The Journey to Building a Successful Channel for Your Software Business – Step 1 of 6 | Blog | Insight Venture Partners
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The Journey to Building a Successful Channel for Your Software Business – Step 1 of 6

by Meg Fitzgerald

Step 1: Validate    

You’ve established sufficient revenue and scale. Your product is proven. You have referenceable customers and predictable ARR. Perhaps you have informally partnered with complementary product or services companies in a recent deal or via a joint marketing campaign.

So, you’re ready to dive head first into building out a channel partner program, right? You’re a growing software company. Isn’t what you’re supposed to do? Maybe you’re dreaming about how the partner flywheel will alleviate any new bookings hurdles and open a treasure chest of new ARR.

…Not so fast. Before embarking down the path of building a channel partner program, it’s important to pause, and look at the big picture to understand whether you are indeed ready to (or should) build out a channel partner strategy. Investing in the channel is exciting and can pay big dividends for your business, but it comes with its fair share of risk. The channel is not a magic bullet, flick of a switch solution. Be prepared to invest a great deal of time, money, and effort to get it up and running. Partnering is hard work and having the right frameworks in place to build out a sound strategy is key.

Successful channel execution is the focus of this blog series. The goal is to inspire you to ask the right questions and become attuned to the patterns that could either trip you up or bring you great success. Many of Insight’s portfolio investments are at the point in their growth trajectories where they are considering building or strengthening their indirect revenue stream. Insight Onsite has channel expertise to help you grow and navigate the partner path. I know from my operating experience at a SaaS company that there is a right and a wrong time to invest in channel, and building one out requires a great deal of discipline, patience and compassion. Start putting yourself in the partners’ shoes now!  

Our 6-step journey to channel success provides a framework to validate and define a channel strategy, recruit and enable your partners, and ultimately grow and analyze your program. Each of the posts in this series will explore the crucial steps necessary to set you down the path to achieving an efficient and powerful partner flywheel.

steps

 

And, with this preamble, let’s start at step 1. It's critical to take the time to carefully validate your reasoning for “why channel?” before launching into any solidified planning.

Validate – It starts with why

Why is a simple question, but it isn't an easy one. Take the time to dig into the motivations behind moving to the channel in order to identify whether you truly understand the reasoning and whether that reasoning makes sense.

The very first question you should ask is: Why will a partnership make the customer experience better? If the answer isn’t clear, then I would advise rethinking your motivations. Counterintuitively, this is not about what channel can do for your business, but what it can do for customers. The goal of any partnership should be to bring added value to the end user experience. That value could be in the form of seamless implementation, better support, stronger user experience, or verticalized domain expertise.

After you consider the customer, you must understand why a partner would want to work with your company in the first place: Why will working with you benefit the partner? For example, partners could sell more to their existing customers in order to maintain a stickier relationship, fill gaps in their customers’ pain points, or drive incremental business for themselves. If you feel confident with your answers to these two questions…great! Onward. But, ensure you’re maintaining a customer and partner-first mentality throughout your planning process.

Partnering is by no means a “build it, they will come” scenario. It’s paramount to take the time to validate why you’re looking to invest in channel partners. Maybe your answer is as simple as: “Direct sales have plateaued.” But, if you don't know why your direct sales aren’t growing like they used to, you certainly should not assume that investing in channel partners will resolve the issue. Can your products offer partners added value they aren’t getting elsewhere? Is there anything that should be fixed or improved before building out your channel strategy?

Validate your business readiness

Some additional channel readiness questions are below to help you think through whether your business is equipped to hit the ground running with partners. If you answer “yes” to more than 5 of the questions below, your business is more than likely ready, or at least on the path to channel readiness.

  1. Have you established a predictable ARR engine? If you are primarily a direct sales business, it makes sense to reach predictability through your direct selling motion before building out an indirect revenue source.
  2. Have you achieved product-market fit? The channel is not going to push the ball uphill. Pull from the market is a necessary precursor to get partners onboard.
  3. Do you have reference customers? Having repeat customers that are willing and able to speak to the value your business brings is incredibly important. Without referenceable customers, your partners aren’t going to have the confidence they need to invest in selling your product.
  4. Are your products/services documented and understood by a third party, hence ready for a partner to implement/sell? If your products/services are overly complicated and lack clear and simple documentation, chances are partners will have a difficult time getting up to speed on sales and technical implementation. We will get to this later in the “Enable” step, but keep in mind that direct sales enablement is going to be a different beast than partner sales enablement. These two groups care about different things. Materials can be leveraged from direct to partner, but ultimately, direct and partner enablement should be personalized to the things each party cares about. 
  5. Is your messaging easy to understand? A good test here is to take a close look at how well your direct sales reps understand and articulate your value proposition and product marketing messages in a selling situation. Are they able to answer tough questions from prospects? If the answer is “sometimes” or “eh, maybe not” – an external party (a partner) is probably not going to do any better. Make sure your value is clearly defined.  
  6. Is your sales cycle overly complex? Clearly defined stages of every sales cycle are key to getting the deal done in the most efficient manner. It’s important to have assigned roles and responsibilities, timelines, and stages for both direct and partner selling motions. For example, maybe there is an assigned SA for partner-sourced deals that lives and breathes partner. That person is the partner’s technical “go-to”. Whatever it is, be sure you have your deal cycle execution mapped out.
  7. Is your product relatively straightforward to implement? Software is complicated! There may be several technical integration points (some or most of them customized) and phases of implementation in order to get a customer up and running, but if that is not clearly outlined, a partner will shy away from investing. Speed to market is important. The faster a customer is off to the races, the faster partner services can be put to work.
  8. Do you have alignment across functional teams? Channel is not a siloed function. It spans all departments in a business. If product isn’t on board, you have a problem. If marketing is unsure, you’re in trouble. No partner support on the customer support side of the house? Well, that’s an issue. Ensure you are gaining alignment and clearly defining stakeholders (ideally with quarterly channel success targets attached to them) and systems across all functions.
  9. Is there executive support and budget allocation? Your leadership and your board must be fully behind your efforts in order to make channel successful. They are your biggest cheerleaders. It’s important they understand that giving up margin in the short-term will pay dividends in the medium to long-term. Building a channel takes time (24 months should be allotted before seeing any real traction). Without understanding and enthusiasm behind the investment, you will be fighting a losing battle from the start.  
  10. Are you ready to dedicate ongoing enablement and marketing resources? As discussed, the channel is not a “flip the switch” solution. In order to arm partners with the right enablement and marketing, you need to hire and invest in the right infrastructure (e.g., deal management software, partner portal, etc.). This is not a one-time thing. Ongoing commitment to enablement and marketing are critical to lasting success.

The graphic below shows how you may outline your own channel readiness factors and areas for improvement that must be addressed before building out the channel. It’s important to have a clear handle on this before diving into the “Define” phase.

graph

If you can confirm that your business is ready to build a channel (or, at minimum know what to fix to make it ready), next up is validating the market opportunity. Bottom line: If you’re failing at direct, you won’t succeed with the channel. The channel is not a panacea. However, it can certainly help your business scale efficiently and effectively into the future. Once you have a compelling reason as to why you are building out the channel, you can move into figuring out how to do it.

Validate the business opportunity

Validating the channel opportunity requires understanding what your goals are and where the opportunity lies. Ask yourself whether any of the below five statements describes you.  

  1. Your product is not stand-alone, so maybe you need partners in order to sell and/or implement it.
  2. You’re looking to reach a new customer segment – moving into the Mid-Market or Enterprise.
  3. You’re looking to reach new geographies.
  4. You’re looking to reach new vertical markets.
  5. You’re looking to reach new buyer personas or lines of business.

Once you’ve examined your business reasons for wanting to build a channel, ask yourself the below questions to ensure that you are ready to start defining what your program will look like. These should be answered for each new vertical market, new geography, or buyer persona you plan to target.

  1. Will the customer be satisfied working with a partner? How does the customer want to engage in the selling cycle?
  2. How does the customer purchase today, and which partners do they currently work with?
  3. What outcomes do you want to achieve? Which target should you prioritize first, and how large is the opportunity?
  4. What is your expected timeline to see results?
  5. How much resource (people, money, time) are you prepared to devote?

From Validate to Define

Initially, you need to validate your channel plans. Why are we doing this in the first place? Are we really ready? Is our product sophisticated enough? Is our brand strong enough? You need to be sure you have a strong reason to take on partners and ultimately be the best partner you can be.

From validation, the next step is defining your partner types and the program you want to build. Stay tuned for the next 5 blog posts in this 6-step series. Insight wants to help your business grow. If you’re interested in learning more, please get in touch and send through any feedback you may have. We are always open to your suggestions. Partner on!  

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Meg Fitzgerald

Vice President, Marketing COE

Meg Fitzgerald joined Insight in 2017 as a Vice President. She partners closely with portfolio company executives to accelerate growth and capture value, specifically through marketing and channel sales strategies. Meg also supports go-to-market investment due diligence and leads Insight's…

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