The Ecstasy & Agony of Resellers

In this four-minute read, a veteran of reseller relationships speaks from experience to reveal the five key Benefits and three significant Risks of this business acceleration technique.

The scaling phase of startups and early-stage tech companies is a pivotal inflection point marked by a balancing act between time and costs around its go-to-market strategy. Establishing a reseller partner channel is an important way to tackle both.

This strategy enables early-stage companies to expand their market reach, scale quickly, and share risks with experienced partners. But while those benefits can be enough to make a business leader ecstatic, it comes with some potential agonies too.

The Ecstasy of Resellers

First, the attributes of reseller relationships that can take you to the heights.

1. Accelerated Market Penetration

Reseller partners provide immediate access to established customer networks, allowing early-stage companies to penetrate markets more quickly. These partners often possess deep relationships within specific industries or regions, eliminating the need for companies to build connections from scratch. By leveraging these networks, they can reach potential customers much faster and with greater efficiency than they could on their own.

2. Increased Sales Reach Without Significant Overhead

A major benefit of reseller partnerships is the ability to scale sales efforts without the burden of significant overhead costs. Building an in-house sales team is both time-consuming and expensive, particularly for early-stage companies operating with tight budgets. A reseller model allows them to tap into a network of experienced sales professionals without the costs associated with hiring, training, and managing an internal team.

Moreover, resellers typically work on a commission basis, meaning that sales costs are directly tied to revenue generation. This structure makes it easier for early-stage companies to manage cash flow and ensures that expenses are aligned with performance.

3. Faster Sales Cycles and Enhanced Credibility

Early-stage companies often face challenges in building trust with new customers, particularly when competing against more established players. Resellers bring a significant advantage here, as they typically have long-standing relationships and credibility with their customer base. This trust can dramatically shorten sales cycles, as customers are more likely to adopt solutions recommended by partners they already know.

In many cases, resellers act as trusted advisors, which is especially valuable in enterprise sales where purchasing decisions are complex and involve multiple stakeholders. This established relationship allows companies to gain credibility and close deals faster.

4. Increased Focus on Core Competencies

By building a reseller partner channel, early-stage companies can concentrate on their core differentiators, innovation and product improvement, while their partners handle sales and distribution. This focus lets them respond more quickly to customer feedback, enhancing product-market fit. Then too, without the weight of a large sales team, any needed market pivots can be executed more rapidly. 

5. Reduced Risk

Entering new markets or launching new products always involves a degree of uncertainty. Resellers can help mitigate these risks because they often have valuable insights into the dynamics of the markets in which they already operate.

This makes resellers a great way to test new products in a controlled environment before launching on a larger scale. Companies can thereby gather market feedback and refine their offerings without fully committing to large-scale production or international expansion.

The Agony of Resellers

While reseller partnerships offer all these considerable advantages, they come with some agonizing risks that must be managed effectively.

1. Misaligned Incentives

One common challenge is the potential misalignment of incentives. Resellers may prioritize products that are easier to sell or offer higher margins, leaving the early-stage company’s product underrepresented. To avoid this, partners should be carefully chosen to ensure that business objectives align and that compensation structures incentivize the promotion of the product in its own right.

2. Customers Held at Arm’s Length

Another risk is the loss of direct customer relationships. When resellers are the primary point of contact, early-stage companies can lose valuable opportunities to gather customer insights directly. To mitigate this, they must collaborate closely with resellers to assure they can gain direct access to customers to collect feedback and to continuously expand their understanding of customer needs.

3. Training and Support

Training and support are also critical. Resellers need to fully understand the product to sell it effectively. Early-stage companies must invest in training and ongoing support to ensure their partners can communicate the product’s value to customers clearly and confidently.

A Real-World Example

In a previous startup, I was launching a bootstrapped SaaS company in the marketing data space. With limited funds and unable to afford a large sales team, but urgently needing revenue, we arrived at a critical inflection point. 

 I partnered with a leading marketing technology service provider (MSP). The MSP integrated my startup’s product into its broader offering and rolled it out to an existing base of 50+ customers, incorporating the product into its sales mix. This collaboration resulted in a $6 million revenue increase for my company within six months, with minimal impact on sales expenses, making it a highly profitable partnership. Additionally, the rapid market entry enabled us to build real-world use cases that could be leveraged by our newly established direct sales team.

Conclusion

Establishing a reseller partner channel can offer an ecstasy of benefits for startup and early-stage tech companies, including rapid market penetration, increased sales reach, and reduced overhead costs. But to avoid the attendant potential agonies it is essential to manage those risks by carefully selecting partners, providing adequate support, and aligning incentives to ensure the reseller’s success is closely tied to the company’s own.

Managed effectively, reseller partnerships can accelerate growth and provide a sustainable path to success in competitive markets. And that’s enough to make anyone ecstatic.

Mike Curtin, Partner

Marlborough Street Partners

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