How to build indirect sales channels when you’re a start-up
Once a start-up has established product-market fit and a scalable and repetitive sales model, it’s time to start thinking of how to accelerate revenue growth. Leveraging channel partners can be a great way of doing just that.
When the timing is right, channel partners can enable a start-up to test new markets and find new ways of getting customers. They can also help complement the product value proposition, and bring new and valuable sale and support skills. This is a simple framework to start executing your channel partner strategy effectively and avoid a number of common pitfalls.
Preparing the groundwork
The precondition for building a successful channel for a start-up, is to have reached the product- market fit phase. At this point it has created a successful product with a functioning prototype and measurable commercial traction. The value proposition is clear, and customers are starting to see how the product is solving a problem for them. They want it and they are willing to pay for. Users are engaged, revenue is trending upward, while the economic model is holding up.
Simultaneously, the start-up would have started to build a direct sales force to got to market and engage its first cohort of business customers. This phase gives the team the time it needs to hone its pitch, identify the buyer’s journey, settle on a sales methodology, and write up guidelines for a customer qualifying matrix. This knowledge is essential to create channel programs and enable partners quickly. After this point, the start-up is ready to start recruiting and on-boarding its first channel partners.
A model to execute channel partner on-boarding
When thinking of recruiting channel partners, it is convenient and useful to split the execution in three successive parts: Engagement, Development and Management of partners. Commercial success hinges upon successful execution of all three parts.
In the engagement phase, the start-up progressively builds a landscape for the various categories of partners it wants to consider. It identifies why it thinks there is strategic fit for both parties, the size of the opportunity and the challenges. It also ranks and sorts the various potential candidates based on a number of criteria and its preference. In presenting its value proposition to partners it will need to make the case that the new product will generate an incremental revenue stream for them. Three elements will be essential in this pitch: the size of the new opportunity, the problem the start-up is successfully solving and the fact it has established product-market fit.
The next phase is about putting in place a partner development plan. As soon as a potential partner expresses interest in collaboration, it will want to know what the expectations are, its role and responsibilities. The start-up will need to be ready with program assets such as sales and marketing guides, sales tools, data sheets and other packaged demand generation activities. The latter being repeatable, standardised activities that can be deployed and executed systematically. Training and coaching are a very important part of this phase and a key success factor on the long term. A failed attempt at on-boarding a channel partner will make it less likely the same partner will want to give it another try.
The third phase is partner management. It is good practice to establish yearly and quarterly plans with goals, activities and KPIs. Partners will appreciate a periodic schedule of reviews, meetings and disciplines to stay in close touch and establish good collaboration. This phase requires consistency in the approach, constant revisiting and churning.
Common objections and way forward
Throughout these execution phases, it is common for partners to raise objections. Here are five typical objections and suggested responses.
Firstly, a start-up might look too small for large players to really want to partner with. A good way around this would be to focus instead on the sizable business opportunity and the disruptive potential of the product.
Secondly, partners are slow to respond, or they may lack commitment. This is common of large players who are comfortable with the status quo. They think they have too much to lose with a new disruptive product. In this case, start–ups will benefit from identifying partners who have a challenger attitude, and more appetite for risk, even if they are smaller. Larger partners tend to move after seeing a smaller challenger threatening their positioning.
Thirdly, partners are unconvinced of the product- market fit. In this case, they might say that “customers are not ready yet for the product”. They believe the product is still an early adopter play, and they prefer to wait for the mainstream market to emerge before investing. A way to address this objection is to test the value proposition with a number of strong customer relationships the partner has, and involve senior sales managers who could offer a positive opinion and become advocates.
Fourthly, partners see the direct sales force as a rival and competitive force. In this case, it is essential to reframe the conversation to make a number of points. Firstly, to show them the size of the opportunity, and make the case that there is enough headroom for everyone to grow. Secondly, it is essential to let them know that the direct sales team is sharing with them the knowledge they are acquiring, and that by doing so they want them to succeed. Everyone will be better off if the start-up acquires market share fast. Finally, prepare partners for collaboration with the direct sales teams. This will be necessary insofar as the channel will act first as a leads generation engine, requiring the support of the direct sales force to close deals. It is fine if at first commissions are paid to both parties, in order to ensure growing the customer base. This will make collaboration smoother.
Fifthly, partners report back that sales cycle take too long to close. This may result in a partner shifting focus to other opportunities or “lower hanging fruits”. The best response is to establish a narrow and strict segmentation, and guide the partner’s effort onto the chosen target group. For example, it might be best to start with the mid-market and a specific industry vertical, as opposed to Enterprise customers. Another solution can be to hand over qualified leads between partners and the direct sales force earlier, to close faster.
In conclusion, channel partners are instrumental to accelerate a start-up’s growth strategy. However, to ensure success, start-ups have to take the long-term view. They must also invest in dedicated resources to ensure proper partner on-boarding, development and management. This will also allow them to navigate the most common pitfalls, as they arise, and in a methodical manner.
