When Choosing a Dealer Program, Fully Vet Terms of Obligation
When considering a potential dealer program partnership, the decision-making process should be conducted with a strong eye toward making certain your business interests are safeguarded, advises alarm industry attorney Ken Kirschenbaum, principal of Kirschenbaum & Kirschenbaum. While profit may not be mutually exclusive to either the dealer or the program promoter, the dealer needs to be aware that the balance of the bargaining power sides with the promoter.
“Dealers need to understand that the promoter of the dealer program is profit motivated just as they are,” says Kirschenbaum, who pens SSI’s “Legal Briefing” column. “They need to be careful that the program isn’t lopsided in favor of the promoter, leaving little left for the dealer at the end of the day. Make sure you select a program that has more to it than enriching the promoter.”
Dealers and integrators should have realistic expectations when entering into a dealer program. Ask yourself, “Where will I be in one, three, five and 10 or more years?” The investment in the program should justify long-term commitment and the dealer should expect to be able to make a sensible living and build a valuable business over time, Kirschenbaum says. “Personally, I don’t favor programs that encourage or require dealers to sell or turn over the RMR accounts to the program, leaving the dealer with an empty bag at the end of a career in the alarm industry.”
Sandy Jones, principal of Chardon, Ohio-based Sandra Jones & Co., a consulting and business support and services provider, also emphasizes that assessing your company goals should be the starting point to determine a good match in a dealer program. What do you want to accomplish? Typically it is to grow your business and generate more revenue. Or it’s marketing assistance, etc. Determine your business objectives and go from there.
“Then you have to look at the program’s obligations. Just like any good relationship, you have to find a way in, but sometimes you have to find a way out,” says Jones, who has studied dealer programs extensively and provided market research data to industry stakeholders in the channel. “Understand if it isn’t what you thought it was going to be for you — either you can’t do what they expect or they can’t do what you expect — make sure you understand what the obligations are for getting out.”
For example, there are dealer programs that stipulate you bring in X number of contracts in order to be paid a specific multiple. But what if you don’t sell that many contracts? You could possibly receive a lower multiple that fails to meet your expectations. If you chose a manufacturer program, let’s say you build up a territory and make an obligation to sell amount of product in a year and then you fail to do so. Do you now lose the product line, having set up a path for your competitor to come in? Do you keep the product line but have to keep a higher price?
The fundamental point is to be sure you fully realize the ramifications in the event you don’t meet the program’s criteria, as well as your obligation to be released from the program.
“You have those programs that are about buying contracts. You have those that are driven by suppliers, and those that are driven by monitoring central stations,” Jones says. “They all have different deliverables and conditions based on who is providing or funding the dealer program.”
Rodney Bosch is Managing Editor for SECURITY SALES & INTEGRATION. He can be reached at (310) 533-2426 or [email protected]
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