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It’s easy to get distracted by the allure of channel partners and the belief that these relationships will unlock growth. That is rarely the case. Channel partnerships can be a force multiplier for existing momentum, but are not a substitute for founder-led sales.
The best channel partnerships feel like extensions of your own team. The partner knows your product deeply, represents it accurately, and has direct incentives to succeed. They're not just forwarding leads—they're actively selling, supporting, and growing the relationship.
Pre-$1M ARR companies
If you haven't crossed $1 million in ARR, your default answer to channel partnership opportunities is typically no. You don't have the resources, processes, or leverage to make these relationships work effectively.
The exception is when a partner approaches you representing an existing, active user of your open source software who has urgent, specific feature requests they're willing to pay for. Not just someone aware of your project—someone actively using it with real pain points. Before you say yes, ask:
- Is there an end customer already deployed on our open source software?
- Are they actively using it?
- Do they have real pain points?
- Do they have three burning feature requests?
If the answers are yes, explore the opportunity. Otherwise, pass and focus on direct sales.
Post-$1M ARR companies
Once you've proven product-market fit and crossed $1 million in ARR, channel partnerships become more viable. But you still need to be selective about which opportunities to pursue and how to structure them.
Resellers
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.
Concentrate your efforts
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
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.
Revenue share structure
Focus on creating a single-channel model first, and then replicate it. 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:
- Limited Touch (i.e., platform listing/warm leads & intros only): 10%
- Active Deal Sourcing or Qualified Opportunity: 20%
- Assistance on Closing the Deal (i.e., address customer concerns / overcome objections): 30%
Follow similar logic for referral partners. Make sure there’s still a sufficient margin to cover your direct costs after channel compensation.
Create a shared sales and marketing plan
Build a concrete plan together with agreed-upon deliverables and timelines. This isn't optional—it's how you separate real partnerships from time-wasting relationships. Your plan should address:
- Sales targets and expectations: Be explicit upfront. How much will they sell, and when? If you're targeting 10 customers in Q1 and 25 in Q2, put that in writing. If they miss targets by a wide margin, you need to know quickly so you can reallocate resources. Vague hopes about "exploring opportunities" don't work.
- Lead sharing protocols: Will you share all leads in their territory with them? What happens when you get an inbound lead from a customer in their market—do they handle it, or do you? Decide this before conflicts arise, not after.
- Co-marketing investment: How much will each side invest in marketing this partnership? Who owns content creation? Who manages campaigns? Co-marketing sounds good in theory, but fails in practice when expectations aren't clear. Put dollar amounts and specific deliverables in the agreement.
- Field training specifics: How many of their people will be trained on your product? What's the format—live sessions, recorded materials, certification programs? Who pays for travel if in-person training is required? Great partners will invest in training their team. Poor partners will expect you to do all the work.
- Sales incentives: Consider offering double commission for the first quarter to get them motivated and prove the partnership works. Front-load rewards to create momentum. If they close three deals in their first month, that success builds motivation for month two. If they close nothing for three months, you both lose interest.
- Support protocols: Who handles the first phone call when a customer has a problem? If the partner fields initial support requests, what's the escalation path? What issues do they handle versus what gets passed to you? Define service level agreements and response times. Unclear support protocols kill customer satisfaction and damage both brands.
- Product roadmap alignment: What features are coming that will help them sell? What customer feedback should they funnel back to you? Regular sync meetings—monthly at minimum—keep everyone aligned on priorities and progress.
Before you finalize any partnership, ask yourself: Can I articulate exactly what success looks like in six months? Do we both know our responsibilities? Have we agreed on specific, measurable outcomes? If the answer to any of these is no, keep negotiating or walk away.
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