B2B Channel Partner Strategy: Partners Sell What Already Sells
We signed a channel partner and nothing happened. What did we get wrong?
Both Sides of the Table · Mark Suster
Published
A channel partner does not create demand for a product nobody has bought yet. Mark Suster argues that most channel deals produce no revenue because the vendor has not proven the product sells directly. His strategy is to sell it yourself first and let the partner fulfill. Sign only a few partners, give them real margin, and assign someone to manage them. The channel pays off once your own sales show the product is easy to sell.
Why the partner went quiet
You signed a reseller, or a distributor, or a consulting firm that already sits in front of your buyers. The kickoff went well. Their team seemed interested. Six months later, the partner has produced no orders and nobody on their side returns your calls.
Most founders read that silence as a partner problem. Mark Suster argues it is usually a strategy problem, and one the vendor made. Suster built and sold two software companies before he became a venture investor. In a 2010 post on his blog, Both Sides of the Table, he wrote that most channel relationships produce no revenue at all. He also argued that the reason is predictable, and that a vendor can plan around it.
The math on the partner's side of the table
Suster asks you to look at the deal from the seller's chair. A partner's salesperson carries a quota. They hit it by selling what they already know how to sell. Their own products carry full margin for them. Yours carries a share, which he puts at half at best.
So your product has to earn its place in their day. If it sells easily, they will sell it all day. If it needs a long explanation, an unfamiliar buyer, and a long cycle, they will set it aside and forget what it does. Suster's point is that a sales organization behaves like a market. Effort goes where the return is.
His figures are from 2010 software deals and they show their age. The mechanism does not. It holds for any partner that carries more than one line.
Sell it first, then hand over the order
Suster's first rule follows from that math. If you have not already sold enough of your product directly, a partner will not push it. A partner puts in the effort to train people, build materials, and pay bonuses only when they believe your product is easy to sell. Your own sales record is what proves that.
So in the early years, you still do the selling. You create the demand, work the deal, and let the partner fulfill the order. Suster adds that you should not let anyone stand between you and a signed order.
This changes what a partner is for at your stage. The partner is not a replacement for a sales team you cannot afford. The partner is a way to scale a sale you already know how to make.
Keep the partner list short
Suster's second rule is to limit how many partners you sign. Each one needs more training and attention than a salesperson on your own payroll. Ten signed agreements with no one tending them produce ten announcements and no revenue.
Pay the partner enough to invest
It is tempting to hold margin back until a partner proves itself. Suster calls that a mistake. You are paying for the partner's attention now, so that the partner is ready when your volume grows. That payment is an investment, and it costs margin.
His starting point was about 30 percent for the partner. He would accept 25 percent if the partner does little. He would go to 50 percent if the partner carries real sales and marketing work. Another option he describes is to keep most of the product margin and give the partner the service revenue, provided they do the implementation.
Someone has to manage the relationship
This is where Suster says most vendors underinvest. Signing a partner is one job. Keeping them selling is another.
He calls the second role a channel manager. That person goes past the partner's business development contact and gets to know their salespeople, engineers, and service staff. Those are the people who spot a customer who needs your product. A channel manager builds materials for that partner, prospects with them, and works out how your product helps them sell more of their own line. The job is to stay in front of the partner's people, because otherwise another vendor will.
For a small company, this is often the founder or a senior salesperson. The role still has to be named, or nobody does it.
What a channel partner strategy is for
None of this means you should avoid partners. Suster names what they bring even before they produce volume. A known partner lends credibility with a large buyer. Many businesses scale more cheaply through partners once the sale is proven. A partner is also a likely acquirer.
His advice comes down to this. Sell the product yourself first. Choose a few partners, pay them fairly, and assign someone to manage them. Then expect the channel to pay off when your own sales show the product is easy to sell, not before.