Selling a product indirectly through value added resellers (VARs) is a great way to reach a broader market at a lower fixed cost. These channel partners can help augment your services, shorten the sales cycle because they already have existing relationships, and provide valuable feedback. My one piece of advice for startups is to not expect the channel to be the best way to grow your business early on. The channel is extremely hard to get up and running, gives little visibility into the sales pipeline, and follows the 80/20 rule (20% of the partners will deliver 80% of the partner deals).
Why shouldn’t you focus on the channel when first starting out? It is so important to have clear and unfettered lines of communications with your customers that only direct sales provides. In addition, direct sales allows for more visibility into the pipeline and more ability to control your own destiny. Only after you have a repeatable sales process yourself should start putting more effort into the channel.
Just starting out with the channel I recommend a simple revenue sharing policy. Something easy like a 10% referral fee for leads that they give to you that you have to close the deal along with a 30% referral fee if they do all the selling and close the deal handing you a purchase order. Having the 10% and 30% plan makes it quick and straightforward for VARs to do deals and sell their bread and butter offering (typically consulting services billed as time and materials).
What else? What other advice do you have for startups and VARs?
David Cummings on Startups 
David,
Thank you for this post. I have a quick follow up question…is the 10% and 30% you mentioned on the top line revenue for the first year (or 2, 3, 4, etc. years) or for the life of the customer?
Any thoughts?
Love the blog, by the way. I’ve been a long time subscriber.
Thanks David!
-Chandler
The 10% and 30% is for the life of the customer. We want the resellers to have a strong incentive.
Thanks David! I appreciate the quick response!