The bottom line in all things business, is delivering effectively, delivering and exceeding the ultimate customers’ expectations. Learning what works can be highly expensive when we have to backtrack and go again in a different route. Strategic Partnerships can deliver great success when it works, it can be enormously frustrating, disappointing and expensive when it doesn’t.

A key part of what we do in Maidsfield Associates is to focus on matching our clients’ business objectives to suitable partners in the chosen target markets. As defined in Maidsfield’s Corporate Partnering Process we review seven criteria in evaluating partner-fit and develop an understanding of the potential partners business to see how they could work together with our client to meet the market opportunities.

So many Strategic Partnerships fail because of the most obvious of reasons, in hindsight:

1. The partner’s sales people sold their own product before yours, because it was easier to sell, they met their targets easier and made more commissions not focussing on selling your product.

2. The partner company’s management hadn’t taken on board the full opportunity to grow a new business area and wasn’t fully committed. Things slowly died away and eventually people faced reality.

3. The partnering plan didn’t go much further than a good idea and good story press release. It helped the profile of your business in your existing proven markets and possibly your investors but it didn’t produce revenue.

4. Your partnership was based on an initial opportunity identified by the partner, and that’s great, but it was not their core business area and they simple seized an opportunity that presented itself. They were ill equipped or not interested in pushing further. So be aware of your investment time in once-off opportunities with partner companies that approach you.

5. There was too much effort in getting the partner up to speed in selling your solution and their expectations of your pre-sales department were excessive. They probably wanted you to do all the work and they get the sale. They weren’t doing their share. You expected them to start selling immediately and transfer the cash to you on a monthly basis. The expectations on both sides were just not right from the start.

The real cost in getting it wrong is opportunity cost. Basically the lost time and opportunities in the time spent working on something that doesn’t produce. You need to gain an understanding of the target market through a “Market EcoSystem and Trends” summary analysis, identify your potentials, rank your targets, make your decisions and then follow up.

Watch out for part 2 with what it means to get Strategic Partnerships right.

What type of partnerships suit a Software-as-a-Service (SaaS) business?

End-users would always love to pay on a drip-feed-as-value-gained basis. It eliminates risk and spreads much of the costs over the value period. SaaS preaches this message. There are many advantages to SaaS businesses, but years on we’re still learning to balance the business’ cash requirements and customer charge models. There are many variant hybrid models floating between monthly subscription and a full upfront perpetual licence fee.

How do you get a reseller channel working on a SaaS model?

SaaS businesses are different in how they sell? If your business model is purely monthly subscription based and no setup fee then how to you incentify your sales people? ‘Traditionally’ you would pay your sales person’s commission on new business once the cash had been received. Sales people operate best in an instant gratification model. They win, they get rewarded, they get happy, then go sell more. They are ‘coin-operated’ sales people.

Many resellers, system integrators and independent software vendors still operate on full licence fees paid upfront basis to incentify their sales engine. SaaS businesses don’t generate cash to enabled paying lump-sum commissions on a cash-received based.

Consider a Sales Person’s Choice: When a sales person has an option of selling a product with full commission upfront and or one with a drip-feed commission over 3 years, which is he going to choose?

What should you consider when selling your SaaS software through resellers?
Assume they are a suitable partner with access to your target market and have the necessary skills to resell your offering)

1) Business Model Differences
Does the reseller currently sell or has sold SaaS offerings?

2) Sales People Incentives
Are their sales people currently incentified in lump sums on a cash receipts basis? How will your product sell in this mix? What do the sales people think?

3) Agility / Pace of Change
SaaS model is associated with highly scalable growth, will your partner still be suitable to work with you through many iterations of change. How fast can they educate their sales people? How fast can they respond to the market?

4) Culture / Customer Focus
When you’re concerned about keeping or losing customers of your SaaS system on a monthly basis, you are deliberately highly responsive to customer needs. How will this work through a reseller?

5) Legacy, History and Tradition
It’s hard to change mindsets. When people and businesses are used to operating in a particular way, don’t expect instant change. When a reseller or a sales person is starting to sell their first SaaS offering, the differences will take time to get used to.

So how do people made it work?

I know of one company who changed the charge model to include a setup fee, just so they could incentify their sales channel?

Another, their offering added value and helped sell another product with an initial licence fee and thus gave the sales person an added bonus drip feed commission over many months into the future?

How do you incentify your sales people in your SaaS business?
How do you overcome the channel effectiveness challenges in partnering your SaaS business?

Can any company at any stage successfully secure and sell through corporate partners?

With the right commitment from both sides, the partnership can of course produce revenue, but will it be profitable given the amount of time and energy needed to produce the results?

A successful profitable partnership needs to be based on a reasonably compelling offer for both parties. When you seek partners you should be ready, somewhat.

An ideal scenario is outlined by the 10 points
1. You have a product that is proven with strong referenceable customers
2. You have defined marketing and sales process that works in your existing markets
3. You have good marketing and sales materials, including website that really supports the sales process
4. You are operating in a proven business space with growing market opportunities
5. You have a clear Value Proposition and Competitive Advantage that wins customers
6. You’re business success is not dependent on a small number of people
7. You have defined charging model across consulting, product, options, implementation and annual maintenance
8. You have a product and services development roadmap responding to or leading market requirements
9. You have defined clear responsibilities and revenue splits for a real mutual beneficial relationship with a partners
10. You are committed to a Corporate Partnering approach to the market and are realistic in your expectations

So how does your company score in meeting these requirements?

If you score high in all these, in full spirit, then you’re likely ready and a Hearty Congratulations, as these 10 points are a big achievement for any company.

The good news is that you don’t need to have all 10 fully defined and proven to be successful. This is more like a weighted scoring system rather than one requiring a full score in each. Like everything else, being very strong in some areas can make up for being weak in others.

I know early stage companies who have a very compelling offering easy to explain with experienced management, they are likely very ready to partner.

I know established companies who have a very complex offering and where it is difficult to explain and this more difficult to sell. More difficult to sell means much more difficult to get a partner to sell successfully.

Remember, partnering into a market should be taken as seriously as establishing an in-market office, just much more cost effective.