Reducing The Trusted Advisor’s Time to Profitability
“Two years of hard work and if you really put your head down and go to work you too can possibly make millions.” That’s the goal and time frame that is commonly known in the Telecom Channel as the requirements to get a Trusted Advisor off the ground. The fallout is staggeringly high and the number of failures in the first year of this business start-up follows the typical startup failure metrics. Which isn’t a very high success metric.
The good news in this industry is those who fail to start up a Trusted Advisors (TA) business can fall back on the hundreds of suppliers and a handful of Trusted Services Distributors (TSD) that are begging for good people to join their teams with a guaranteed salary, healthy commissions and dozens of industry upward mobility options for future growth. But who is going to be the first facet of the industry that helps those who have the ambition to undertake such a daunting task and shorten that success metric with a sustainable and repeatable model?
There are a number of ways a TA can try to jump in and find success as a business start-up. From joining an existing TA with contracts that allow for future anonymity to PE backed roll ups that provide very structured loans that cover a new entrepreneur lively hood as they make this leap of faith into their self-confidence of sales and channel success. The masses want it but only the few have the confidence in their abilities to put themselves out on that limb. The road is not clear, no one has shown a fail-proof model from start up to putting food on the families kitchen table. This makes it so only those with personal knowledge and confidence make the leap of faith. We need a lot of people to do that or we have a stagnated funnel of TA’s entering the market.
The founders of this industry are phasing and cashing out with newly formed exit strategies. Private equity has shown this industry that you don’t have to manage a base of customers forever as a retirement plan. You can sell your revenue streams for upfront cash or exit in one of a number of new ways. Those who have proven themselves and built a revenue stream worthy of acquisition are now doing just that, exiting. Some are bought in on a second equity event and some are now enjoying their vacation home in Costa Rica.
As the top begin to execute on an exit strategy, a significant chunk of revenue from those TAs begins to diminish. Less revenue goes to the suppliers, which in turn less commission to the TSDs and on to the TA. When channel revenue starts to slip from these suppliers, we have an issue where management might reduce staff and Marketing Development Funds (MDF). This problem isn’t caused by the newly formed exit strategies, the timeline was just sped up a few years. The channel community that has been within the industry since the late 80’s has been phasing out slowly over time or reducing their new yearly sales number year over year. Now that an additional attractive offer has come along, many choose to execute the exit strategy instead of the gliding down over time method.
The lost new revenue needs to be made up and exceeded to find net new growth for the channel community. For any business ecosystem to thrive, a lifecycle of birth, growth, and exit must exist. As the market matures, we are starting to see Private Equity Firms build out more and more attractive exit strategies. I'm also sure we will see those start to mature as we learn more about what works and what doesn’t work. They will start to find a real stride as the methods begin to prove themselves out.
We see the path to success where suppliers and TSDs mature and lean In with a focus on helping the partners mature and grow. Yet, the birth of new TAs into the community is still relatively unknown. Only through collaboration and the community's help can we bring in new blood of the TA, which will allow the ecosystem to thrive. Through innovation, proven documented sales motions, and tribal knowledge this community can band together and overcome the industry challenges that we will face as we mature into this Channel 2.0™ version.
Stay tuned for a working/living crowdsourced document of current solutions. For ideas and commentary please send ideas to:
Kameron Olsen
Kameron@thechanneladvisors.com
Ph: 469-955-4565