Should I Finance Through My Partner or Elsewhere?
During a short break between meetings at a recent trade show, I found myself chatting with a guy who is an IT buyer for a small company. At one point, he told me that we analyst types have fallen short in our coverage of the things that matter to small businesses. “Oh sure. You’re all fine when it comes to technology speeds-and-feeds, but at the end of the day, a technology purchase is a financial decision, and you’re all woefully unprepared to engage at that level.”
As an analyst who specializes in go to market strategies, I figured I had the upper hand in this discussion, but he was unimpressed.
He went on to talk about a recent engagement that he had done. A major upgrade was necessary, and he had limited resources with which to pay for it. So contract financing became key. He looked into a variety of usual sources for money and basically did his due diligence with respect to the normal number-crunching. But he said he had underestimated the extent to which his channel partner wanted to participate in the selection process. The partner wanted to finance through the mechanisms provided by the key vendor for the technology products, themselves. Presumably, there was some reward in it for the partner. No doubt there was. The man wasn’t particularly surprised that the channel partner had a story to tell with respect to financing, but he was taking a little bit off guard by the energy with which the partner sold it.
The truth is that this is something that has evolved over the course of the last several years. With budgets stretched to the max, financing has become increasingly important. Product margins are not quite where they once were, so channel partners are constantly looking for new ways to add value to their sales propositions. And with various incentives offered by the vendors, a lot of those partners are highly motivated to get the credit portions of the deal. It is another place where margin lives, and wherever margin lives, channel partners will be beating down the door.
This is actually good news for small business owners and IT buyers. By adding another dimension to the deal, the opportunity for negotiation and compromise becomes even more fluid. It is another factor to calculate into the equation. And that can be beneficial to arriving at the most equitable terms for the deal in a larger sense.
In addition, enabling your channel partner to benefit from your finance contract increases your value as a customer, and can instill higher levels of allegiance at times when you need it most. Of course, the bottom line still needs to make sense, but keep in mind that much of the value brought to the table by your channel partner involves their ability to consult with you, focus on you, respond to you, and generally look out for your well-being. Therefore, money spent with your partner rather than elsewhere can have beneficial ramifications down the road. Again, let me be clear: I’m not suggesting that you don’t want to drive a good deal. But it’s also true that your upfront efforts can have certain collateral effects in the future. And those need to be calculated into the equation as well.
By and large, the market will drive appropriate pricing. And finance/credit is rapidly evolving as an important part of those contracts that can be used in the trade-off of negotiation. While it is easy to send your finance contract in multiple directions, the value of that part of the contract can be useful in keeping your channel partner fully engaged.