Can Channel Partners Grow Your SaaS Business?
Most SaaS founders I know at some point consider a partnership strategy to grow their business.
As I’ve grown Proposify, I’ve gone far down the road with both affiliate and channel partners and can share some of what I’ve learned.
Why consider a partner strategy?
A partner play can scale fast for three reasons:
It’s a one-to-many relationship. If you have ten partners, and they each bring in ten customers, you have one hundred customers. When it works it’s high leverage.
They ideally have access to and trust in a market you don’t yet. If this is the case, offering them a commission to sell your product to their audience will be faster than building a brand within that market. You can pound the pavement yourself, it will just be harder and take longer.
Another reason I like it is that it’s a shared risk model since you only pay the partner a commission when they land a customer. In this way, it’s better than advertising and other acquisition channels where you front the money but have no guarantee that the investment will pay off.
My experience with a partner program
As Proposify grew, we had a lot of inbound requests from people wanting to promote Proposify to their audience and receive a kickback.
As is often the case with entrepreneurs, I saw only the opportunity with little downside.
We implemented a tool called Partnerstack to give out tracking links to our affiliates so they could get automatically credited if someone signed up through their link, and we would manually pay them at the end of the month.
As we began to move up-market and sell higher-priced plans, we built a partner program.
Partners who got accepted would be able to sell higher-tier Proposify plans and offer their own services to help make the customers they brought on more successful.
But after a few years, I shelved both the partner and affiliate programs and laid off the partner manager.
Here’s why.
Most of our affiliates brought in basically no customers. Some brought in a few, and a very small percentage brought in the lion’s share.
But by the time we had this mini-engine going, I had a team of two employees managing the partner programs.
There was a surprising amount of overhead to manage with this program, from accepting and vetting partners to dealing with partner agreements to tracking commissions and paying them out. Eventually, even the two employees wanted an intern to help offload even more of the work.
We even developed separately branded swag for partners.
Partners and affiliates came with their own set of product requests. They wanted in-app tools to help manage and oversee their clients. We built some of these tools in our product, but ultimately it was a distraction that took focus away from building a better product for our actual customers.
The customers who came in through affiliates were very small, and there weren’t a lot of them, so when you factor in the salary of the employees, it wasn’t a profitable means of customer acquisition.
On the larger end, we just never could get partners to land big deals. Partners didn’t know our product as well as our internal team did. They needed training, resources, and coaching that we just didn’t have for them.
Also, our deal sizes just weren’t big enough at that time to make it worth it for them. We explored the Salesforce channel partner ecosystem, but our Salesforce integration wasn’t very mature at that time, so most real Salesforce implementation partners wouldn’t consider selling us.
My advice if it’s something you’re considering
Nothing is ever free or easy.
You may think that letting external partners sell your product is a win-win, but as you can see, it is a completely separate acquisition channel that requires its own thoughtful consideration and investment.
Deal size is important. If your Annual Contract Value (ACV) is low and you're playing the volume game, partners might not be the best channel. Affiliates could work, but it’s tough. The revenue needs to be meaningful enough for them to warrant the partnership.
My advice? Be generous with the first year's sale. When advertising, it’s not uncommon to have a 12-month CAC payback period, meaning that it takes a full year to recoup the dollars you spent acquiring the customer.
I would offer a generous commission to partners on the first-year sale, but not in perpetuity unless they were upselling the customer and adding seats or upgrades.
Second, your product should be part of their suite of offerings. Partners love to bundle products that complement each other. If your product can be packaged with others, not requiring dedicated 1:1 sales, you're in a good spot.
Selling partners on selling your product is still a sale. Resellers don't make the problem of sales go away. In fact, it complicates your marketing efforts because now you have multiple audiences you have to position yourself in front of.
You still need to qualify them like leads, you still need to close them, train them, and support them like you do customers.
Sometimes it’s easier to just sell to the customer yourself and cut out the middleman.
Again, I’m not saying they never work. Some SaaS companies have scaled tremendously through a partner channel. It’s just not effortless.
If you’re less than $5-10M in revenue, you are generally going to want just one single acquisition channel that you pour 80-90% of your effort. If something is already working well, a partner program can muddy the waters really fast.
Listen to the podcast episode about this.