Channel Partners

Channel partners are important to scale sales. For early-stage companies, focus on creating a single-channel model first, then replicate. Good partners offer complementary solutions and have a vested interest in your company’s success (e.g., increased customer usage of your product enhances the retention rate of their solution).

The commission structure/revenue share for channel partners is typically based on their level of effort in facilitating a deal. For illustrative purposes:

Follow similar logic for referral partners. Make sure there’s still a sufficient margin to cover your direct costs after channel compensation.

Resellers buy software products from manufacturers, usually in bulk, and then sell them to their network of clients. Working with a reseller can help you leverage the reseller's established relationships, market knowledge, and sales infrastructure, helping you to enter new markets more efficiently and effectively.

Resellers can add value by offering additional services such as customer support, training, and customization, which can be particularly important for complex B2B SaaS products. They also typically handle billing and collections, reducing the administrative load for the software company. However, working with resellers also has its challenges. It's important to carefully select and manage resellers to ensure they represent the product correctly and maintain the quality of service that end-users expect. Effective communication, ongoing support, and performance monitoring are key to a successful reseller relationship.

For reseller relationships to be effective, concentrate your efforts with 3 or fewer resellers and don’t extend too far. Otherwise, each reseller will be limited in how much they can sell for you and may not invest as many resources in training and support, which diminishes the value they bring. Reseller relationships should be mutually beneficial for the company and the reseller. You invest in them, they invest in you.

White labeling is a practice where software produced by one company is rebranded and sold by another company as its own. This allows companies to offer software solutions without developing them in-house. The original manufacturer provides the software, often with customization options, which the reseller or another company then brands with their own logo, name, and identity.

White labeling with a targeted reseller (i.e., an IT outsourcing company with an existing user base) can be a good sales channel when it's a quick and clean arrangement. Allow minimal branding flexibility and avoid investing significant resources. For example, you can offer customizable logos as a paid feature. Don’t give an MSP your whole code base and allow them to compete in the marketplace, or enter into a lengthy negotiation cycle.