The earliest that you should consider recruiting and working with channel partners is when you understand how to market, sell and service your solution (some people advocate that you should have at least $5M in ARR, but I think that is a very rigid perspective). Okay, so you are ready to take your product to market through the channel for all the right reasons. But how do you recruit and sell through the channel?
HOW DO YOU WORK WITH THE CHANNEL?
It is not a case of “build it and they will come.” Assuming that there is a product/channel fit (or a fit with channel partners’ customers), you need to market your solution to the channel as if they were another segment of target customers. With specific messaging about your value proposition, how they can make money and/or strengthen their customer relationships, and how you will work together to make them successful.
I’ve been involved in building channels at several early stage companies; including a few where mistakes were made that almost derailed our channel efforts. But lessons were learned, thankfully.
You should get to know your channel as well as your target customers. Invest in understanding your prospective channel partners’ businesses, and how they select to work with certain technologies and vendors. Then create a clear joint value proposition that communicates how they can profit from a relationship, and how their customers will benefit from using your solution. That messaging doesn’t have to be perfect, because you can test and iterate it. Create landing pages and campaigns to attract the right partners, and provide information on your website to help them self-qualify if a partnership is right for them. And be responsive to any questions that they have. Remember, they are testing you out to se how easy it would be to work with you if they choose to partner with you.
Don’t be lulled into a false sense of security by thinking that you will automatically sell into a partner’s customer base. Even though there may be a fit between your products and their customers, it will take time for them to open up and introduce your solution to their customer base. It is best to start working on some very targeted opportunities. In some cases the best channel partnerships are started when you come to a prospective partner and say, “One of your significant customers has approached us. Would you be interested in working together to implement our solution?” That gives them a taste of whether their customers need your solution and what a working relationship might look like.
Once you have started to recruit partners, you must also create significant end-user pull for your partners, to show them how to make money selling your solution. This sounds counter-intuitive but a necessary step. This will take coordination between your Marketing and Sales teams to seed new partners with leads. But don’t just hand them business blindly. Use each lead passed as an opportunity to educate them on qualifying and how you manage the sales cycle. Hold them accountable for follow through. At one company we allocated a majority of our marketing budget to co-host a series of over 900 face-to-face seminars to over 27,000 end-user prospects. This allowed the channel to contribute over 70% of corporate revenues in a short period of time.
And you need to educate everyone in your company about why you are working with the channel (executive buy-in is critical). Recruiting and ramping a channel takes hard work, and that effort is magnified when you are in an early stage company that is fighting for mindshare and traction. If you do decide that it is necessary to sell through a channel to achieve your revenue targets, then you need to do it right by structuring a marketing and sales process that takes the channel into account.
Implement a channel properly and you will grow your revenues faster and lower your customer acquisition costs.
So, how did it go with the two startups struggling to sell through the channel? At Backupify we quickly rationalized our channel program to create a reseller channel that showed a 350% CAGR, to contribute almost 30% of corporate revenues. And at LiveVault earlier, after streamlining our channel, we focused in on VARs and a few select OEM partnerships and had a successful exit by selling to an OEM partner, Iron Mountain.
See my Slideshare deck – “Your Channel Program is a Train Wreck” - for an overview of the top mistakes that companies make when trying to build a channel.