3 Tips for Choosing the Right Channel Partners (Channel Journeys Podcast with Rob Spee)

    Listen to the podcast. Aired on June 2, 2021.

    Choosing the right channel partners.

    Table of contents:

    • Recruiting the wrong channel partners
    • How to avoid recruiting the wrong partners
    • Have the resources and mindset to support large channel partners    
    • Don’t rush into new partnerships    
    • Is the partner a cultural fit for your organization?    
    • Have a term sheet for channel partners    
      • Underperforming channel partners    
    • Understanding and researching partner companies before recruiting    
    • Pitfalls of companies building a channel    
    • Knowing your ROI and your channel partner’s ROI    
    • Partner program fees    
    • Conclusion   

     

    Rob Spee: Today we're talking about finding the right partners to grow your business. That's a challenge that most of us face in running a channel business as you're building, growing and maintaining your ecosystem. We're always searching to find the right partners.  

    Recruiting the wrong channel partners

    Rob Spee: One of the challenges that we're having, and I think a lot of channel managers face this, is finding the right partners. And it's like hiring, when you recruit the wrong person, it's really expensive. You can waste a lot of money. It's astronomical, how much money is spent when you make the wrong choice.

    The same is true with partnerships and it's really tough. We're looking at who's going to be a good delivery partner, who's going to be a good sales partner? I was wondering if you could share your experience and what you've learned and how do you pick the right partners?

    Paul Bird: Channel partners are absolutely great. They give you the ability to grow your business and bring you into new accounts.
     

    "If you get it right, you get the right people, then you see sales increase and you get new and exciting opportunities. If you get it wrong, or you miss the mark, not only does it cost you a lot of time and a lot of money, but it can also impact the market's opinion of your brand because you have the wrong mix in place."

    There was a study done late last year from Accenture. Where they looked at channel partnerships, and established that only 7% of channel partners managed to hit at least 65% of their target sales revenue. So this is quite common, where you have recruitment efforts where we're just connecting with the wrong people.  

    Rob Spee: If you're hiring your direct reps and only 7% of them are hitting their targets, you're in a world of hurt.  

    Paul Bird: And they're not working for you anymore. I can tell you that. If your sales team for direct are not hitting or exceeding the targets, you're looking for new people on your team.  

    Rob Spee: The traditional channel recruiting method was spray and pray, right? Let's recruit a couple thousand partners and see which ones stick. I was just thinking, what if that was your approach as a direct sales leader? I'm just gonna go hire 100 people and see which ones can sell?  

    Paul Bird: If they were all working on straight commission, fine. Then there's no cost outlay to the business. But still, you have to think, you've got the wrong people out there pushing or sharing your message as a brand and people listen. How many attempts do you get going into the same account? When they've decided not to do business with you, it's pretty well one and done. You don't get a second chance to make a good first impression, as they've always said.  

    Rob Spee: If a bad rep is out there really disparaging your brand. It's gonna be a while before you can get back into that account and have another run at it.  

    Paul Bird: If you can ever get back in. Sometimes when the door is closed, it's closed for good.  

    Rob Spee: With partners, not only are they closing that door, but they're closing your door as a channel leader with your sales team. Now they've got a bad impression of you as a channel leader.  

    Paul Bird: As soon as your name, from a company perspective, is tied to a bad experience. Now you are fighting an uphill battle in order to earn that account.  

    If you have direct sales reps that are working off of a set of named accounts, they've got 100 accounts that they're going to go after, and your name has been dragged through the mud previously, it's going to be really difficult not only for a direct rep, but for a channel partner to make any headway in those organizations.  

    Rob Spee: We've all had those partners who slip up, right? There are good partners who slip up. That happens, and you can deal with it. But the partner who never gets it and just continuously slips up and is dragging you through the mud, those ones you’ve got to get rid of quickly.  

    How to avoid recruiting the wrong partners  

    Rob Spee: Is there a way to avoid recruiting those types of partners in the first place? What have you learned? Maybe some tips or tricks that you've used over the years. Maybe at Magentrix you're even advising some of your customers as they come to you for your PRM solution on what they can do?  

    Tip #1: Have a well-defined channel strategy 

    Paul Bird: Number one, where everyone needs to start off, is a good, solid, well-defined channel strategy. It’s first and foremost, the old adage, you fail to plan you plan to fail. Having that channel strategy in place is really critical.

    As you're building that strategy, every company has or should have their ICP, their ideal customer profile. But as part of your channel strategy, you also need to define the ideal partner profile. Who's the best type of channel partner that you want to have within your network?  

    There are some things that you need to ask yourself like:  

    • What are you trying to accomplish with this program?  
    • What's going to drive the growth of your business?  
    • What makes you different?  
    • What's your unique value proposition?  
    • What's important to you in that partnership?  

    This really all helps define that channel strategy.  

    And you have to make it specific. You have to know:  

    • Who's doing what?  
    • Is there a clear definition of your target market?  
    • Are you planning to work with referral partners or affiliates?  
    • Are you going to co-sell?  
    • Are you going to let the partner take the lead on the sales opportunity?  

    Defining that channel strategy is really key as the starting point to recruiting the proper individuals that are going to be members of that program.  

    Rob Spee: So that's about, what are we really trying to get from the channel? What are we looking for? What are we going to do? What is the partner going to do? What are the strengths or characteristics of a partner who is going to be able to deliver?  

    Paul Bird: Exactly, and the resources that you're going to provide to them.

    "It's completely pointless to start recruiting channel partners if you don't have the resources available to train them, provide them sales and marketing collateral, and support them through their efforts."

    Having that channel strategy in place and making sure that it evolves as the business grows, is also tremendously important.  

    Tip #2: Define the ideal partner profile  

    Rob Spee: What are some of the key points as you're defining the ideal partner profile? What elements of that are really critical?  

    Paul Bird: You should consider, first of all:

    • Are they capable?  
    • Are they ready?  
    • Are they willing?  
    • Are they able?  
    • Do they have the same mindset as you do?  

    Then we start getting into the specifics:  

    • Do they have a partnership style mentality?  
    • Are they the partner that's going to be take, take, take and no give?  
    • Technically, are they a fit for your organization?  

    Then we start looking at:  

    • Does their team have the right skills, the right experience?  
    • Are you both in alignment from a values perspective?  

    Then one thing I think more companies should look at is, are they stable? Are they financially stable? Are they stable from a headcount perspective? Because the last thing you want to do is invest all of this time and money into channel partners only to find out that they're really on economic rocky footing.  

    Can channel partners be too small or too big?  

    Rob Spee: Is there a partner that's too small?  

    Paul Bird: It all depends on your channel strategy and your goals. I think that you can have a really effective one or two person operation. If they're extremely well versed in your brand, they know your unique selling proposition, and they know exactly what your market is, and are completely self-sufficient, then those are great partners to have. I wouldn't say that they're too small at all.  

    At the same time, maybe a partner is too big. You become lost in their offering if they seem like they're spread too wide.  

    It really comes back to that channel strategy.

    "Once you've identified what it is you want to accomplish, the traits of the partners that you want to have in your program, define and set those criteria."

    Those are the first two tips on how to get started with a great channel program.  

    I'm guilty of this as well. Early on in my channel career, I would take literally anyone that knocked on my door and sign them up as a channel partner. Typically, a lot of organizations have this 80/20 rule, where 80% of their revenue is coming from 20% of your partners. Mine was more like 95/5. I had five really well producing partners, and then I had 95% that weren't really producing too much at all.  

    That comes back to making sure that we have that ideal partner profile, understanding all of those capabilities.

    Tip #3: Keep a scorecard for channel partners  

    Paul Bird: The third tip is to score them. Look at your capabilities, understand which ones are important, the top of your list, which capabilities they must have 100%. Maybe second is nice to have.  

    Then also track the non-starters. So if I see a partner with a trait that I've defined as not going to help my business. Maybe that's representing a competitive solution or something like that and you don't want to put them in the middle of who they should choose. Then make sure that you're willing to knock them off the list, and be selective.  

    That is really the secret to making sure that you've got a vibrant, healthy channel.  

    Evolving your channel strategy as you grow  

    Paul Bird: But realize that it's got to evolve. What is good for you when you're a brand new startup, you've decided your route to the market is through channel, you've got your strategy, you've got your ideal partner profile, you know all the traits, you go and find those people you start growing, getting that triple digit growth that we all strive for, maybe you get to that unicorn status where you're a billion dollar valuation. I assure you that

    "between the first day you open the door and the day you get that unicorn status, your channel strategy is going to evolve. And the types of partners you're going to want to have in your program are going to need to evolve as well."

    That may be saying goodbye to some partners and opening doors to others.

    Rob Spee: That's certainly true for OutSystems. We've now reached what you would call a deca-unicorn. We've got a projected value of nine and a half billion and our partner needs have evolved.  

    We started out with a very small boutique, 100% OutSystems partners. Many of them were ex-OutSystems employees. Fantastic partners, loved the product, you had 100% mindshare. But now as we're growing, and we're engaging bigger and bigger partners, the GSI's, the big boys, they carry the competing product lines, you don't have their mind share, it's a whole other beast. We've had to hire a whole different team to try to recruit and get those types of big partnerships going.  

    Have the resources and mindset to support large channel partners  

    Paul Bird: If you think about the investment that you have in just recruiting them. Equally, as I had mentioned before, you have to have the resources and the mindset, and this goes back to the channel strategy, to support them.  

    Make sure that they can get their training, make sure that they have rich, relevant content available to them, and make sure that you're providing the support they need in order to be successful.  

    Rob Spee: When you're talking about those mega partners, even like a CDW, those big nationals, you don't need one person, you need a team managing those guys to be successful.  

    Paul Bird: For sure. CWD was one of my channel partners in the back and I did the floor walks with the team. I was in Chicago and Pennsylvania, on basically a quarterly basis, so I could go and talk to them, have those direct conversations, have fun, have the pub nights, which was always good, but it is a beast.  

    Not only do you have to provide support for that, but you also need to start considering demand generation for those partners to get them rolling and, like I said before, feed the beast. Those big partners, the GSI's, the CDW's of the world, they really do require a lot of resources and a lot of attention in order for them to be successful.  

    Don’t rush into new partnerships  

    Rob Spee: When you're working, let's go down below the big GSI's, those big mega partners, and above the boutique shops, in that sweet spot zone, that we all try to get. What other things have you seen that help you pick the right ones? You mentioned culture. To me, that's super important. And a lot of times, in our excitement of getting them signed on, we might ignore that and later it comes back to bite us.  

    Paul Bird: Absolutely. One of the things that I find is that this comes down to not just rushing into new partnerships and being really strategic.  

    Asking the questions:  

    • What are you trying to accomplish?  
    • How can I help you grow your business?  
    • What are you prepared to give our organization or your organization?  
    • What resources are you going to dedicate to us, so that we have an opportunity to be successful?  

    I was talking with somebody about this topic very recently and asked about those types of relationships, not the big boys and not the small players in the market, but that mid-market of channel partners, and he had said, it's a lot like a marriage.  

    "There's going to be give, there's take, we're going to agree sometimes, we're going to disagree sometimes. But that's the commitment and dedication that they need to have with those partners so they can get the mindshare, get the wallet share, and make sure that it's a mutually beneficial relationship on both sides."

    Is the partner a cultural fit for your organization?  

    Rob Spee: When we're recruiting an employee, cultural fit is really important for us. I went through an exhaustive list of interviews, 10/12 interviews. But it's not just testing the strengths or skills or experience, it's also looking for that cultural fit.  

    I think when we're recruiting partners, we need the same approach. Don't put it just on your shoulders, as a channel manager, but have multiple people in your organization interview that partner and different people in that partnership.  

    Paul Bird: It’s something that I really wish more organizations would do is have more than just the channel manager or whoever's doing the recruiting, if they're trying to cast that wide net, and they've got people picking up phones and just trying to recruit anyone they can.  

    I still think that first, before we sign the agreement before we start committing resources, put this on not just the channel manager. Maybe there's needs to be a discussion from a technical perspective. Let's make sure they've got the right skills, let's make sure that the way that they communicate with our technical resources or other resources, potentially in marketing, that the way the dialogue is going is very similar to the dialogue that you're providing with your partner management team.  

    So cultural fit, that's pretty important as well. But it's got to be baked into the channel strategy. Because that plan, that's the playbook that you're going to have for taking your product or service, whatever you're offering is, to market and you have to keep going back to it like a mission statement. Make sure it evolves as your company does.  

    Rob Spee: I probably sound like a broken record because I always say it always starts with strategy. It's so core.  

    Paul Bird: Unfortunately, I do see a lot of companies where they have no channel strategy. Their strategy is, let's recruit, get them to sell our product, but that's as far as it goes.  

    A lot of people don't realize the importance of having that plan, that playbook on how you're going to tackle the market. What type of channel partners will you have? What are your expectations of those channel partners? When is it time to say goodbye? And when is it time to start recruiting somebody with more resources? Because again, if you don't have the direct team, and you've gone straight channel, that is your avenue to revenue in the market.  

    Have a term sheet for channel partners  

    Rob Spee: I'm curious if you've ever tried this. Up until recently, when we were recruiting partners, we would have a partner questionnaire and we had the key elements of what we wanted to know about them.  

    We'd do interviews, multiple interviews, and try to understand the cultural fit. But one thing we weren't doing that I hadn't even thought about applying was a term sheet, like you would use in a tech alliance partnership. 

    I went through the Partnernomics training that Mark Brigman runs with his company. And he reminded me of the importance of a term sheet. We put one together and we're starting to use it. So before we even sign up the partner, we're getting alignment on what we want to accomplish together in the first 90 days.  

    What we found without that was, we'd get all excited, we'd get the partnership signed, and then crickets. Sometimes they wouldn't even respond to your phone call. You wouldn't stop talking to us, we had to get the deal signed quick, quick, quick, and now you won't even respond to our call, so what's going on? That's a really extreme example but, sometimes just nothing happens.  

    Paul Bird: I think it's a great idea, I think it's super important.  

    Outside of my time managing channel and building channel, I've spent time working in the channel. I have worked for Microsoft Gold partners and different hardware and software resellers in the Greater Toronto Area. 

    And absolutely, I am guilty of uncovering an opportunity with a potential client, signing up so I can be a partner, get the one sale, and then I never go back again. So was that the best use of those companies' time and resources to go through the process, offer training, everything? And basically all I'm going to do is turn a sheet of paper and then leave from there. This is how that channel gets completely diluted.  

    Going through those steps, like you're doing at OutSystems, which is, before I'm going to allow you to sell my product and make any kind of margin on it, you're going to go through a series of interviews to make sure that you're an ideal fit. Making sure that you have an agreed set of goals, and whether you're doing it every 90 days, every 180 days - and that's kind of the idea of a QBR. So you almost have a business plan before they are actually a member of your program and then you're going through and doing those reviews. That advice that Mark's providing in his training, I think is super important.  

    Rob Spee: One of the steps in the term sheet is the date that we're going to work on the business plan. Part of the first 90 days is we've got to work on the business plan and then set the sequence for a success cadence and even set dates for the next couple quarters for the QBRs.  

    Paul Bird: That's great that you're investing that much into your channel. And that's why you're going to get those levels of returns and why you've got a $9.8 billion valuation.  

    Underperforming channel partners  

    Paul Bird: For people that are either just starting their channel program, or they're at a point where they find that their channel is plateaued and is no longer growing, to take some of these tips and implement them into that program. Not only to be more selective in the types of people that they have, but maybe it's time to clean the closet out and get rid of some of the underperforming ones.  

    If you're in that 80/20 rule where you have 80% of your revenue coming from 20% of your partners, maybe the idea is to move the middle. Let's get rid of the bottom 20%. Let's see how to get more mindshare from those partners that are in the 21% to 79%. Do we go back and now say, I know that you've been a partner for so long. Here's a term sheet that we'd like to work on with you. Let's establish how we're going to work together.  

    If you get that commitment from them, you move the middle. And if you don't get the commitment from them, then maybe it's time to say goodbye.  

    Rob Spee: I agree. We've been using that. In fact, as we look at our bottom performers, some of them we've given them one last chance. We haven't done anything together, will you sit down and do a term sheet with us? When they say no, okay, we're done. When they say yes, then we cautiously proceed, and we give it one last shot.  

    I was talking to Taylor Macdonald, on my latest podcast, and one of the things that he prescribes is every year cutting out that bottom 10-20%. So he's always bringing in new partners and always flushing out the ones that are the non-performers.  

    Paul Bird: I think it's super important because, as the organization,

    "the investment that you're making back into that partner community for sales training, for technical training, all of the SPIFFs or rewards that you're offering, the market development or co-op marketing funds, it's a significant investment for an organization to make sure that they're taking care of their channel."

    So we need to see a little bit of that in return – that give and get – it has to go both ways.  

    Rob Spee: Even though your channel may be on a 100% commission model, still, I don't think anyone in the channel has too many resources, we're all short on resources for enablement. You can't waste them on partners that aren't the right fit or who aren't going to perform.  

    Any other things that you've learned that have helped you find the right partners?  

    Understanding and researching partner companies before recruiting  

    Paul Bird: We talk about that ideal customer profile. And we want to basically look for, if I've got my target customer, I've got my target market, I'm going to start looking for other people that sell into that market.  

    This is where, when you start looking at your customers, if you've acquired them directly, to understand who they are working with, who they buy services or hardware or software or whatever you're offering from. But I think that's part of the research that we need to do into those companies before we approach them to see if they want to join the program.  

    Or if they've approached us, let's go and do the research. Who are their customers? Most people display the logos of their clients on their website. So if they're in alignment, we come back to that alignment that we talk about when it comes to the market, then those are the ideal partners that you want to increase.  

    "Look for the people that you want to do business with from an end-user perspective. Then go back and look at all the other companies that are in that space, who are they working with? And now I know the partners that I want to go after."

    At least have that initial conversation to see if they're a good fit, and they scored well on my scorecard. Then from there, that's when we can start bringing them into the enablement process and dedicating our resources to make them successful.  

    Rob Spee: So you're touching on two things. One is asking your customers who they buy from or who they work with. And then number two was looking at potential partners' websites and seeing who their logos are, and are those are those accounts we want to get into?  

    Paul Bird: Precisely.  

    We use LinkedIn at Magentrix extensively. When we establish connections with people that we're looking to do business with, we will also look at who they're connected to. How has this expanded the network? And are they a fit for Magentrix?  

    While we internally haven't developed our channel strategy yet, where we are purely focused on a direct model right now, we're starting to build the channel strategy on how our go-to-market will be. But until we have the resources and the focus to make sure that we manage that channel. It's not something that we're going to kick off right away.  

    Rob Spee: You know well enough, you don't want to fail channel. So don't embark on it until you have it covered.  

    Pitfalls of companies building a channel  

    Rob Spee: Are there any other pitfalls that you're seeing? And not naming names, but, you work with a lot of companies that are trying to build a channel, right?  

    Paul Bird: We really do. 

    Here are the pitfalls that I see:  

    1. Verbal handshake agreements  

    Let's stay away from the handshake or verbal agreement, where you can immediately become a channel partner because I think it's a recipe for failure.  

    2. One sided partnerships

    One sided partnerships where you’re doing all of the work, you’re sending the leads to the partner, and there's no give and get. As soon as you see that this is a one sided relationship. I think that's another pitfall that we have to watch out for.

    "Set the expectations early, make sure that you identify exactly the type of people that you want to have in our program, and go after those people, not just anyone under the sun that wants to have a partnership."

    There are some large companies that basically allow anyone to sell their product. This afternoon, within an hour, I could probably sign up for 50 channel programs and be considered a partner. But would I really be? The answer is no.  

    3. Unresponsive partners

    Partners that become unresponsive. It may happen from time to time. But if you get those unresponsive partners, I think it's time to clean out the closet.  

    So I think the approach that you're taking, that strategic approach, term sheet, I think is fantastic. And I think that that's really critical to setting yourself up for success. I'm actually going to start recommending that to people more as well as directing them to Partnernomics because I think that's great training and education.  

    Knowing your ROI and your channel partner’s ROI  

    Paul Bird: Now getting back to that Accenture article, only 7% of channel partners hit 65% of their sales targets. I don't know how you run a business when your channel is so diluted that they're not performing. So I think it's really critical that we start being more selective when it comes to the relationships that we have with channel partners and who can be a part of our program and who can't.  

    Rob Spee: That's got to be a really low return on investment in your channel investment, if only 7% are really hitting their targets.  

    Paul Bird: That goes back to the channel strategy as well.

    "You need to establish and know what the ROI is. At the same time, you need to be able to understand what the ROI is for the channel partner and share that with them."

    What can they expect?  

    The almighty dollar will always decide what companies will carry what products. For a lot of them that is an unknown when they're coming to partner with an organization or when you've approached them to partner with you.  

    If you understand the ROI, and you understand the potential ROI for a channel partner, then we're starting to get into a good alignment. And we have that opportunity where we can have successful outcomes in the future.  

    Rob Spee: A lot of companies, us included, build ROI calculators for our prospects, customers. Why don't we do it for the channel?  

    Paul Bird: And we should be because we expect an investment from our channel partners in product, technology, or service offering. They've got to have some skin in the game, they've got to be able to bring resources to the table to meet us halfway, it's the give and get.  

    This is where, if they understand the potential ROI, and it is as well documented as you would provide an end user on what they will potentially realize, then these are checking all the boxes on how we can set ourselves up for success when we're starting to build out our channel or managing the existing channel we have.  

    Rob Spee: If your calculator that you're showing to the partner says you're going to make your money in software, not in services, or vice versa, or it's a good blend of both, that's setting expectations too. And will help you recruit the right partners that are going after what you're going after.  

    Paul Bird: And if they're an organization that is entirely focused on as-a-service organizations, then it may immediately determine that they're just not a fit.  

    Maybe they're not interested in making margin on reselling or pushing boxes out the door. They just want to be able to offer services. And with more and more of us moving to the cloud, and offering subscription based offerings. Now, this is going to change the model a little bit where there may be less services and more ongoing revenue share.  

    So building and sharing that ROI back to the channel partners at what they could potentially realize when they make the investment into your organization. Again, this is just all setting us up for success and not falling into that 7%.  

    Partner program fees  

    Rob Spee: What do you think about partner program fees and using those as a qualifier for gauging a partner's commitment?  

    Paul Bird: It depends on your industry, the goals, what's baked into that channel strategy. I think that you'll find out really quickly if they're putting skin in the game if there is a fee to join the program.  

    But I also think they should be rewarded for performance. So in the event that they hit all of those numbers, or you have a threshold on when they have their fees refunded or waived for the following year, I think that shows that you're prepared to invest in the partner as well.  

    And I think it depends on the maturity of your company. If you're a startup, you're going to market and you're trying to charge people $1,000 to join the channel program. I don't think you're going to have a lot of success. But if you're a Microsoft, and you want to say: you want to be a certified partner, you want to be a silver or a gold partner, then we're going to give you some things in return but it's going to cost you some money to join the program.  

    Conclusion  

    Rob Spee: You can find highlights of today's show on my website at channeljourneys.com/cJ71.  

    Thank you to my sponsor, Magentrix. They are experts in creating web and partner portals. They have full integration to your CRM system. That could be Salesforce, Microsoft Dynamics, even HubSpot.  

    Reach out to Paul on LinkedIn.

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