Why Brokers Can Potentially Destroy Your Business

Brokers can open doors you cannot open on your preferred timeline. They can even get off-cycle meetings to happen. In both cases, intermediaries shine as access nodes where you couldn’t make headway. In a world where large chains do annual resets, especially for the small brand areas on the shelf, missing a year can hurt your steady addition of smart doors.

Sounds great, right?

Sure, but this is NOT how 99% of new CPG founders utilize brokers. Unfortunately, they generally think of them as their ‘cheap’ sales team. This is a huge mistake, but one tempting for introverted founders who do not understand how the B2B and B2C components of a consumer retail business interact. Honestly, these folks should build a seven-figure online business first. Then, they’ll enter retail with enough confidence and actual trailing sales leverage to bypass brokers or to have them partner better with them.

The problem is that brokers, like retail buyers, are jaded folks. I don’t blame them. All sorts of founders approach them, mostly unprofessional ones. Most want unrealistic service from them. Others want to out-source the entire sales function and focus on operations or marketing or playing with their puppy. I’ve seen every permutation of the oddly disengaged founder.

Anyone who hires a broker as a) a sales savior or b) as a replacement for their involvement in the B2B sales process needs to step back and re-evaluate how you’re approaching these stake-holders.

The #1 reason to hire brokers is when you want to court complicated accounts (e.g., Costco, Target, and Whole Foods). Knowing the internal culture is critical OR when you can’t generate a response. In many cases, you may keep the broker on board after onboarding, if the account is sufficiently complex and idiosyncratic (and you want that ally around). In many other cases, you can and should fire the broker after you successfully launch. Or, re-direct that broker to opening the next accounts.

Regardless of how you work with them, you have to manage them actively against 90-day goals with expert communications. They are a sales support function. They are NOT an outsourced salesperson. Many ‘brokers’ prefer to use the term ‘fractional salesperson,’ but these folks are not functioning any differently than brokers. They’re just trying to avoid the stigma of the word. Brokers turn on accounts for a % of sales. Don’t keep paying the % for accounts they already opened. That’s what you do when you get one account, and they fail to turn on new ones. The other reason you have to manage these folks is that they are incentivized to chase case volume growth non-strategically. Pure case volume-chasing can and will take your precious inventory into dead, brackish retail waters devoid of traffic and sales. You must manage them against precise account performance criteria or, better yet, give them lists of accounts to turn on before signing an agreement with them. Otherwise, you will be scattered all over the country in bizarre retail locations of no strategic relevance. More importantly, you will be unable to generate exponential growth based on steady velocity growth at stores whose trading areas are dense with your target audience.

On Oct. 9, my next cohort will go through my Riding the Ramp Strategic Planning webinar. If this post touched a nerve and you don’t have a 2021 strategic plan. Then I encourage you to grab a spot. Only 10 left.

Dr. James Richardson

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