Channel distribution represents one of the biggest and most important changes in customers acquisition for SMB SaaS startups in quite a while. Historically, channel distribution has been reserved for the most expensive software and hardware. IBM, Intel, Cisco and their kin generate more than 80% of their revenues through a universe of resellers and distributors.
As many of these channel partners move to newer distribution models, the brokerage channel model in particular, they represent an efficient and leveraged customer acquisition channel.
“There are three different types of channel relationships for SaaS companies,” a seasoned executive told me recently. Which is the right one for your SaaS startup?
In a classic reseller relationship, the value-added reseller sells, builds, services and operates a solution to a customer. After signing the deal, the VAR crafts and customize the software to the needs of the customer, invoices the customer and supports the customer. The VAR pays some royalty or license fee back to the vendor.
The notion of channel sales in SaaS companies is becoming more common than in has been in the last few years, and for some businesses like Intacct, channel partnerships drive more than 50% of sales.
Channels used to be about software customization, delivery and support. Most SaaS has little customization, manages all the delivery and are better suited to handling the support. Plus, value-added resellers charged buyers on a per-project basis which doesn’t align neatly with the recurring subscription intrinsic to SaaS.
Leads are the lifeblood of every SaaS company. As a SaaS startup grows, the limiting factor of the business quickly becomes demand generation. Can the marketing team generate enough leads for the inside sales team to attain their monthly quota? The Marketing team’s mandate is to generate these leads in a cost-effective way and develop a portfolio of lead-generation mechanisms. Ideally, these generate inbound leads, who often convert at 2-3x the rate of outbound leads.
You have just launched your new software start up. The last webpage to go up on the website is the pricing page. Like many other SaaS startups, you decide to employ some version the three pane pricing plan: first the free version, second a paid upgrade costing between $5-$40 per month, and third an enterprise tier with a “Call for Quote” in place of the price.
A few days after you launch, an enterprise customer contacts you asking for a quote.