Setting Up Your First Channel Partnership

Business is humming. You've found product-market fit. Your direct sales team is hitting their numbers quarter-over-quarter. It probably feels like it's time to pursue accelerated indirect growth via channel partnerships. 

But how do you do it? 

Below are 9 steps to help you get started.

Segment Your Paths to Market
Begin by brainstorming with your team on all of the different types of companies that might resell your product. Cross both industries (e.g. software firms vs industry consortiums vs services companies) and offerings (e.g. specific subcategories that you play in). Through this brainstorming exercise you might come up with 5-7 market segments that are worth exploring.

Clarify Your Value Proposition
For each segment, think clearly about why a reseller relationship might make sense. In order for a channel partnership to take off, you need to be able to simply and firmly state, in 1-2 sentences, what's in it for three stakeholders:

• Company Executives: strategically and via a logical revenue model, the C-Suite needs to get it. Quickly. And they need to be excited.
• Partner Sellers: account executives and their managers need to be able to remember what you do and easily understand how they'd make money selling your product -- ideally lots of money.
• End Customers: prospective buyers of your solution need to be able to clearly see how and why they would buy from your partner organization. Ideally, your product would be a simple extension to what they've already bought.

Note that if you struggle to clearly state a value proposition for each stakeholder for a market segment, you may need to remove that segment from your target list.

Identify Specific Companies
Once you have segment clarity, create a list of your top 3-5 target companies per segment. As a rule, I'd recommend that you pursue companies that are at least 10x larger than you from a revenue standpoint. In other words, if you are doing $5M a year in revenue, only pursue resellers that are doing at least $50M a year. Also, look at companies that have already structured at least one channel deal. While you can be the first, it's a lot harder to start something than it is to build on established success, personnel and process.

Create a Target Contact List
To initial dialogue with each target company, we recommend a two-pronged approach: business development and executive/product leadership. Who you start with often depends on your ability to get a warm introduction. Of course, it's generally better to start as high as possible. But, an endorsed intro into someone who is motivated to find a solution like yours can work wonders. LinkedIn 2nd degree connections -- with a tee-up from someone credible -- are great to begin with.

Gang Tackle Your Outreach
Conversely, we've also seen strong success with a two-pronged from within your organization, generally via both your C-team and the head of business development pursuing conversations, sometimes in parallel. You'll probably need a combination of email and phone calls to connect with key prospects.

Maniacally Sell Up, Down and Across
Reseller deals require enormous patience, energy and consensus. Expect sales, marketing, services, product, finance and other stakeholders to weigh-in and want to look under the covers. Deal cycles may be 3, 6, 9 or even 12 months. 

Be Clear on Reseller vs White Label
A pure reseller deal (where your product maintains its unique brand and packaging) might be the optimum starting place in many instances since it reduces friction to market. Plus, many business processes around Ts & Cs, onboarding/setup and support can be managed by your firm. Generally, reseller deals don't have minimum commitments. 

OEM, or white label, deals on the other hand require more work on both sides. But the channel partner benefits through higher margins and clear brand/product ownership. White label deals usually have minimum commitments -- often running into 7 or even 8 figures per year -- given the work required by the product company. Further, it's not unusual for an OEM deal to have an element of exclusivity to it.

Whether you intend to pursue reseller or white label deals, make sure you're clear on your expectations and ability to invest.

Staff for Success
The above provides a rough sketch on how you might start to pursue a channel. Assuming you are able to navigate the process and close a channel deal, make sure that you are staffed to succeed. Large channel partnerships often have dedicated product, engineering, services, support, marketing and sales-enablement resources. These partnerships aren't cheap to staff but the payoff and accelerated growth can be significant.

Consider Supplementing
While tackling a channel via an existing team is generally preferred, many companies don't have the business/channel/corporate development talent in-house at the time they're ready to begin. Further, many may want to test reaction to potential channel partnerships before hiring a full-blown team. 

Firms like Alder Growth Partners can help. With experienced executives well versed in transactions and partner management, we can help you jump start a process -- and provide the appropriate flexibility to turn things over to your full-time team at the right juncture. 

For more information, please contact us.

About the Author
Steve Semelsberger is the Founder of Alder Growth Partners. He has structured a myriad of alliances, reseller and OEM partnerships -- from minimally impactful co-marketing deals to $20M+ white label arrangements, both as a full-time member of high-growth software companies and via outsourced consulting arrangements.

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