Channel sales for startups

When should a startup transition from direct selling to selling via partners and channel?

For B2B startups, one of the biggest challenges and costs is “sales”. Especially if the product costs greater than $10K annually. While many of the lower price point SaaS products might spend more money on marketing, the immediate costs of hiring, managing and growing a sales team is a big challenge for most entrepreneurs.

I hear from a lot of entrepreneurs who try to “develop” a channel, the frustrations of working with a large company’s sales force.

In the attempt to tap into their existing customer base, they end up educating the “channel” sales team on questions to ask prospects, how to qualify opportunities and how to handle objections and not getting enough from the process.

In still other cases, entrepreneurs try to work with partners in the ecosystem – system integrators for example or existing products in adjacent spaces and trying to engage with their sales and technical sales professionals to help position and sell new products to customers. They realize after many weeks or months that the teams are rarely given an incentive to do anything more than sell the company’s own products.

While I am a big fan of trying to drive indirect sales via partnerships and business development efforts, I also believe doing it too early sets the wrong precedent for startups.

 The question is “When is too early to engage partners to sell”?

There are no actual numbers, but some rules of thumb that I follow.

First, if there is enough demand for your products that you are unable to return customer calls or you are unable to fulfill requests from customers for meetings, then you should engage partners. The best and easiest way to help build a loyal partner base is to drive the initial business to them.

Second, you should have enough case studies to cover at least 3 use case scenarios in your top industries as examples. What that means is that you should have 3 possible case studies of how your product helps drive initiatives in a specific industry that the partner operates in, where you are targeting to get customers.

Third, you sales cycle time should be reducing 10% per opportunity and your sales process must be defined enough so it is consistently predictable. For most companies, this does not happen until you are selling for a year and have about 30-50 customers already.

I usually get the question that if these were already in place, why would you need partners? The short answer is to scale.

Similar to funding from institutional investors, if you already have a business that’s doing well and growing, then funding and partnership sales helps you scale quickly not to generate the initial excitement. 

In fact, my suggestion to enterprise B2B startups is to not consider channels and partnerships for selling until they have raised their series B funding from an institutional investor.

Channel sales for startups
Channel sales for startups

Channels take time to develop and you have to invest a lot of money to gain the benefits over a long period of time.

I would highly recommend you be in control of your own destiny and push yourself to directly engage, generate and close your initial leads and customers.

Channels can come much later in your journey.