.

Of course your ‘switching costs’ will rise in terms of changing your sales channel model after you are in business but, as history has shown, the right sales channels for a training firm change as the company evolves.

When I am asked what the right sales channel is for a training company I give the age old consulting answer of “it depends.”  Since that makes for a cr@ptastic blog entry, let me share some of the thinking I go through after that initial answer.

I will also point out that a similar but slightly different thinking should constantly be considered for your delivery channels (ie using employees, independent contractors, or partners to deliver your training and consulting).

You might use this list of “critical questions” to guide your decision making process.  For many of these questions you should peer through two lenses – first, your business today, and second, your business as you are thinking of evolving it.

• What is the makeup of the sales force in terms of their demand creation, business development, and general selling ability?
• What quality and quantity leads are your marketing efforts generating?
• Describe your current client base: industries, original lead source for the account, level/title of economic buyer, sales cycle length, etc.
• How would you describe the owners appetite for risk and amount of finances planned for investing in the business?
• Who are your primary competitors and what is their sales channel model?  Do you know how and how much they pay their channel?
• What are your typical messages of differentiation against those competitors?  And if any element of it highlights the difference in sales, delivery or account coverage model please highlight that.
• If you are one of the many training firms that typically says “We’re kinda different and we really don’t have competition on most deals” then please describe your typical selling message to convince prospects to not “do nothing.”
• How well can your owners handle a salesperson who is absolutely not ‘managed’ as much as they are ‘herded’?  You might have to stick to employee sales channels just to prevent “Founders Ulcer”, a common and painful malady second only to “Crazy Founders Syndrome”¹ in the training industry.

Feel free to pick up your fingers and set up a 60 minute call on my calendar if you would like to have a preliminary (no charge) conversation about what to do with these answers.  In addition I would encourage you to review your answers with your sales, marketing and product development department heads – and compare answers.

To help in that conversation here are some pointers on what other training firms have done, using a typical example of a US-based training firm founded by 2 former sales people.

• Startup phase: US-only sales force consisting of the founders only, ie a direct sales force.  The founders are also doing all the workshop delivery worldwide.
• Startup + 1 year: Founders are still selling and now independent contractors (ICs) are doing some of the delivery for ~US$1,500 per day
• Startup + 2: Independent sales agents (also ICs) are added in the US and probably getting paid commissions of about 40-45%
• Startup + 3: An international distributor is added who is likely paying 25% or so royalties back to the firm (ie they are keeping 75% and responsible for selling, teaching, and printing and translation of materials).  Distributors are often in non-English speaking countries
• Startup + 4: Independent sales agents are added in English-speaking locales like Australia and the UK.  Direct sales people are added in the US, one at a time with a fairly low base and high commissions upside.  Because of the small size of the firm there is little channel conflict between direct sales reps, US ICs, non-US ICs, and global distributors however people ‘plant flags’ on their sales funnels for big account names near where they live, even though they have no active account penetration for them.  Your stomach hurts a little about this but you assume you’ll be fine because you recruited good, ethical people
• Startup + 5: Because you have invested a lot of money in operations infrastructure as well as marketing, you’re now paying ICs commissions of about 30-35%
• Startup + 6: Because margins are so much higher with good selling agents than distributors, a decision is made to terminate all distribution partners and replace them with ICs in those countries
• Startup + 9: Because margins are so much lower with selling agents outside the US in every but the largest markets, a decision is made to terminate most international ICs and replace them with distribution partners.  New distribution partners though as the people that were terminated 3 years ago are still not on speaking terms with you.
• Startup + 10:  Because you now have a good brand recognition and have continued to build up your infrastructure you are now paying ICs commissions of about 25%.  However you are still about 10 points lower in margin than you were in year 2.

Clearly there are a lot of different variations that I have seen that aren’t reflected here, but I’m hoping that this was good food for thought.

¹ While I haven’t written about Crazy Founder Syndrome (CFS) yet, anyone who has ever talked to me for more than 30 minutes about the training industry knows I feel the problem is rampant.  I’m not sure if I coined the term but for now I’ll take credit for it … I should also point out that “crazy” has many definitions (though no, I don’t mean ‘crazy like a fox’) – so when I refer to a founder as having CFS I sometimes mean that they are intensely passionate about their own firm but have some blinders on about their firms weaknesses and that they also think that because they have such an easy time selling their wares, any half-decent sales person should be sell exactly how they sell and be successful.  Another version of CFS is the founder who is generally referred to with 4 letter words (and not the nice ones) by most former employees and partners.

• starting a training firm, or at least hanging out a shingle to be a training firm
• starting life as an IC for a training firm
• starting to represent multiple firms as an IC and wondering how to convey your new multi-faceted message

Some books and articles advise new ICs and business owners to avoid making the time and monetary investment of setting up their own website.   I agree in principle because many new entrepreneurs focus on the wrong things when they start their business – especially when it comes to ‘advertising, marketing and promotion.’   However I know that many salespeople lose credibility with their prospects who look to the web to ‘authenticate’ the people selling to them.

I would suggest two options that can work for a new IC – one of which that can also work for a new 1 to 3 person training company.

1. LinkedIn.  If you fully utilize LinkedIn and create a deep profile – and definitely choose a good vanity URL – you can have a free ‘web page’ to give to clients and prospects in lieu of a full website.  See my profile at www.linkedin.com/in/strategy2revenue.   I have this URL on my business cards and embedded in my email signature line.




2. WordPress.  Many of you know of WordPress as a blog.  WordPress (and other blogging sites) allow you to create additional tabs/pages that can easily be utilized to add info like “About Me” and “About XYZ, Inc..”  Ideally you will create a few blog entries though those might be as simple as writing a paragraph and linking to pages or documents created by the training firms you represent.

For US$10 a year WordPress will redirect your ‘blog’ to another URL so that it even looks more like a regular website.  For example, http://st20.wordpress.com is what I was able to get for free, but for $10 I can redirect people to www.salestraining20.com and no one has to know I am using WordPress.

For an even better example of building out a WordPress site check out Dave Stein’s blog.

If you are just starting out, or starting over, as an IC or a new training firm and want other ideas or advice please Shout It Out Loud¹ – ie call or write me.   And for the heck of it here is a sample of what you can do in about 15 minutes: http://trainingic.wordpress.com.

¹ I couldn’t resist having a KISS reference in my blog.  For those of you that know me you know I am pained that it took so long.  Next up will be an AC/DC reference, come Hell or High Water.  Wow, that was easier than I thought…

Disclaimer:  Working closely with a company that does sales messaging (Force Management) influences my bias to the importance of this area.

When I was at OnTarget/Siebel Systems I worked for an executive, Nick Nascone, who was fond of talking about Big Animal Pictures¹.  Big Animal Pictures in the training world are the graphics that you use to talk about your business – and can be represented on a Powerpoint slide or hand drawn on a whiteboard, flip chart or napkin.

I believe all firms need Big Animal Pictures that are easy for your sales team to remember and articulate – and that resonate with your customers.  You need one picture for “What we do” and another for “How we do it.”

Here is my main Big Animal Picture – what I call the Value Chain for Training and Consulting Firms.  Below are some examples from inside the sales training world:

• Miller Heiman and their Sales System
• Channel Enablers and their ChannelPro methodology
• Infomentis – what they do and how they do it
• Think Inc. and their Value Proposition
• Force Management and a real life napkin drawing
• Huthwaite and the SPIN Solution Suite
• Breakthrough Sales Performance showing how their approach differs from tradition
• KLA Group and their Curriculum

If you don’t have a Big Animal Picture yet here are some suggestions as you go about creating them

• “What we do”
  • Think about the areas you impact when you serve customers.
  • How do you ‘bucket’ or group your solutions in a typical presentation or conversation

• “How we do it”
  • How do you implement your solutions – is there a process or methodology you follow for implementation or change adoption?
  • How are you different from your nearest competitors?

• Other questions to ask yourself
  • Can my salespeople easily articulate this with a pen and a blank piece of paper?
  • Is this clear enough that my current customers would agree this “sounds like you”?
  • Does this look identical to how your competitors describe themselves?

Get outside advice on your Big Animal Pictures and investigate how others describe themselves – in the training world and in your customer base.  Feel free to contact me if you’d like me to give you input on your ideas.

.

¹ The original Big Animal Picture book was published in 1903 and contained big color pictures of cats, dogs and cows.  We haven’t made much progress in 100 years.

If you aren’t a subscriber to Dave’s blog you can do that here.  Dave is the only analyst solely focusing on the sales training space and posts content that is of interest to both training firms as well as buyers of sales training (you know, everyone else in the world!).

Dave runs his research through his firm ES Research, where you can read some free content or subscribe to get access to deep dive reports on training companies or assorted topics related to training.

Please do me the favor of checking out Dave’s blog.

For those of you not familiar with the concept, consider yourself lucky!  Most of the training firms I know have been dragged down this path because their biggest clients have imposed travel freezes that effectively kill off their chances to make money the old-fashioned way of running two day workshops.  Virtual ILT is another name for “Web-Based Instructor-Led Training,” and I’m assuming most of you don’t need a decoder ring to know what that implies.

Some firms, like Infomentis, have already invested heavily in this area.  When I first heard about what they were doing I was shocked because I didn’t realize web-meeting technology had gotten to the point of allowing breakout rooms so you could mirror a ‘regular’ class.

Of course this is where the danger lies … assuming you should base your Virtual ILT on your face-to-face ILT workshops.  Ian spells out the top 10 mistakes he made along the way on his journey to becoming the master of vILT.

I’d encourage you to read the white paper “So you think you can WebEx” or pass it along to the people responsible for sales or product development in your firm.  It may open their eyes on a new potential revenue stream, and a way to avoid losing revenue to travel freezes.   Ian is available on a project or retainer basis if your firm would like to develop a Virtual ILT solution in less time and with fewer “first-timer” mistakes.

Cheerio,

¹Instead of a reference to a rock song this is even better, a reference to Monthy Python.  Even more appropriate since the author of the attached article is also British

Reading the large number of articles and blog posts recently that highlight all the differences in selling and marketing during a recession I thougt about this article … and how its message is true during economic times both good and bad.

If you are working with/for a training firm that teaches some method or process on opportunity assessment or measuring against ideal opportunity criteria, I’d encourage you not to be the cobblers kid and not use your own ‘stuff.’  However if you don’t have something like that in your arsenal give this a quick read – and if you need to intro to a firm that focuses on opportunity assessments in their methodology let me know.

For those of you looking to jump to the end …

here are the warning signs listed in the article that a deal you are pursuing might be unwinnable:

1. No Driving Force (or what some call a Compelling Event, Compelling Gap, Trigger Event, or the reason the buying influence is now in Growth or Trouble Mode)
2. Not enough insight and intelligence
3. Not enough access
4. Not enough business value

Review the Unwinnable deals PDF here

And if you want to see the original, unpublished, version of the document from October 2005 (with more of my ‘special’ style of humor), click here.

Fundamental Questions for Business Evaluation

1. Is it Real?
2. Can We Win?
3. Is it Worth it?

- Don Schrello, 1974, Product Evaluation and Planning Seminar

The Opportunity Evaluator

1. Can we add value?
2. Should we pursue?
3. Can we compete?
4. Are we aligned to win?

- Jim Holden, 2002, The Selling Fox

Opportunity Assessment

1. Is there an opportunity?
2. Can we compete?
3. Can we win?
4. Is it worth winning?

- Target Marketing Systems,1989, Target Account Selling Seminar

And in another area, Product Portfolio management, this came in a Harvard Business Review article in 2007.

Managing Risk and Reward in an Innovation Portfolio

1. Is it Real?
2. Can We Win?
3. Is it Worth Doing?

-  George Day, Harvard Business Review December 2007

20. Decide on what you want to do after the sale, and when

21. Consider ideal structure you would like

22. Understand earn outs

23. Locate all your legal documents

There is an excellent document created by the WLS Alliance (a partnership of Whitestone Communications and Luntz, Suleiman & Associates), of which these are 4 of their 121 (and counting) suggestions. If you think there is even a possibility that you might want to sell your training firm in the next 3 years and you don’t already have an M&A advisor that you are in love with, I would encourage you to read this document.

I would be very happy to introduce anyone to one of their managing directors as I have been extremely impressed in every dealing I have had with their group … I just wished I had known about them when the Heiman’s sold Miller Heiman back in 1999.

And for those of you who would like to talk to them without me knowing you might be on the block, you can find them at www.whitestonecommunications.com – ask for Baran Rosen or Glenn Shapiro. And of course I would apreciate if you at least tell them confidentially that this blog spurred your interest as it will help my own personal brand equity with them!

The real focus of this post is discussing “Exit Strategies.”  For all small businesses (which generally covers 99.9% of the sales training firms in the world) the Exit Strategy should really be the first strategy defined before the rest of the business planning and strategy work is done.

I’m certainly not implying that a firm always need to be 100% clear about their exit strategy or that they should never change their plans, but so many business decisions would be made differently based on different exit strategies that it really is silly not to spend some time thinking about one.

However based on general conversations with training industry execs and managers it seems like many firms have only briefly considered their likely exits.

The most likely exits probably include:

• Selling externally … to another training firm, an investment group, or to an alliance partner

• Selling internally … to the management team or to one of their distributors (and this might be combined with selling to an investor)

• Keeping the firm going for life … but with the founder graduating to the Chairman of the Board role with someone else taking over as day-to-day President

• Keeping the firm small … with the Founder staying in charge until they retire … with the business shuttering at that point

Obviously the size and scope of the business affects whether all these options are on the table.

Back to the reason for this post … there are a number of business decisions to be made that should be made differently if the final exit is selling externally rather than being kept with the most short-term annual profits.

If the firm is a ‘mature’ firm with an exit horizon of one to three years, it’s also possible for a training firm to have a feel for the type of firms that they might sell out to … which would also change day-to-day decision-making.

For example, growth into Asia for an American firm can be a potentially revenue-raising, but short to mid-term profit-shrinking, endeavor.  If the only firms that might buy you are larger global entities then pursuit of business in Asia could be done with a lower time and cost investment model such as independent agents.  A better long-term play might be investing in local employees and offices but that may not be the best use of funds if a potential suitor would already have that infrastructure.

My suggestions are:

1. Take time at least once a year to consider your exit strategy and how that might influence your other strategies (Go To Market, operations, product development, etc.)
2. When you are starting to think about selling your business, strongly consider engaging an M&A Advisory firm to give you a valuation and counsel on steps to take in your final year(s) to maximize firm value  (I know people in an M&A firm that focuses on the training industry and would be happy to introduce you if you are at that stage now)
3. When you are networking with other execs add “exit strategy” to your stable of conversational items.  You might just get a great idea from a peer that makes you a ton of money … and keeps you from ending up between A Rock and a Hard Place.²

¹Led Zeppelin, released 1979.  It has nothing to do with sales training … though one song was called “Hot Dog” .. hmmm …

² Rolling Stones song from their 1989 album Steel Wheels