Having a strong partner network is an excellent way to grow your business, scale your impact and leverage an existing resource to improve your results. Do you reckon you are exploring all the options to maximise your partners’ contributions to results? How effectively can you handle an ever-expanding partner structure, while maintaining your operational standards?
Expert partner management goes beyond sending out the occasional newsletter and the annual distribution of gift bags at an event: these actions are not enough to foster a deep level of involvement. Seeding a community is a relatively simple task that can have a spectacular return-on-investment. If you successfully integrate your partners in an online community that is anchored in a sense of belonging and that is continuously fed with interesting information, this group will quickly become one of your best allies. Moreover, if you use video to train and inform this growing network, you are sure to keep them engaged and wanting to come back for more.
In this article, we will show you how to calculate the return on investment of an online video training approach to partner development. We will walk you through the different steps of the simple economics behind it — this will help you build a solid argument that can be used as a rationale that justifies an investment in this area.
We will use two main metrics to reach our conclusions: net partner contribution to income and standard annual cost of partner management team member. The latter is quite self-explanatory: it includes the salary package and overhead (benefits, incentives, related expenses) of a partner management team member. The former — net partner contribution to income — is defined as the net contribution - measured in net sales or EBITDA - partners bring to the business during the period we are analysing.
There are five sequential steps an operations manager can follow to calculate the ROI of a video training approach targeted at improving results with their business partners:
Step 1) Gather current information about your partners’ contributions
Step 2) Estimate your partners’ contribution improvement with an online academy
Step 3) Determine savings in the growth of your partner management team
Step 4) Quantify investment in online partner training
Step 5) Calculate your online partner training ROI
You can follow this the article using your own numbers to reach a tailored conclusion: click here to download the Online Partners Training Academy ROI Calculator.
Step 1) Gather current information about your partners’ contributions: consider the annual weight each partner has to your net income and calculate their average contribution. Let’s use an example:
Company C is a marketplace with two hundred partners selling products through their platform. Each partner makes on average thirty sales per year with an average sales ticket of two thousand euros. Company C receives an average sales commission of 25% per sale. We can calculate that each partner brings on average €15k per year in commissions (30*€2k*0.25), and that the overall partner network is responsible for €3M in commissions.
Step 2) Estimate your partners’ contribution improvement with online video training
With online dedicated training, Company C’s marketplace partners will manage to close, on average, three extra sales per year. And they will be able to increase their average sale ticket to €2.5k. If we assume that the same commission is applied (25%), then each partner will be bringing an extra €5625 per year (33*€2.5k*0.25) - (30*€2k*0.25), and the overall partner network will be bringing an additional €1.125M per year in net commissions.
Step 3) Determine savings in partner management team growth due to video training gains
By implementing an online partner training solution, Company C will manage to save a full-time employee on the partner success team growth, saving close to €50k annually.
Step 4) Quantify investment in online partner training (annualised investment that covers the technology, the person in charge and the actual training content)
Company C would spend €90k per year in partner training. This includes a platform subscription, a full-time team member to manage this platform, and €25k per year in content production and maintenance.
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Step 5) Calculate your online partner training ROI. We are now ready to calculate the ROI of investing in online video training. We take the increased income due to the annual change in your partner contribution, add the reduced annual cost of our partner management team, deduct the online video training investment per year and divide this result by our annual online video training investment. Let’s look at the formula:
((Increased income due to the annual change in your partner contribution) + (Reduced costs in partner management team) – (Online video training annual investment)) / (Online video training annual investment)
In our example company, their ROI is 12X investment.
(€1.125M + €50k - €90k) / (€90k) = 12
This looks great, right?
This example uses annual values to keep the economics simple. If we take into consideration that the improvement in net commissions and potential team savings will also generate better results in the following years, and that most of the initial costs of content production only happen at kick-off and will be reduced over time, the ROI with a 3 to 5 years’ scope is even higher.
Do note that we can also use this formula the other way around:
Company C could have defined their minimum ROI to invest in online partner training and then analyse if the additional contribution and team savings would justify that investment. If Company C had decided that a 5X Investment ROI was enough, it would take a positive online partner training contribution of €450k per year and the same investment to achieve this ROI.
Interesting, isn’t it? You can use this methodology to assess whether partner development and engagement through online video is something you should be investing in, and what the resulting proceeds would be — download our Online Partners Training Academy ROI Calculator here.
As always, the bugle team is glad to advise and create a customised offer to your case. Get in touch!