What should be in your Channel Partner agreement?

channel

A startup company (other types of companies as well) may enter into an agreement with partner companies for purposes of reselling its software and services. Such agreements are typically executed for the purpose of geographical expansion without taking on a burden of creating a large sales force and account teams. In most cases, the channel partners provide integration and support services and act as the first point of contact with customers. This is applicable to boxed software and SaaS. Partner relationships are more common in B2B SaaS.

If your company is thinking about getting into channel partnerships, here are some things to consider in your agreement.  Usual aspects like term/termination, confidentiality, indemnity, liability limitation are assumed.

Territory

This stipulates geographical areas that your channel partner is allowed to sell your software and services. It could be a state, a region (example: South Eastern USA) or any custom locations.

Non exclusivity

You would want to reserve your right to do business yourself or appoint other partners in the same territory. This could be used if the partner is too busy to take on new requests, is not performing or you think that a direct relationship with that customer is vital to your interests.

Training

You should set a deadline for training to be completed by the channel partner. You would also have a mutual obligation to be ready with the training materials. When you prepare training materials, make them generic so it can be applied to new partners. When your software or SaaS changes significantly, there should be a mutual obligation to complete the updated training.

Marketing

While you are going to focus on marketing globally, the channel partner should be encouraged to conduct its best efforts to market your product in their areas. You would also actively share your marketing collateral with your partner, so they are clued into your efforts. Writing this into the agreement ensures that both sides take it seriously.

Pricing and Discounts

This is the most important aspect. The agreement would clearly state your list prices for software, services, hardware and support.  The terms should specify the discount that the channel partner gets from your list price. The channel partner would be free to quote their own price to the customer. Since you may change your prices, the agreement should always reflect the current prices, which could be maintained in a partner portal.

Business Plan

It’s a good practice to request a business plan from your partner after you have worked together for a few weeks.  While you can do that informally after the agreement, I find that requiring in the agreement makes it clear that you are taking this seriously and so should your partner.

Support

Tiers of support need to be well defined and agreed upon. Make sure to address any integration that the partner has provided to the customer on top of your platform.

For channel partnerships to work well, establishing a formal agreement off the bat is important. It could be painful to deal with issues once you have gone ahead without a proper framework in place.

Happy partnering!

2 Comments

  1. Thank you for the insightful article. I chanced upon your article when I was looking for inputs on channel partner management. Very relevant and succinct. Now I know better. 🙂

    • Thank you Sajid.

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