Whether you run a startup or a scaleup, you probably already figured out that you won’t be able to accelerate your business without relying on partnerships, especially in the SaaS industry.
In this guide, we will help you understand everything you should know about Partnerships and how it could serve your company.
What is a partnership?
A partnership is a fairly simple concept to understand. Basically, when two or more entities decide to join forces to accomplish something that they could not have accomplished on their own, it can be considered as a partnership. Nevertheless, it’s often difficult for startups and scaleups to implement it.
Usually, companies only focus on defining a joint goal, a vision and a strategy for the partnership. They don’t pay enough attention to the execution and tend to forget that each company has its own culture, priorities, challenges, etc.
Therefore, you can’t expect your partners to operate exactly the way you do, and vice versa. You have to find common ground. And to do so, you must be prepared to dedicate time and energy to your partner and, above all, to go into the details of every aspect of the partnership.
Some of the most successful SaaS companies – like Slack, Trello, Box, Spotify, or Zendesk – have perfectly implemented their partnerships strategy to achieve growth. Actually, you can leverage partnerships in many ways: for customer acquisition, platform interoperability, system integration, brand awareness, geographical expansion, or even for filling a gap in your value proposition – the list goes on.
But before going into more detail, here are the most common types of partners you could work with.
The most common types of partners for SaaS companies
As technology evolves, the lines between the different types of partners become increasingly blurred. Yet there are a few general categories in which partners still recognise themselves:
Resellers/VARs (Value Added Resellers)
After all these months or years of work, you finally managed to have a stable and scalable version of your product. You also convinced a number of customers and now you want to accelerate your sales.
Why not work with resellers?
Indeed, resellers can be an excellent way to accelerate customer acquisition. Not only will they quickly tap into their large client base and find some interesting opportunities for you, but you will also be able to leverage their coverage and increase your sales in areas where you’re not present.
Additionally, you’ll have to address some key points such as the partner compensation (revenue sharing, commission, etc.), training, onboarding, potential channel conflicts, etc.
Most of the time, resellers are a great fit for:
- A simple product to sell and configure
- A product that can complement their own portfolio
- A product that can suit their usual target market and buyer personas
- A product with traction and great potential
- A product with a short sales cycle
- A product designed for SMB or Mid-Market
Of course, you may have exceptions, but at least you have the main guidelines. If you have a more complex product that should be integrated with other solutions in order to work, maybe you should partner with a system integrator.
According to Gartner, a System Integrator (SI) is “an enterprise that specialises in implementing, planning, coordinating, scheduling, testing, improving and sometimes maintaining a computing operation. SIs try to bring order to disparate suppliers”.
These partners will be really important for you if your products are complex and need to be integrated into an existing IT ecosystem. Indeed, they can support you from pre sales consulting to installation or managed services, personalising the solution to fit the end user’s unique needs.
Most of the time they won’t resell your product. You’d rather be in a co-sell approach and they’re used to work with large accounts at a global scale.
ISV or Tech partners
ISV or Technology partners offer a technology that is complementary to your product or technology. Basically, they will help you improve your value proposition, which is the case for the partnership between Apple with the iPhone and Google.
Concretely, this partnership allowed Apple to get Google Maps on every iPhone which was a key component to make it the first smartphone that truly appealed to consumers.
Take another example between Spotify and Waze. On one hand, a music streaming application and on the other hand, an application which provides live traffic data, traffic alerts and GPS. This partnership allows users to have Spotify embedded in Waze.
“This allows Waze users to begin navigating to their destination right inside the Spotify app on iOS, and also allows complete access to Spotify playlists from the Waze app when navigating. It lets users skip tracks, play and pause and more.”
This was obviously profitable for both apps’ users as it remains the kind of incredible value proposition that a technology partnership can bring when done properly.
Hubspot highlights perfectly how you can use Agencies to drive business. Being essentially marketing or digital agencies, if your key personas are marketers or e-commerce specialists then they will be able to help you.
Consulting or advisory firms
These partners are the most difficult to manage because they want to remain neutral. If your product is really relevant for their customers and can help them thrive they will recommend it. These firms usually have direct access to executives at top companies so their recommendation is really valuable.
Keep in mind that they will recommend you because your product is a really good fit for their client and not because they are expecting something in return or potential fees. Therefore, it is generally difficult to get them to join a partner program.
What's a partner program?
A partner program is a business strategy that companies use to encourage their partners to recommend or sell their products.
It includes many components such as training, revenue sharing (which can be different depending on the partner’s level), onboarding program, resources, support, SLA (Service Level Agreement) etc. It’s a sort of guide that supports startups or scaleups to manage their partner ecosystem.
As you can imagine, before moving forward with the creation of your partner program, you’ll have to make sure that it will be aligned to the company strategy, business goals, processes and culture.
Don’t forget to define a clear value proposition for your partner. A solid value proposition automatically gives you a foothold. It’ll determine whether people will bother learning more about your solution, services, or product. But this is not the only thing you should consider before building a partner program.
Things to consider before building a partner program
There are lots of things to consider before creating a Partner Program – let’s have a look at those.
You have to make sure that your company is ready for this stage.
For instance, if you’re willing to build a network of resellers, are you sure that your finance team has everything set up in order to invoice the partner and not the client directly?
How are you going to manage renewals, first-level support, requests from the clients but also from your partners?
Are you sure your teams really understand why the company is taking this direction?
If you choose technology partners, are you sure that you are able to expose your APIs while ensuring the necessary security?
Will you be able to support your partners without negatively impacting your product development pace? Will your teams know how to prioritize?
Depending on your company’s level of maturity, your resources and the value that partners can bring you, you will have to make trade-offs. And the more you are aware of this upstream, the more pragmatic your decisions will be.
The cost of building a partner ecosystem
First of all, you need to stop to compare your direct sales team with your partner network. Although it is not necessarily more expensive, it is not cheaper either. It can be more costly than your direct sales force just as it can be less expensive. It all depends on your vision and the value you’re expecting to get from your ecosystem. You need to consider your partner network as part of your go-to-market strategy.
For example, some companies use their partner network for particular market segments or areas that they could not have covered as efficiently on their own.
Therefore, it is clear that the partner network should be viewed as complementary to a direct sales force. This is why you should take the time to think about your strategy upstream.
But let’s get back to the cost of your ecosystem partners (by the way, the term investment would be more appropriate). You have to take into account several points, with some simple to calculate and some a little less so.
People: You will certainly need one or more people to manage your partner ecosystem. Don’t think that your salespeople will be able to manage a network of partners in addition to their usual work. Or it means that you are not yet ready to create a real partner network.
Unless you dedicate the time, resources, people, and energy to making these partnerships work, they just won’t work… For deep partnerships, if you don’t invest in the people component, then there’s no way you’re going to see a successful outcome.Aaron Levie, CEO of BOX
Commissions or revenue sharing: If you work with resellers, you will need to think about how you will reward their efforts.
Adaptation of internal processes: You will have to adapt your internal processes so they remain relevant for your customers but also for your partners (billing, support, marketing, legal, etc.).
The product: If you work with technology partners, you will need to make sure that your product has been designed to facilitate interactions with other products. You will also need to provide your partners with technical documentation, make sure you are legally covered, etc.
Co-marketing: You’ll need to work on marketing campaigns with your partners. This means your marketing team will need to spend time with your partners, which needs to be planned ahead to avoid overwhelming your teams.
Legal: It’s a no-brainer, but you’ll need to make sure that the contracts between you and your partners take into account everything that’s necessary. For instance, the protection of your intellectual property, the relationship with your customers, liability, disputes, payment cycles, etc. Of course, you will learn as you go along, but you will still need to plan a minimum of things before you start.
Sales: If you’re working in a co-sell model, you’ll need to train your teams so they know how to work with partners, when to leverage them, how to synchronise on deal progress, how to engage with joint clients or prospects, etc.
Training & onboarding: You will have to constantly train your partners (new or existing) on your new products, on how to position them, on the evolution of your tools, etc. More and more companies are offering online training to limit costs but you’ll have to provide this.
What is channel conflict?
Something essential to know is that channel conflict will happen from time to time and will usually be depending on how clear your rules are. Primarily, a channel conflict is when your direct salespeople compete with your partners for the same business.
Often, it’s just because someone doesn’t want to give up the commission, which can be understood. It can also be due to pricing misalignment so you need to establish clear rules and escalation processes to avoid the frustration of your partners or your direct salespeople.
But channel conflict is not only about direct salespeople against partners. It can also happen between two or more partners and might result in some making some aggressive discounts to win the deal. Once again, you have to determine some clear rules.
For instance, you can define a specific area or customer segment for each partner, make them register their deals in your system, etc. This is something really important if you want to have a healthy ecosystem.
How to identify and recruit the right partner?
The 20/80 rule is also true for partner networks, especially if you intend to have many partners. Only 20% of your partners will bring you 80% of the total value. So don’t be afraid to be selective and choose the partners that can support your strategy.
There is a variety of criteria to consider when selecting your partners. Below, we have compiled some non-exhaustive key points that we suggest you analyse to identify the right partners.
Depending on the partnership model you wish to implement some points will be more important than others.
But if there is one thing you should keep in mind, it is that you should not try to partner with everyone. If you do, it will mobilise a lot of resources for an outcome likely to be disappointing.
Complex or simple product?
Some companies offer products that are very simple to market such as office automation tools (ClickUp, Dropbox, etc.) while others offer fairly complex products such as ERP (Enterprise Resource Planning).
Depending on the products or services you offer, you must therefore ensure that your partner has the necessary capacities to market them. That is to say, you will have to assess the capacity of the partner’s sales teams to deliver the right message.
Does your potential partner already have similar products or services in its portfolio? Can he or she promote your product to a customer without undermining its credibility? This point is particularly relevant for reseller partners.
Just as you know your target industries and your customer typology, you also need to identify the partners that are relevant to these industries or customers.
Indeed, if you are selling enterprise software, don’t recruit partners who only work with SMB customers. You will not be in the best position for a successful partnership and the same is true for industry.
With the acceleration of the SaaS model, many solutions are now Plug & Play and require practically no technical intervention, while other solutions require months of implementation.
In the same way, you have partners who are only interested in complex implementations because they have the resources to lead this kind of project, and partners who are not interested in complex implementations at all. Again, it is important to choose the right type of partner.
Innovative product or commodity
Innovative solutions attract many partners, often out of curiosity at first, but also because they do not want to miss out on new market trends. Some partners are more accustomed than others to launching new products on the market.
They are aware of the investment involved and are prepared to invest for the long term. If you have an innovative solution, it is rather towards this kind of partner that you should be directed.
This is probably the most challenging point to assess and yet it is quite important. You will need to multiply interactions with your potential partner to be able to measure cultural fit.
For example, try to evaluate the responsiveness of the partner, the way he or she treats customers.
Do you have the same qualification criteria for an opportunity? Are your interests aligned? These are only suggestions but think about analysing as many elements as possible to find out if the relationship between you and your partner will be simple and fluid or on the contrary complicated.
Local, regional or global partner
Depending on your ambitions and the area coverage you want, it may be interesting for you to work with local, regional or global partners. But working with a global partner requires a completely different organisation than working with a local partner.
Do you have the capacity to support the partner’s activity in several countries? Can you set up global governance for this partnership? Being fully aware of your capacities will help you better choose the right partners to work with.
Contribution to the overall revenue
Resellers can help you generate more revenue and accelerate your growth. Depending on companies, resellers represent between 10% and 50% of the company’s revenue.
During the first quarter of 2014, thanks to its partners, Hubspot managed to generate 33% of its revenue and 43% of the number of new customers. Xero generates approximately 50% of its business through the partner ecosystem.
Another example of success is Shopify. In 2017, Shopify made $673 million in revenue, while its partners generated approximately $800 million in revenue. This shows how the company and its ecosystem are complementary. According to Shopify, 16,500 partners referred to new merchants in 2017. The key point is that Shopify is able to generate value for their customers and partners and therefore for themselves.
In 2019, a study conducted by SaaS Capital revealed that companies with a reseller program grow 5% faster than those that only sell direct.
If you are a SaaS company and are thinking about creating a partner ecosystem to support your go-to-market strategy, you need to be patient. The results won’t show up overnight. But it can really help you accelerate customer acquisition, improve customer retention and build brand awareness among others.
According to Accenture, 81% of companies agree that ecosystems allow their organisation to grow in ways otherwise not possible. But that’s not all: 56% of the executives believed that ecosystems would create a new competitive advantage for their company within the next years. Interesting, isn’t it?
So if you want to leverage the power of ecosystems, it’s not too late. However, take the time to think about what you want from your ecosystem, but also what you are going to offer them.