Conventional wisdom: Retailers and distributors offer the best and quickest way to get your product on the market.

On the contrary: Working directly with your customers gives you more control over the process.

When new entrepreneurs ask for my advice, I'm always happy to put in my two cents--not because I believe anyone is going to actually listen to what I have to say (and a lot of the time they politely choose to ignore me), but because I wish someone had done that for me when I was starting out.

When we discuss how they plan to go to market, most tell me that, regardless of their product, industry or target market, they plan to sign up as many distributors (or dealers, agents or reps) as possible. They think more doors means more sales, and, well, that's just the way everyone does it. Isn't it?

Going around in circles over shingles

We don't do it that way (and the reasons why will be the topic of next week's post). But rather than try to directly convince the newbie entrepreneur that their reasoning has holes, I like to tell a little vignette about the time I tried in vain to buy synthetic slate roofing tiles from a large national company.

I started by calling the roofing manufacturer directly. They told me to go through the authorized distributor in my area, so I found the dealer and stopped by their place of business. The guy behind the counter had never heard of the roofing company. Neither had the guy in the warehouse. Finally, the manager confirmed that the shop did, indeed, sell the roofing company's products. The clerk dug through some drawers until he found a decade-old brochure about the company's asphalt shingles. He offered to make me a copy.

I called the roofing company back to tell them about my experience. They thanked me for my call and referred me back to the distributor. (Guess who never got his shingles.)

The distributor disadvantage

Admit it--you've had a similar experience. So, no matter what you may think about how the rest of your industry does this, dealing with dealers can be a real challenge. There are good distributors out there, to be sure, but they don't all have the kind of dedication necessary to actively promote your product.

For every dealer you sign up, you must have the staff to monitor their sales, to motivate them to sell, to educate them in the benefits and qualities of your product and to help them identify the customers and situations your product will serve best. This takes marketing, money and manpower. If you spend money on advertising and generate leads that go to your dealers, you have to be able to follow up with the dealers to make sure those leads turn into sales. Otherwise, you might as well throw them all in the garbage and set fire to the money you've spent on your ads. The money you think you're saving by not hiring a sales force of your own could go right down the drain when you're forced to hire people to corral your dealers.

You may also have a tough time getting information from your dealers about the people who buy your products. Turning single-unit customers into multi-unit corporate accounts can therefore be exceedingly difficult.

And then there's the question of the margin and maintaining your pricing structure. For one brief period of our history, we did use dealers. Our experience was that we were giving up 15-20 percent on each sale, but we were doing nearly all of the work to get our products sold and to service the customer after the sale.

Using dealers might be conventional wisdom, but there are great benefits to be gained by going against the grain and working directly with your end users. But more about that next week.

Published on: Oct 31, 2014
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