
Title:
Distribution Complexity Solution  How to Build a Startup

Description:

So we just discussed the number of distribution channels available to a startup

and we talked about picking one but what's really interesting is the solution complexity

that each channel can handle.

That is system integrators are designed to handle complex systems.

And so therefore on the xaxis, we see increasing complexity of what each channel can actually have.

And what's the sales and marketing complexity of each sale on the yaxis?

So for example, system integrators are great for putting in defense systems

or telecom systems that require hundreds or thousands

of moving parts and software and hardware.

Where on the other extreme, the complexity of selling toner over the web. Incredibly simple.

Simply, consumers already know what they want

and the channel just simply is there to fulfill enduser demand.

And the marketing complexity, would simply just say toner for you printer.

So when we look at a sales channel, we talk about what's called valueadded.

How much value is the channel adding?

And as we go up this curve, we're seeing higher value added at each step.

Web: Telesales, almost no value added. Retail maybe adds a little support.

VARs, a lot of integration and support. Direct sales, that's direct connection to your factory.

System integrators, not only supporting, servicing, and integrating your products

but potentially tens of others.

So each portion of this channel is adding higher and higher value.

Now what's interesting is this higher value added comes with a cost.

Typically, higher volume systems are at the low end.

So you might be selling hundreds or hundreds of thousands of cases of toners,

but you might be doing ten large system integrations a year.

So more examples, retail channel might carry PCs.

VARs might do video editing systems that are turnkey.

For direct sales though, this is the anomaly.

Remember, these are the salespeople who work for you directly.

One of the interesting things that you'll be considering later is

how much you're paying your salespeople and how many dollars they need to be bringing in

every year to justify their existence and bringing a profit to their company.

So this ends up to be an interesting calculation.

Your direct sales people can actually be the one talking to the consumers directly

or they could be the ones selling to system integrators,

VARs, retail, and web and telesales people and so this is a math problem we'll think about

in the coming discussions.