, and nobody wanted to say that out loud.

Distribution is the partnership that is invisible when it works. One partner stocks your product, finances the resellers, ships the boxes, handles the paperwork, and the end customer never learns your name. That is the point. You gave up the relationship for reach, and if the reach is real, it is a good trade.

Here is the problem with a distributor who is half your number. They know your number better than you do. They know which resellers are actually moving product and which ones just took the training. They know your seasonality, your price floor, and how much inventory you can carry before you start making phone calls. Every one of those is a negotiation you will eventually have, and they are holding the cards.

So the next move, and it feels disloyal when you make it, is a second one. Smaller, in a different region, with some overlap on purpose. Not as a hedge, although it is that. As a way to keep the first one honest. A distributor who knows there is a second door negotiates differently, and nobody has to threaten anybody.

One test. If your largest distributor walked away tomorrow, which quarter would you miss? If you cannot answer that in one sentence, you do not have a distribution strategy. You have a customer who happens to resell, and one day they will act like one.

The follow-up question is the one that tells you whether anybody is actually running the channel: who built the second one, and when?

Thursday: systems integrators, and the difference between being in the deck and being in the backlog.

Who is your second distributor, and does your first one know?

Part 7 of 15 in the Which Partnership series.