Through Emergence Capital Partners' work in funding some of the most successful companies in the world, including Yammer, Box, Salesforce.com and SuccessFactors, ECP has gained a unique perspective on what works—and what doesn’t—in creating a successful business development program to grow a company. Based on this experience and the in-depth knowledge of our team of experts, this paper tackles some of the most frequently asked questions in the business development arena aimed at providing insights for SaaS startups in the B2B space.

1. USING BUSINESS DEVELOPMENT TO GROW
YOUR SAAS STARTUP
ANSWERS TO 12 BURNING QUESTIONS
Sean Jacobsohn, Venture Partner
As one of the only venture funding organizations focused exclusively on B2B technology-enabled services,
Emergence Capital Partners has been on the front lines of the cloud-service renaissance in B2B services.
Through ECP’s work in funding some of the most successful companies in the world, including Yammer,
Box, Salesforce.com and SuccessFactors, ECP has gained a unique perspective on what works—and
what doesn’t—in creating a successful business development program to grow a company. Based on this
experience and the in-depth knowledge of our team of experts, this paper will tackle some of the most
frequently asked questions in the business development arena aimed at providing insights for SaaS
startups in the B2B space.
Business Development Burning Questions
1) Why do business development in the first place?
2) When in the company's lifecycle should you focus on business development?
3) What types of business development deals are possible?
4) What percentage of our revenue can we expect from business development?
5) Which potential partners should I pursue?
6) Which should I avoid?
7) What type of partnership can I forge for a freemium business?
8) How do I handle channel conflict with direct sales?
9) In building my business development team, what type of individuals and skills should I look for?
Besides the business development team, who else in our organization needs to be involved to
ensure the partnership is successful?
10) Should I consider an exclusive deal with a partner?
11) How should I structure the actual deal? What margin should the partner receive?
12) How do I get my most sought-after partners to work with me?

2. Background
Demand for Software-as-a-Service technologies for business-to-business applications is growing at an
exponential rate, driven by the increased operational efficiencies and lower IT cost enabled by cloud
computing. In fact, a recent Gartner report pegged total global SaaS revenues in 2011 at $12.3 billion, and
by 2015, the research firm predicts the industry will surpass $22 billion. There is unprecedented opportunity
for innovative SaaS startups to capitalize on the surging demand and capture an early share of the
burgeoning market.
Aside from direct sales, business development strategies have become one of the most valuable growth
tools in the SaaS startup toolbox.
The problem is, “business development” not only means something different to seemingly everyone you
ask, but it’s also very difficult to pinpoint the right strategy to serve each startup’s specific needs and goals.
In truth, there is no perfect formula. Devising a smart business development strategy can be a messy,
introspective process, with much risk and reward on the line. Getting it right is even more important to the
SaaS ecosystem now that SaaS has evolved beyond re-segmenting existing markets to creating new
markets. The skills and relationships required to grow and develop a new market are very different from
those needed for entering an existing market.
A Definition
One of the reasons business development strategy is such an enigma is that it can take so many forms.
Before we move on to tackle the12 burning questions, let’s first examine what business development might
entail, and define exactly which variety we’ll be addressing.
Business development typically takes one of four basic shapes:
 Platform creation designed for third party developers to extend the capabilities of your company’s
core products. Salesforce.com and Box have all taken this approach, creating a foundation upon
which many other developers have built new functionality and created customized solutions for
specific niche applications or industries.
 Corporate development aimed at rounding out your company’s main offering through acquisition of
smaller companies and niche solutions to bundle with your core product. Microsoft’s acquisition of
Yammer and Perceptive Pixel multi-touch hardware both reflect this strategy, along with Apple’s buy
of Siri and AuthenTec security solutions.
 Solution integration for mutual benefit involves striking a deal to package complementary—but
not competing—technologies together to improve one or both products. Such a program might be
developed with a system integrator, a partner that doesn’t necessarily develop their own solutions but
focuses on bundling existing products, or with an OEM partner, where the partners integrate
solutions into their own products.
 Revenue-producing partnerships with distributors, resellers, channel partners and affiliates. These
relationships are directly tied to generating income from selling your product with revenue splits,
margin specifications and negotiated distribution terms.
This paper will focus on revenue-producing deals – one of the most important, yet challenging forms of
business development for start-ups.

3. Revenue producing business development can be hard for start-ups for several reasons:
1) Most startup entrepreneurs have little or no experience in formulating this kind of deal, and many who
do, haven’t had tremendous success. The typical CEO or company founder is a product guru—a
technological visionary with a product concept who has not had the opportunity to negotiate many
business development deals.
2) When you’re a young and hungry startup, it’s easy to get caught up in fanatically and selfishly
pursuing your own goals. But, successful business development requires making your partners’ goals
a priority. Synergy and mutual benefit are critical factors in any successful partnership.
3) Startups in hyper-growth mode often face a plethora of opportunities both inbound and outbound.
While this is a nice problem to have, it can certainly make prioritizing and getting up and running with
a business development program difficult when you’re being pulled in so many directions. These
early deals are also often the most time and resource intensive because there’s no model to use,
which makes prioritizing even more important.
4) Many startups are ill-prepared to ensure their product stays on the reseller’s radar and instead
assume the partner will just magically sell the product successfully. In reality, resellers are often
pushing multiple products and tend to focus on the few they know the best or where they stand to
gain the most. It’s up to you to cultivate the relationship.
Now, on to the Burning Questions…

4. 1) Why do business development in the first place?
It’s a valid question. It may seem obvious to some, but quite often eager startups are focused on a direct
sales strategy and, while they may be willing to entertain offers from potential partners, they’re not inclined
to actively seek them out. Business development offers several key advantages over a strictly direct sales
model, including the ability to:
 Gain broader coverage in the market beyond direct and indirect sales. Depending on where
your direct sales force is focused (industry-wise) or located (geographically), you are most likely
neglecting large pockets of opportunity. Business development enables you to work with partners
that can cover all the possible market bases, from enterprise to SMB, certain verticals and key
geographic regions. To conquer all these possibilities on your own would be nearly impossible,
outrageously expensive and overwhelming in scope. Instead, striking smart deals with partners
already ingrained in their respective markets gives your company a shoe-in without the ramp-up
investment. However, it’s important to ensure that resellers are equally as competent as you are in
selling, supporting and implementing the solution, so as not to impact the customer experience.
 Outflank your competition by gaining distribution into segments they cannot. Partnerships
enable you to penetrate different cultures, language barriers and industries that may be tough to
crack. Leveraging relationships in these existing areas helps you make a smooth start to see where
the success can be found, and perhaps back fill with your own sales team down the road. In 2011,
Adaptive Planning’s network of over 400 global channel partners drove 33 percent of the company’s
new bookings and 50 percent of new sales.
 Reduce capital expenses while still expanding. Business development efforts can yield
tremendous revenue potential without outrageous investment in marketing efforts, hiring a large team
or fixed cost for establishing a business presence in new territories. Instead, partnerships allow you
to leverage existing infrastructure to keep expansion costs low. In fact, half of Intacct’s 2012 revenue
was generated from its reseller partners.
 Break through walled gardens. In certain verticals, cultures and geographies, target customers
prefer to buy from a limited number of vendors, typically those with which they already have a
relationship. Bundling your product with those key vendors may be the only way to get distribution.
You might not be able to sell them your point solution, but when it comes neatly packaged with a
solution they already know and trust, suddenly the door is much more open. For example, Intacct’s
partnership with Avectra, which provides CRM solutions to associations, nonprofit, and charitable
organizations, has opened a valuable door for Intacct’s accounting software
 Building Brand Awareness. In some cases, it’s also about associating with a well-entrenched
partner. As a New Zealand-based startup, Xero had a tough time breaking into the U.S. market, until
its partnership with a large payroll provider put Xero on the map in the U.S., earning the company a
stamp of approval from a massive player in the space.
 Create a combined offering more compelling than the sum of its parts. From an end-user
standpoint, some products are natural complements and provide much greater benefit when bundled
together. Finally, partnerships can also be great test beds and a less risky proposition for pursuing a
particular offering or audience than building internally.
 Eliminate constraints on growth. Choosing partners that can help relieve bottlenecks, such as
service delivery capabilities, can clear the way for massive growth. Developing a large partner
ecosystem can make it very difficult for competitors to supplant you from a market leadership
position. That momentum will drive more potential partners your way.

5. 2) When in the company's lifecycle should you focus on
business development?
Business development should be on your radar from the very beginning, at least conceptually and for the
purposes of planning a business road map. However, actually kicking off such a program requires that you
have a replicable sales process with established customer successes in place. Once you’ve established a
repeatable system and a successful track record, you can then begin to effectively train partners to
replicate that system based on the best practices you’ve established.
How do you know when you’re ready? There is no prescribed timeline that says you must begin business
development within 18 or 36 months in order for it to work. Instead, use your internal temperature as a
guide.
There truly is no one-size-fits-all “best time”—it’s entirely
dependent upon your goals and whether you’re in a good
position to capitalize on the opportunity. For example,
Cornerstone OnDemand launched its channel partner
program eight years after launching their direct sales
channel, with the goal of gaining complete coverage in the
market. Direct sales was focused on enterprise deals in the
U.S. and Europe, while indirect sales had green field space
to cover SMB, new territories (including Asia Pacific and
Latin America), and unpenetrated verticals such as higher
education. Plus they were able to leverage the indirect sales
teams’ focus on enormous installed customer bases such as
Sage (with 3.2M customers in the U.S.), gaining distribution
into customers and markets where their competitors had
difficulty penetrating without such partnerships.
Business development can even make sense before your company feels “ready” in cases where a natural
partnership presents itself and in a short window of opportunity. As long as the deal is properly qualified
and carefully vetted, don’t automatically turn it down just because a formal program has yet to take shape.
Questions to Ask to Determine
Your Readiness
1) Is your sales model working
well?
2) Can you effectively onboard and
train your own salespeople?
3) Do you have enough reference
accounts?
If the answer to all these questions is
“Yes,” you’re probably in a good
position to get started.

6. 3) What types of business development deals are possible?
Revenue-producing partnerships can take a number of forms:
Partnership
Type
Description Examples
White label
partnerships
White label partnerships involve offering your product as an
extension of your partner’s core offering to help them sell more
of their own product and/or retain customers by demonstrating
progression or offering a value-add. In this arrangement, your
partner’s sales team has a quota on distribution, and often a
tiered system of revenue share whereby the partner earns a
higher percentage of the sale as their volume increases.
Cornerstone
OnDemand,
Zoho
Co-branded
partnerships
Co-branded partnerships position your product as an add-on
solution to the partner’s product and the sales team might have
a quota on distribution. Startups often worry that white label
arrangements will dilute their brand or cause them to sacrifice
their own identity and potentially hurt future direct sales growth.
However, if you’re determined to maintain your brand in the
deal, you may also be responsible for the majority of the sales
and marketing work, which demands both time and financial
investment—and should be clearly defined in the agreement.
When you let the partner market the product under their own
brand (in a white label situation), the onus falls on them to
promote it. Partnerships can also begin as co-branded and
later convert to white label based on the success of the
program.
Box,
NetSuite
Referral
partnerships
Referral partnerships are mutual arrangements where both
partners refer each other’s product to their customers and bring
in the partner sales team to close the deal. This can be a fairly
simple arrangement, but it’s important that both sides are
closely matched in terms of market opportunity and
penetration, as well as individual sales rep training, finesse and
skill. Reps must fully understand the capabilities and benefits of
partner technologies in order to effectively identify referral
opportunities. Not only does the referral approach eliminate
channel conflict in areas where the company has direct sales,
but also it enables them to leverage the brokers and
consultants looking to deliver added value services. Since
these partners own the customer’s ear, they can refer in
solutions that are a good fit and provide services around the
core product.
WageWorks,
Workday
Fortunately, there’s no reason a company must pick just one model—instead, a strategic mix can diversify
the revenue stream. And, even within the various models, the channels can vary as well.

7. 4) What percentage of our revenue can we expect from
business development?
This depends entirely on how much or how few resources you deploy toward business development versus
direct sales. SMBs, certain verticals and some international markets are difficult to penetrate and cover
efficiently with a direct sales force. Therefore, how much of your business is focused on those areas
determines the revenue percentage you can expect through partners in those veins.
There certainly is no magic number. We’ve seen companies where partnerships account for as little as 5
percent and others as high as 100 percent, as is the case with Axcient, which derives all of its revenue from
some 27,000 resellers. It truly depends on what makes sense for the company, its target market and the
opportunities. For example, 40 percent of Cornerstone's revenue is influenced by a partner: 25 percent
from resellers and 15 percent from referral partners.
While there is no magic number, several factors should play into the process of establishing a revenue
program. These include: the relative price point of your product versus that of your partner, relative margin,
strength of existing customer relationships, barriers to market entry or growth and expectations on sales,
marketing and post-sale service.
It’s also important to remember there may be a few tradeoffs you have to be willing to make. For example,
with resellers and OEMs, you’re trading margin for a reduction in customer acquisition cost (CAC). If you
have a relatively high CAC and your reseller or OEM partner has a relatively low CAC and low margin, then
you’ll both benefit from CAC arbitrage for a long, long time, making for a beautiful partnership. The same
holds true for other important SaaS metrics, like retention rates and cost of service. The ability to exploit
these arbitrage opportunities makes business development in the SaaS world much different from the on-
premise world. In the on-premise world, access to channels was the primary motivation for revenue-driven
business development activity. But with SaaS, arbitrage is where much of the value is found.

8. 5) Which potential partners should I pursue?
Start by identifying partners that offer products and services that complement your offering. For resellers,
ideally these are often opportunities for your product to replace a lower-performing (perhaps competing)
product in their suite and/or to extend the capabilities of their own product. In addition, partners that
currently offer B2B SaaS solutions and those who already have experience as a reseller are better fits
because they understand the space, and it’s often quite difficult to train individuals on selling software if
they don’t currently do it today. Box has adopted this approach, partnering with Insight, the #1 reseller of
SharePoint and Microsoft’s #1 reseller overall, and Softchoice, the #4 reseller of SharePoint and #1
Microsoft reseller in Canada.
Ultimately, it’s important to choose partners that align with your joint development and sales objectives, and
it helps to develop formal written plans with stated revenue goals and milestones. Worthy partners must be
willing to put “skin in the game”—to commit to training and enablement of their team, revenue targets and
dedicated executive sponsorship, as well as a dedicated alliances executive who owns the quota,
engineering and support commitments.
At the top of your pyramid, identify a few potential game-changing strategic partnerships and work these at
the executive level. For young companies, forging a partnership with a large market leader can dramatically
accelerate revenue as well as credibility, as Xero discovered with its payroll provider relationship. While
these can take time to develop, they are typically well worth the effort. You must also be mindful that this is
a competitive process, and your top competitors are likely trying to build relationships with the same
strategic vendors in your ecosystem, so you must be engaged both from an offensive and defensive
position.
For international resellers, faster success can often be found in English-speaking markets such as the
United Kingdom and Australia. One of the challenges for smaller companies in expanding to partners
beyond these markets is localizing the SaaS platform. You’ll also want to consider national laws on data
privacy when looking to establish international resellers, as some countries may require the use of local
data centers, which could be cost prohibitive for smaller companies.
A benefit SuccessFactors is seeing from some resellers is the ability to slow or reduce the growth of their
professional services resources. Some of their most experienced partners on the services side are
resellers that they can outsource services work to. The great thing about software-as-a-service is that you
can use resources in one country to work on projects elsewhere.
Finally, while it may be tough to quantify the criteria, identifying partners with the right talent and skill sets to
make the partnership a success is critical. A lack of resources and proper skills can make it impossible to
scale and limit future growth opportunities.

9. 6) Which should I avoid?
Be wary of prospective partners that have competing products in their portfolio, or at least be assertive in
determining how they plan to handle that conflict. Maybe they aim to replace their difficult-to-maintain
product with yours to streamline operations and cost. If so, this can be a very effective relationship.
Also, be cautious of smaller partners that might have credit risk and those that you doubt can make a
meaningful impact on revenue. Focus on quality over quantity. It’s better to work with fewer partners with
meaningful impact than a larger number of partners with minimal impact. Besides, as a startup with limited
resources, the last thing you want to do is spread yourself too thin and waste time chasing deals with little
value.
Be aware of your strategic roadmap and that of any prospective partners. While you may not be
competitors today, as each of you build out solutions, you may become fierce competitors soon. This
situation can quickly kill many months of hard work in building and structuring the relationship, so it’s better
to be as candid as competitively possible up front.
Finally, be mindful that some of your best partners may potentially be your acquirer down the road. While
this can be an intriguing thought, be careful about any proposed investment in your company as such a
move could preclude other partnerships or acquisitions. Good partnership can lead to lucrative exit
strategy, but only if you don’t close all the doors in the process. Such was the case for KACE, which began
as Dell’s vendor partner of network, desktop and server appliances. After Dell generated more than 50
percent of KACE’s revenue with a reseller partnership, the PC giant eventually acquired KACE in 2010.
Pursue Avoid
Sell complementary products to same
buyer
Sell competing products
Large customer base that’s a good fit
for your products
Small customer base
Small number of partners who can
make major impact on your business
& who have had success reselling
other products
Spreading limited resources across
too many partners and/or those
without experience as a reseller

10. 7) What type of partnership can I forge for a freemium
business?
Freemium products are definitely a breed of their own, and as the adage goes, “Birds of a feather flock
together.” Other freemium providers like adding additional freemium products to their suite, which can
increase engagement with their own products and help increase the likelihood of customers hitting a pay
wall. Adding free solutions to existing paid solutions can also increase engagement with partner customers
and help further monetize the total solution when customers hit the pay wall on your product.
WinZip added a white-label version of the freemium YouSendIt product to their solution calling it ZipSend.
Not only did this increase the value proposition and engagement of the core WinZip product, it increased
the conversion rate of free WinZip users to paid users.
The e-commerce channel can very useful in the freemium game, both at the top of the funnel to generate
traffic, and at the bottom to convert that traffic with a more compelling product offering. In this way, if you
have a strong understanding of your CAC, conversion ratios and customer lifetime value, you can treat the
partner as a marketing channel, offering them an incentive per lead, giving you the opportunity to evaluate
how each partner channel performs versus one another.

11. 8) How do I handle channel conflict with direct sales?
Start by identifying resellers that focus on areas where direct sales isn't. For instance, if direct sales is
pouring all of its efforts into enterprise business, choose partners that sell to SMB customers. If direct
sales is focused on North America, then build relationships with international resellers. If there are certain
verticals where your direct sales are weak, identify resellers in those verticals to help you boost
impact. The goal is to work both sides—direct and indirect—to establish full coverage in the market. In
areas where there’s simply no way to avoid direct conflict, consider signing up referral partners or co-
marketing and co-sale partners like systems integrators and other service providers.
In the case of cloud content-sharing service Box, their model mitigates channel conflict via compensation
by creating a channel neutral scenario. Box salespeople earn the same commission and quota relief
regardless of whether a deal is sold direct or via a channel partner in their region. This encourages
salespeople to give the channel partners leads and engage in co-sales with the partner.
Regardless, we strongly recommend that you leverage a registration process through a CRM system in
which the first partner to register a qualified opportunity owns the deal. However, in cases where both direct
sales and the partner find an opportunity at essentially the same time, they might even team together on
the deal and split the revenue and quota credit. Also, if a partner or direct salesperson can add value to a
deal already in progress, give the owner of the opportunity the chance to team with the other, if they're
open to giving up some of the incentives.
Lithium, the customer-facing social community software and social marketing provider, takes an entirely
different approach. It mitigates conflict by having its direct sales team sell certain products to marketing,
while resellers focus on selling other products into customer support.
In a somewhat different model, Google Enterprise eliminates channel conflict by giving their sales reps
quota credit for all deals sold by a reseller in their territory. In addition, the company requires that all deals
under 10,000 seats must go through a reseller. In such a scenario, the quotas are increased to cover all
direct and indirect sales in a rep's territory. Meanwhile, SuccessFactors incentivizes direct sales reps to
push work to partners to help fuel the demand and engagement.
Finally, maintaining price parity is vital to mitigating channel conflict and this should be worked into the
partnership deal. A situation in which partners try to sell your product at a different price and compete
against your internal sales force in the same market can destroy any potential benefits and hurt both of
your reputations.

12. 9) Organizational Questions: In building my business
development team, what type of individuals and skills
should I look for? Besides the business development team,
who else in our organization needs to be involved to ensure
the partnership is successful?
On your business development team, you'll need a hunter who can identify, negotiate and close
partnerships, who has authority at the highest level and the ear and confidence of the C-suite. You'll also
need “farmers”-- account managers who will cultivate the partnerships for success, manage the account
executives and sales team, provide resources for enablement, and who are subject to revenue quotas. A
specialist in partner marketing can provide tools, materials and support for partners in promoting the new
product to their customers and prospects, as well as support the partners' own marketing initiatives. Other
key team members include solutions consultants who help train technical resources; customer support
consultants who train the partners' customer support teams on managing clients' success; and
implementation specialists who train the partner on implementing the solution.
In all cases, a team approach is critical whereby each of these key players work together to streamline the
process. For example, for implementation, your partner might first observe an implementation or two, then
you might tag-team implementation tasks for one or two customers. Finally, the partner would lead their
own implementation for one or two customers under careful supervision before they become certified. This
system should be duplicated in the sales and solutions consulting, as well as support, and ongoing training
and certification should continue as new products are launched.
Beyond your business development team, executive sponsorship on both sides of the table is critical to
making sure the partnership is a strategic priority. Sales and marketing will need to be involved, and you’ll
also want to consider customer, account and technical support. In fact, assigning technical resources to
assist third parties is imperative to ensure the integration is seamless. Will bringing on new partners add to
the demand? Will you or the partner provide technical assistance to customers acquired through the
partnership? Again, there is no single correct answer that works for all arrangements, but it’s important to
determine the expectations up front, and ensure the responsible party can meet them.
For large, complex partner sales organizations, it’s critical to socialize the partnership with the on-the-
ground sales reps and managers. Don’t leave tasks to the partner VP of Business Development or Sales;
instead, you must be actively involved in educating your partner’s sales force on your offering.
Particularly for referral partnerships, it is important to work on building relationships and trust between your
sales team and that of the referral partners in their region. Partners favor vendors who they can trust and
with whom they enjoy a personal relationship. Your local sales team’s attendance at partner sales meetings
can have a huge impact on driving deals in the field.
With OEM partnerships, your Product Management team must be involved to help scope the work to
integrate the two solutions and determine the level of investment on both sides. Once this is accomplished,
both sides can review the business plan to determine if the investment matches the return.

13. 10) Should I consider an exclusive deal with a partner?
Exclusivity is most often associated with specific targeted market segments (i.e. geography, industry,
brand, use case). In the enterprise software/SaaS space, it’s not uncommon for a software company to
partner exclusively with a large services organization to develop solutions for specific business functions
and industries. Exclusivity tends to works best when a) the revenue potential is very high, and b) both
parties share equally in success or failure. Revenue guarantees are often required when either of these
criteria is not met. Opt outs for M&A and revenue shortfalls are also common.
Exclusives typically only work well if the revenue guarantees are great enough, and only if the exclusivity is
limited to a small number of off-limit partners. Any revenue guarantees should also have time limits,
providing an “out” in the event certain targets are not met, such as failure to achieve revenue commitments
in two consecutive quarters, for example.
Only do an exclusive deal in a specific vertical or geography in which you have no plans for investing via
direct sales in the near future and be very selective. There must very clear lines drawn with regard to
customers in these types of deals. If not, you run the risk of massive channel conflict. As part of the deal,
you also need commitment (contractual) of resource investment from both sides, and consider setting
targets around actual "billings" vs. "revenue/bookings." These targets should be aggressive and somewhat
in line with targets you would expect from your direct sales team (if they sold into the partner
vertical/territory).
Exclusivity should always be bi-directional (unless there is a very sound reason against it). If a partner does
not want you working with their competitors, they should also not work with yours. Also, anti-competition
laws need to be considered, at least in Europe, so putting an exclusive arrangement in place where this is
an issue takes careful structuring.
However, exclusives deals are rarely effective, because they increase channel conflict, require you to give
up part of your addressable market to a third party, and limit your ability to work with other partners who
might have an overlapping client base. Another challenge is the unpredictability of partnerships, as
oftentimes it'll be the first model of its kind, resulting in many question marks. Exclusivity increases the
likelihood that a mistake/miscalculation will come back to haunt you. With such high opportunity cost,
flexibility is key. That doesn't mean exclusivity is out of the picture, but just that it requires much better
upfront knowledge and more accurate sense of the outcome. Thus, a common approach can be limiting the
exclusivity to one year as a trial, especially if the partner is a big value target (large and successful with
another product), and there are a small number of other partners interested in your product.
Exclusivity can be achieved without a contractual commitment if the partnership is successful and requires
enough resources that it’s not feasible for either side to work with another competing partner. For instance,
SuccessFactors does not have an exclusive arrangement with its partner in Israel, but they have yet to
recruit another partner there, so it’s exclusive by default. It’s likely SuccessFactors would structure
something similar for other markets where they don't have the bandwidth to support multiple partners.

14. 11) How should I structure the actual deal? What margin
should the partner receive?
The terms should be determined by multiple factors. Higher revenue share percentages, up to 50%, can
be offered for partners that can obviously make a meaningful impact on your business and require such
margins to effectively quota their sales reps. Many times these major partners will also guarantee
revenue. Typical reseller partnerships provide 20-40% in annual recurring margins on software, but can
also scale up once revenue milestones are met or reps are effectively trained to sell without much
support. Typical referral partnerships pay each side 5-25% of first year software revenue, but can creep up
significantly as volume surges. Many times half of that amount is used for co-marketing initiatives to help
generate more lead flow.
Understanding the strategic landscape is also critical before diving into any deals. In addition to having a
long-term strategy built out, it’s important to also have a sense of key metrics you’ll want to test for in "beta"
deals. Having realistic expectations and working toward actionable, incremental successes is much more
manageable than trying to achieve the big audacious goal right out of the gate. This provides an
opportunity for the business development path to grow in importance, complexity and integration over time
based on incremental successes.
Developing a tiered structure, with specific expectations, metrics and service levels designed to meet the
needs of partners at various levels, can help make the overall partnership program easier to manage.
Plugging potential partners into these pre-defined categories can help establish best-practices so that each
new deal does not require you to reinvent the wheel.
Regardless of how the deal itself is structured, it must include defined goals, KPIs and other milestones
that are satisfactory to both parties. Stated objectives can be defined on a case-by-case basis, but things
like training and certifying a specific number of team members, new customer onboarding and revenue
goals are a few examples. Regular status reviews on a quarterly basis are also critical for ensuring that the
partnership is meeting expectations for both sides. The most productive partnerships work well because
they are based on clear objectives and are supported by the necessary resources to meet them, including
managers dedicated to ensuring those goals are met.
In fact, from an operational standpoint, it’s a good idea to evaluate your overall partnership portfolio on a
quarterly or (at minimum) annual basis, and don’t be afraid to fire partners that aren’t living up to their end
of the bargain. Effective partnerships require ongoing communication about mutual corporate
strategy. Business development needs can change, and you must be willing to make adjustments when
needed. For instance, Cornerstone OnDemand leveraged partners to resell into the mid-market when they
had no salespeople of their own focused on that segment. They now have 60 salespeople focused on the
mid-market and have begun minimizing their reseller efforts there to reduce channel conflict.

15. 12) How do I get my most sought after partners to work with
me?
Finally, perhaps the biggest burning question of all: how do you get target partners to notice you? The
single best way is to start sending them business. Once you begin referring meaningful business they will
take notice and discover the excellent synergy between your products. Approach your initial interactions
with the intention of looking for ways to better serve your mutual customers. The goal is that these altruistic
intentions will in turn encourage them to approach you for a meaningful partnership, rather than you always
being the instigator.
There’s no doubt that your most sought-after targets are likely the same as countless other startups. But,
there’s also a good chance those other startups are mostly seeking a one-way partnership that serves their
own needs, which won't get the partner's attention. The mutual benefit approach is critical to gaining
attention, trust and an ongoing relationship.
Often times, getting one strategic partnership in a market can be leveraged to attract other key players in
that market. The bowling pin theory. If you can get the lead player in a market to partner with you then you
can more easily get the rest to partner with you to restore equilibrium in the market and eliminate the lead
company’s competitive advantage.

16. Conclusion: Build Your Own BizDev Strategy
Some in the industry have questioned whether any one has actually been successful in reselling SaaS.
However, based on the examples cited here and many others too numerous to mention, it’s quite clear that
in fact, there are many success stories and the number is growing. Reselling in the SaaS business has
become a cost-effective way to gain full coverage and outflank the competition, either as a complement to
or replacement for direct sales.
In pursuing any business development strategy, as with any new initiative, begin with a careful
introspection of your organization. It’s critical to align your internal staff and resources to effectively take
advantage of the opportunity. While it can be a risky venture, identifying and working with partners that
have already been successful in reselling SaaS products—and that have already built a best-practices
model and process—can dramatically reduce the risk and enhance the likelihood of success. Rather than
having to teach an inexperienced partner the ropes, and essentially re-invent the wheel, working with an
experienced reseller enables you to take advantage of their experience, success and existing market
relationships.