Choose your channel partners wisely

If you read the first post in this series, you will know that there is often a phase along the Technology Adoption Life Cycle when scale becomes a real possibility. But, immediately before that can happen, there’s almost always a chasm which has to be crossed.

Early stage companies, and especially those which develop new services in the B2B space, tend to find their customers from three sources – their existing contacts, the contacts of their contacts, and genuine innovators and early adopters. But, when the first few logos start to appear on their website, suggesting that the firm’s credentials are sound, the expected influx of new prospects often fails to materialise.

It’s at this point when many firms have their first thoughts about intermediaries: “Surely there are companies already servicing our target market who could simply add our service to their portfolio, build out their offer, and generate incremental revenues for them and for us?” The logic feels persuasive. It’s one of those seemingly obvious ‘hey presto’ moments.

Then, it wouldn’t be unusual for two somewhat opposing factors to come together. First, we tend to believe that it’s only us who can sell our service to those big, juicy, impressive, masthead accounts, so we reserve them for ourselves. And second, we think that channel partners must surely be a low-cost route to market, as all they have to do is to bundle our service in their proposals.

Of course, we’re likely to be wrong on both counts. So let’s consider what the real options are.

Ask yourself these 3 key questions

There are three questions we need to look at first: speed – how quickly can we accelerate through the revenue curve on our own; access – how easy will it be for us to access the right contacts, in the right accounts, and at the right time; and cost – what’s the real cost of acquiring the next wave of customers?

Speed isn’t just about us. It’s also about the receptivity of our prospective customers. Access is all about contacts, referrals and entry points. And cost, and especially CAC – Customer Acquisition Costs, is one of those measures which any funder is likely to monitor as one aspect of cash burn.

It’s not always the case, but well-chosen intermediaries can help with all three of these issues. They can help to make our service seem more appealing, or maybe less risky; they can smooth the path to connecting with new contacts in new customers; and the overall costs, when compared with the potential revenue gains, can make for an attractive equation.

Channel partners of one type or another form a sizeable and important part of the technology go to market landscape. At one time or another, most companies in the B2B space need them – not always as the sole route to market, but often as part of a broad swathe of touch-points with existing and prospective customers.

As we explained in our last post, in utterly simplistic terms, there are three types of intermediary we could work with: resellers – those who bundle our service with theirs, and then take responsibility for selling the whole offer to their customers; referrers – those who are willing introducers, whether that be to their customers, their prospects, or their broader contacts, and where we are in charge of making the deal happen; and hosts – that’s the ecosystems of major software vendors where we can run in their slipstream, offering bolt-on applications which build out their offer, but where the relationship is most likely to be hands-off.

Categorise your resellers carefully

Resellers come in a bewildering array of flavours, but the most important variable is the degree to which they are dependent on you and your time and expertise. They all tend to fall somewhere along a continuum which can be divided into three – those that are almost completely dependent on us to consummate a sale; those that are interdependent – while we need them, they still need us for it to really work well; and those who have become either completely independent of us, and can make a sale unaided, or our involvement is absolutely minimal.

Sadly, it’s not unusual to think that we’ve appointed a team of resellers who will quickly become completely independent, but in reality find that they need way more hand-holding that we had envisaged. In reality, they turn into little more than providers of tepid or warm leads where we do almost all of the work. Oftentimes, we are so pleased to have signed-up some high profile resellers that we fail to work through all the process interlocks needed to really make it work – and there will be more on that in a future post.

A neglected route to market is the introducer or referrer. With this type of relationship, it’s acknowledged upfront that it’s our responsibility to do all the leg-work, while their job is to connect us with useful contacts who can help us break into an appetising account. Generally, consultants and other professional services firms are reliable introducers. They may try to position themselves as more than that, but the reality is often such that while they may help with positioning and framing the offer, the heavy lifting of selling will be down to us.

Then there are the software giants. While they may not be considered a conventional route to market, their ecosystems can be immensely valuable markets to play in. Some of these software vendors go out of their way to cultivate their wider network, since they understand the value of the breadth and depth of a healthy portfolio of solutions. While no one else will do the selling for you, close alignment with these vendors can result in valuable recommendations and introductions to prospects already attuned to your type of service.

Tailor your offering carefully

With each of these types of channel partner, none of the positive gains comes easily. It’s essential that you can fashion a viable proposition which is aimed directly at the needs of your target partners. And that’s what we’ll look at with our next post.

This post was produced in partnership with Richard Nockolds, Fugleman.