When Is Payday? Channel Partners Consider Exit Strategies

By Mike Saxby

While you are away from the office and the day-to-day distractions, it’s a good time to take stock of your business.

What have you got? You’ve built up a book of business. You’ve got a respectable monthly revenue stream. You’ve got customer relationships.

Now what? Unless you want to be in this business forever, you need to be thinking about payday. How can you cash out? How can you exit with the expectation of sitting on an island sipping Mai Tais?

If you are like most agents, your business depends on you being there day in and day out. Your customers want to deal with you. You are the business. There is little in the way of assets that you can sell to exit. You don’t own the customer; your carriers do.

Some of your business may be under evergreen contracts, so the residuals will continue to come in. But does the contract require that you continue to drive new business? So much for that exit strategy. Even if the contract doesn’t require you to be an active agent, it will be hard for you to protect those accounts from the golf course with all the hungry new entrants knocking on their doors. The revenue stream remains at risk.

How can a recurring revenue business survive without you? Here are some ideas:

• Make sure your contracts allow you to assign its rights or obligations to others so that you can “sell” the revenue stream. Attorney Neil Ende, who is speaking Tuesday about analyzing agent agreements, said such clauses can range from prohibiting assignment without consent of the carrier to allowing assignment without limitation.
• Bring in employees or partners that also interface with the customers, so that your interest in the agency can be bought out and you can leave without the revenue leaving with you.
• Assuming your carrier agreements don’t have broad non-compete clauses, create contractual relationships with your customers. These may be for professional services like maintenance, telecom management, TEM or managed services (e.g., proactive network monitoring). Go beyond having a customer list to customer ownership.
• Go to the next step beyond agency and become a network services reseller/rebiller with your own customer LOAs.
• Become part of a franchise organization with branding and infrastructure (service delivery and customer service) that doesn’t depend on you. These are few and far between, but there are some opportunities in the telecom and managed services arenas.
• If none of these things is possible, look into carrier agreements that allow you to retain ownership rights in the customer or to share in the profits that your carriers realize when they sell. There are a number of carriers that have such offers. These are not a sure thing, but if you’re going to sell for someone, you might as well stack the deck in your favor.

Your retirement fund may thank you.