Things Startup Founders Should Understand About Channel Partnerships

by Scott - 1 Comment

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Many startup founders are deathly afraid of building their own sales team. They default to channel partnerships to try and get distribution. Sigh.

 

 

For those unfamiliar with the term, a channel partnership is when a person or organization sells products on behalf of another company. An example of this is how Duda Mobile uses Webs.com as a channel partner. Customers of Webs.com can mobile optimize their website through a partnership DudaMobile. Webs.com benefits from the partnership by filling out their offering to prospective customers and DudaMobile benefits from the distribution to Webs.com customers.

Partnerships like this can be great for both parties. But they also can also barely move the needle and be extremely time-consuming to develop.

Here are a few things startup founders should consider when evaluating channel partnerships and whether this should be their go to market strategy.

How much of a priority is promoting it for the partner?

You need to have a clear understanding of exactly how much active exposure you’re going to receive from a parntnership. Is promoting your product a priority for them? Did they clearly outline how they plan on promoting on it so you can be certain that it’s a prority?

A “partnership” doesn’t mean much if the other party isn’t invested in making it a successful one.

How motivated are the people that are actually selling your product?

Even when the corporate entity is committed to making the partnership successful, it’s important to understand commitment at the micro level . If a partner’s sales reps will be offering your product alongside 4 other products, how does your compare from an incentive standpoint? If they are compensated 3x more on all the other offerings they’re selling, they’ll likely be motivated to push these first and harder than yours. If they’re not actively pushing your product as much as others this can actually make yours look bad. You must understand these dynamics.

Can you trust the people that are pitching your product?

One of the best parts about building your sales team in house is that you can control what they’re saying. This is especially the case with a well managed inside sales team like we have at SinglePlatform (props to Adam Liebman!).

When someone else is selling your product you don’t have this luxury. There is no gurantee that outsiders selling your product are communicating its value effectively or even accurately. When left to their own discretion, sales reps can become mavericks in describing the capabilities of a product just to get a sale. Guess who looks bad when the product doesn’t deliver what someone was promised? Your company does.

No one will ever be able to speak as intelligently about your product as your own team.

How sharp are the people you’re working with on the deal?

There are plenty of bright, hard-working people at large, slow-moving companies. There are also many complacent people that are bored out of their mind. They have nothing to do so they’ll have hypothetical partnership coversations that never go anywhere. They’ll even do deals that likely yield little value for either company just to entertain themselves or give off the impression that they’re getting stuff done. Yay I got a deal!

Don’t get sucked into these scenarios. Even if you’re talking to the most badass company in the world, if the person on the other seems like a dope, it might be time to move on. After all, the success of the partnership is often determinant upon the internal klout your point person has to make sure execution of the partnership is made a priority.

How well does your product resonate with a company’s existing audience in this context?

This should be obvious, but I still see people mess this up. It’s true that many partners might serve the same audience you do. But this doesn’t mean that doing a partnership always makes sense. It all comes down to intent.The best partnerships are where a buyer’s intent when they’re primed to make a purchasing decision closely matches your offering.

Good Example: Webs.com/DudaMobile – people go to Webs.com to make websites. Making their site mobile optimized while they’re checking out is a natural progression.

Bad Hypothetical Example: A partnership between GoDaddy and a sales and marketing automation software company. Wait but both people serve people looking to do business online?

People go to Godaddy to buy domains. Though they might eventually want to invest in sales and marketing automation software, they’re probably not going to make that purchase after buying their domain.

It’s imperative to have a clear understanding of a consumer’s intent at the time they’re exposed to the channel partnership to gauge it’s effectiveness.

How time-consuming will these partnerships be?

Channel partnerships can be some of the most time-consuming types of deals out there. It’s important to understand this and view a partnership in the lens of an opportunity cost. If you’re looking at a deal that has the promise of vast distribution a year down the road, how does that compare if you started building out an internal sales team today?

 

You’re ability to build a great product is often only as good as your ability to bring it to market. If you plan on relying on channel partnerships for distribution, you need to understand all of these things to know what you’re getting into.

Ask yourself: are you relying on channel partnerships because it’s the best thing for your business or because you don’t know how to build a sales team? If you’re in the latter camp, you might be better served investing your time in finding someone who knows how to build sales teams. They’re out there.

 

Interested in business development? Check out my new monthly newsletter that comes out tomorrow where I share secrets and strategies I can’t blog about publicly. Seriously – BDNewsletter.com

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  1. Pingback: Lean, Effective Sales Building for Startups — Not Only Luck

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