The Immutable Requirements for Developing Successful Channel Partners for Enterprise Software / B2B
Leveraging channel partners is an excellent way for enterprise software / B2B SaaS* companies to increase sales. But there are some core requirements that need to be in place before trying to create a partner channel;
* All of these requirements apply to enterprise software / B2B SaaS with an ACV > $25K. Packaged software that is sold through distribution and retail have other rules and requirements.
Product Market Fit - If the software vendor has not achieved product market fit then channel partners are a non-starter. This is an important rule that is often misunderstood -
If the software vendor can not sell direct to a market then there is no reason to assume that a channel partner can.
If you have sold to 30 retail banks in North America and you would like to expand into Europe, then it is reasonable to assume that local partners can help your company sell to retail banks in Europe.
If you have never sold to a retail bank then it is completely unreasonable to assume that signing up a channel partner will help you break into this new market.
Don't use channel partners to break completely new ground. Use them to get leverage in existing markets (geography or industry) where you have a proven track record of success.
2. Margin & WIFM - there has to be something worthwhile for the partner to want to resell your product. This typically has 2 parts to it;
A. Margin or discount for reselling the software.
B. Professional services revenue. The channel partners wants the service revenue to install, configure, train and maintain the software. This is often their core business. They may reluctantly resell the software to get at this service revenue.
It's simple math - the margin or discount you give your channel partners is directly proportional to the amount of time, energy and focus they will invest into selling your products vs. other products. A 5% referral fee will get you no time, no energy and no focus from your partner. Without exception.
This should be obvious yet many software companies try and bypass this rule and offer a small referral fee to partners in exchange for leads. This seldom (maybe never?) works. Read this article to understand why referral programs are a Utopian dream.
3. Repeatable Sales - there needs to repeatable business to be had. A channel partner is not going to invest time, money and effort into reselling something unless they believe that there is a real demand for it. They want to build an on-going business around a product that customers will buy on a regular basis.
4. Partner Ready - Channel partners need to be enabled for success. Signing up new partners is the “easy” part. Enabling partners for success is where all the hard work gets done. Once a partnership agreement is in place, you need to switch to partner enablement. Partners may sell differently than your direct sales force. The channel partner has their sales process. They have a different go-to-market model. So, you can not hand off your marketing collateral and sales tools and expect the channel partner to start using this as is. All this content needs to be tailored to support how the partner sells and markets. The alternative is poorly enabled partners who will deliver disappointing sales.
Channel partners have lots of other products and services that they sell. Every day, the sales reps at your partners make a choice about what they are going to sell. They are going to sell products that are easier to sell. They are going to sell the products from the software vendor that provides them with the most sales support. You have to make it easy to do business with your company. Otherwise, your channel partners will just sell something else.
If you do not have a documented sales process, sales tools and marketing collateral for your direct sales team then you are definitely not ready to create a partner channel.
These are "immutable" requirements because they are mandatory. There are no shortcuts or workarounds. If you try and develop a partner channel before you have these things in place you will probably fail. Skip the pain and do yourself a favor, make sure you have these core requirements in place before trying to create a partner channel.
About the Author: Bryan Socransky is the Principal Consultant of Disruptive Consulting Group. Bryan's experience spans over 25 years in some of the most competitive B2B sectors including enterprise software and SaaS. Now he is applying this experience to help enterprise software, SaaS & IT companies grow via Partnerships - Channels & Alliances. http://disruptiveconsultinggroup.com/