Most companies don’t start out with the intention of building a channel partnerships program. “I came into partnerships unintentionally and I would say that’s the case for most people,” says MP Eisen, a sales and go-to-market leader whose background includes stints at Asana and NerdWallet, and now Glean, the Gen AI SaaS company.
But somewhere along the way, the channel becomes a compelling proposition — either because a go-to-market opportunity emerges organically, or because your business is actively seeking new revenue streams.
The channel can be a source of new revenue streams.
For MP, it was the former. In her first role in International Expansion Strategy at Asana, she was figuring out how to expand Asana geographically: what regions to prioritize, where to open up offices, and where to invest the team’s marketing dollars.
“In doing that work, we realized that there were certain markets that we didn't necessarily want to invest in or open up an office in, yet we were seeing a ton of traction,” says MP. “For instance, we were seeing a lot of usage in the Portuguese language, Brazil specifically. But when we asked if it made sense to hire anyone full time in Brazil, the answer was ‘no.’” Rather than create a Brazilian team, MP and team decided to build out a channel partnership instead.
This kind of program can be an incredibly useful tactic in your overall go-to-market strategy. But whether a channel partnership program is a good fit for your business depends a great deal on the nature of the opportunity in front of you, the resources you have, and what kind of need you’re trying to address.
For founders or revenue leaders grappling whether it’s time to launch a channel program, look no further. In this 101 playbook, we sat down with MP to get her take on what exactly fits into the category of “channel partnership program.” From there, we went on to distill best practices and time-tested strategies so a SaaS team can figure out whether committing to a channel program is right for their business, and if so, how to carry it out successfully.
What is a channel partner program?
A channel partner program is a strategic business initiative designed to leverage third-party companies or individuals (partners) to promote, sell, and distribute a company's products or services. The program aims to expand your company's reach, access new markets, and increase sales through collaborations with these channel partners.
But while many types of programs fall into the bucket of “channel partnership,” not all partnership programs are alike. Let’s break down some of the most common ones below.
1. Value-added resellers (VARs)
Channel partners that resell a vendor's products along with additional services, customization, or integrations (this is the “value-add” part). VARs typically act as boutique intermediaries between the vendor and the end customers, providing solutions tailored to the specific needs of their clients.
VARs can be valuable partners for vendors seeking to expand their market reach and deliver a more comprehensive customer experience. These additional services enhance the value of the original product and help the end customers derive maximum benefits from their purchase.
Examples: Rego Consulting, Faye Consulting
Channel partners that purchase the company's products or services at a discounted rate and resell them to end customers at a markup, earning a profit on each sale. This category also includes distributors (a two-tier channel program), such as TD Synnex or Ingram Micro.
Examples: SHI, CDW, Insight, SoftwareOne
3. Service partners
Partners that offer additional services, such as implementation, training, or consulting, to complement the company's core offerings and provide a complete solution to customers. These partners are often referred to as Systems Integrators (SI’s), whether global (GSI) or regional (RSI) in scope.
Note: A VAR can be a Service Partner, but a Service Partner, is by definition, not a VAR. (Service Partners don’t have resell capabilities.)
Examples: Slalom Consulting, Accenture, Deloitte
4. Referral partners
Sometimes called affiliates or agencies, these partners recommend the company's products or services to potential customers but do not engage in direct selling. Instead, they refer leads to the company, typically in exchange for a commission or referral fee upon successful transaction.
These are online destinations that allow companies to showcase their product and the tools it integrates with, allowing them to reach more potential customers.
Examples: AWS Marketplace, Salesforce AppExchange, Google Cloud Marketplace
To summarize, a channel partner program is a strategic approach that allows companies to leverage external partners to extend their market reach, grow revenue, and deliver more value to customers through expertise, industry knowledge, and localized support.
The business objectives of a channel partner program
It’s a common misconception that channel partner programs are all about generating revenue. While new business is certainly an important component of what channel partnerships can do, they actually have a much more expansive purpose.
"You should not do partnerships just for the sake of revenue,” says MP. “Channel partnerships should be driven by a genuine and organic need that aligns with the business objectives and goals of the company. The focus should be on creating mutually beneficial partnerships that address specific needs, whether that’s entering new geographies, outsourcing lead qualification, or entering new verticals.”
According to MP, “The question shouldn’t be, ‘How can we use a partnership program to hit our revenue target next year?’ but rather, ‘What’s missing in our go-to-market strategy that we don’t necessarily want to solve ourselves?’”
These “missing pieces” of the GTM strategy could include:
- Expanding geographically: If you identify traction in a specific geographic region but don't have the resources to build a local team (such as in MP’s Brazil example), forming partnerships with local companies or agencies can help you expand your presence in that region.
- Language and cultural barriers: In regions where customers primarily speak a different language or have distinct cultural preferences, partnerships with local companies that understand the market can help you effectively reach and serve those customers. Local partners can also assist with currency and payment options, tax regulation compliance, and local entity billing.
- Access to new customer segments: Partnerships can help you tap into new customer segments or industries that you might not otherwise have access to. For example, working with a financial services consultancy can provide access to new banking clients.
- Complementary products or services: Partnering with companies that offer complementary products or services allows you to offer a more comprehensive solution to your customers. For example, you can partner with a technical services partner to provide custom integration development and implementation, which can help unlock big enterprise deals — allowing both you and your partner to cross-sell to each other's customers and provide more value.
- Niche expertise: Partnering with niche experts in a particular domain or industry can add credibility and domain-specific knowledge to your offerings, making them more attractive to potential customers in that niche. For example, partnering with a healthcare consultancy who has deep knowledge around HIPAA and local regulations can help you penetrate that industry.
- Scaling sales and distribution: If your business is experiencing rapid growth and needs to scale your sales and distribution efforts quickly, partnering with established channel partners can help you reach a broader customer base efficiently.
“Partnerships are all about scale,” says MP. “It's about how do you get more leverage and more coverage than you currently have with your sales team alone.” By filling the gaps listed above, partnerships confer numerous benefits, such as increased market reach, cost-effective expansion, an enhanced customer experience, and of course, revenue growth.
What do you need to start a channel partner program?
The benefits of a channel partner program are clear, but how do you know you’re ready to start one? According to MP, there are a few prerequisites to keep in mind.
First up, it’s essential to have product-market fit. Launching a partnership program is easiest with a product or service that has already achieved a level of success and validation in the market. Before launching a channel partner program, you should ensure your offering meets the needs of your customers and you have a proven history of demand for what you’re selling.
This also means you should have an ideal customer profile, or ICP, already defined. You need to have a clear understanding of who your target market is and what segments you want to reach through your partner program(s), otherwise your partners won’t know who to sell to.
While the target audience for a partnership program might be a new segment, it’s useful to have a proven sales strategy that you’ve used with other types of customers in the past. This means knowing the overall buying journey and what key value propositions resonate with customers at each phase. It’s crucial to be able to communicate what your sales process typically looks like to potential partners, so they have some idea of what to expect.
Channel programs require product-market fit, an ICP, and a proven sales strategy.
It’s also important to set your new partner(s) up for success with infrastructure and resources that will support your program. This means creating partner enablement materials, defining incentives, and setting up systems for lead tracking, reporting, and payments.
Depending on the size of your program, you’ll need a dedicated person or team who is responsible for managing the channel partner program. This team should have a mix of sales, strategic, and operational expertise to effectively recruit, onboard, and support partners throughout the program.
Finally, you need to offer compelling incentives and benefits to attract and retain channel partners. "When you're doing a Channel Partner program, you're essentially asking someone else to go out and sell your product or service on your behalf,” says MP. “If you think about a partnership, the most fundamental question is, 'Why would anyone want to work with you? What are you bringing to the table for the partner?'"
Taking the time to define a clear value proposition for working with you — which could include things like competitive margins, marketing support, training, and resources — can help lay the foundation for a strong partner relationship.
Ultimately, by ensuring that all of these components are in place first, you create the ideal conditions for a successful and mutually beneficial channel partner program that expands your reach and drives business growth.
How to kick off a relationship with a new channel partner, step by step
Now that you’ve laid your foundation, how do you actually start your channel program? Here are the steps MP recommends you follow.
1. List your go-to-market needs
Determine the markets where you need coverage and assess the types of partners who can help fill the gaps in your sales and distribution strategy. Consider geography, industry, buying persona, and other segments that you could use help to reach.
2. Identify potential target partners
Identify potential partners that align with your offering and have influence over your target customers and begin to make a shortlist. Remember, "It's not just about finding partners — it's about finding partners who have a similar target customer," says MP. Your main focus should be on finding partners in complementary industries or those who can refer customers to you.
3. Begin outbound partner recruiting
Reach out proactively to targeted partners through email or other channels. Clearly explain your value proposition, what you're offering, and how the partnership can benefit both parties.
4. Pitch your partnership program
Present the partnership program to potential partners and highlight the benefits of collaboration — it’s about what you can do for them just as much as what they can do for you. Showcase the resources and support you will provide to help them succeed and grow their own business.
5. Start small and scale up
Recognize that the initial partner may be a smaller organization, and that's okay. “You have to start small, figure out your first hypothesis on your partnership strategy and test it,” says MP. That’s the only way you’ll learn. She recommends starting with one partner and building a playbook based on that experience. As you gain momentum and learn from the initial partnership, you can scale the program and bring on more partners.
6. Build a strong internal team
As the program expands, build a dedicated channel team to support and manage the partnerships effectively. This team should include partner-facing managers who can work closely with partners and an ops and enablement role to handle operational aspects.
7. Remember that it might not be reciprocal right away — that’s just part of the process when wooing a new potential partner.
“The ‘giving to getting’ ratio is not one-to-one, especially at the outset,” says MP. “You have to provide inputs to the partnership, whether that’s leads, service opportunities, industry or geographic ownership, and so on. The question is: What can you bring to your channel partner to drive specific outcomes?” And then, in time, those investments will begin paying dividends for you too.
A good partner is worth their weight in gold
“At the end of the day, a partnership is a symbiotic relationship where you’re working together to achieve mutual goals and outcomes,” says MP. Partners allow you to expand your offerings without having to build new capabilities in house — whether that’s geographic coverage, industry specialization, customization services, or any of the numerous other benefits that a partner can provide.
But it’s important to note that partnerships rarely work when they’re shoehorned in — the best partnerships arise out of a natural gap in your offerings. And when you find a partner who can fit that gap, that’s where the magic happens.
Ready to kick off your own partnership program? Read on to find the answers to common questions as GTM teams build out these programs.
Channel partner program FAQs with MP Eisen
Q: What percentage of first year ARR do you share with the partner?
MP: It depends on partner type and motion. For VAR’s, it’s typically a 20-30% margin but can be higher if in a market with high taxes (e.g. India or Brazil). For resellers, it’s closer to 5-10% — this is because they’re simply processing the transaction, whereas VAR’s are expected to provide post-sales support.
Q: Is it typically first year or multi-year or are there cases where it makes sense to share in perpetuity?
MP: If you have a SaaS business model, it makes more sense to give margin in perpetuity, to incentivize the partner (whether a VAR or reseller) to retain and renew the customer year after year. But typically in a referral partner program where the partner is not actually billing the end customer and is not on the hook for the renewal, you would give a one-time payment.
Q: How do you compensate your sales reps for deals sold through or by a channel partner?
MP: There are several ways to slice this, depending on the way your product is sold and how AEs are currently compensated. One option, especially in the early days of a channel program, is to offer comp neutrality to AE's for channel-sold deals. In other words, if an AE co-sells with a solutions partner, the actual revenue to the company is only 80% (due to the 20% partner margin), but the AE will retire their quota at the 100% list price. This "double dipping" can be expensive, but when employed properly and with the right return on equity (RoE), comp neutrality helps incentivize AEs to work with partners.
Another option is to comp reps only on the 80% amount (or whatever the net revenue is to the company). But this should be applied in conjunction with a requirement such as, 25% of an AE's quota must be sold with a partner, or some other way to ensure the AE works with partners. Otherwise AE's will avoid the sale and your partnership program will never get off the ground.
Q: Does this change if the rep sourced the deal and sold through the partner, or if the deal was generated by the partner?
MP: It all depends on your rules of engagement and what you want to set in place. If you want to have different compensation approaches depending on the lead source, that's definitely doable. Regardless of what you decide on, just make sure it's all agreed upon and acknowledged by sales ops, AEs, sales management, and the partnerships team.
Q: Do you compensate sales management for this as well or not?
MP: It depends on what your sales ops and CFO recommend, in terms of comp planning and quota structure. I've seen programs which offer quota relief to the AE only, and programs which offer quota relief to the AE and the frontline manager. Talk to your CFO and figure out a strategy that would work best for your business.
Q: Do you offer quota relief?
MP: Yes, but again, this is all bespoke and particular to each company on how they want to structure and compensate channel deals.
Q: How much of the ongoing support work is done by a partner and how do you compensate your account management team if they have to provide support or upsell?
MP: It depends on how much you want them to do! If you design your program to require partners to manage and own post-sales, then you would expect them to do all of it.
Ideally, your internal AEs wouldn't be supporting or upselling a customer who is owned (billed) by a channel partner. Instead, accounts/customers should be owned (billed) by either the company (direct sales) or by the partner (indirect or channel sales). You should ensure a clear ownership of each sales stage. As an example, if a customer is billed/owned by a solutions partner, that means the partner provides post-sales support and is in charge of renewing the customer, and there's no concern for overlap with the account mgmt team.
On the other hand, if a services partner is only doing post-sales services engagements for a customer, and that customer is billed directly, then it won't matter if the account mgmt team upsells the customer. It can be a bit complex, so it’s important to establish clarity between your sales team and your partners so everyone knows their role.
Q: How should we set our pricing relative to the partner if it’s part of a larger systems implementation? For every dollar sold by the company, what is the amount typically sold by the partner in software and/or services? How does this vary by geography?
MP: Partner programs typically do not allow partners to sell software below list price, otherwise this cannibalizes direct sales. If by pricing for services, you can allow your partners to price their hourly services as they see fit. Depending on the complexity of your product, you should recommend to your customer that they budget anywhere from 10-20% of the purchase price towards services and implementation costs.