Dear SaaStr: Do Referral Programs Work for SaaS?
Well, for sure. But … it almost always takes longer than you think than direct sales:
- Salesforce announced a little ways back that its partners were the #1 source of its new bookings.
- 40% of HubSpot’s and Shopify’s and Gorgias’ customers come from agencies and other partners
You can see in our deep dive with HubSpot co-founder and chairman Brian Halligan how their revenue from partners isn’t just critical … but a moat:
A few things to think about though:
- Partnerships often take years to produce material revenue. Invest long here. Take your existing sales cycle — and double it.
- Power laws and long tails are common in partnership programs. A few partners will drive the majority of joint deals, and then all the rest together generally are materials. Try to leverage your API and self-service capabilities for the long tail if you can, and focus human resources on the ones that move the needle.
- Ask yourself “Why?” Yes, everyone wants Salesforce, Google, Box, etc. as a partner. But why would they partner with you? If you don’t know … they won’t. The easiest way to start is to bring them a few big deals.
- Pay twice. For most partner programs, you may have to pay commissions twice. Once to the partner, and again to your own sales / success team. Later, you can nuance this. But in the early and middle days, you just have to pay twice.
- Double down on any partners you have early traction with. In the early days, invest heavily in any partners you have even 1 or 2 joint customers with. Invest in what is working. Just a few early joint customers often point to a future of many more.
- Smaller partners with high affinity can move the needle. Getting 1% of Slack’s or Salesforce’s customer base would be great. But what about 25% of a smaller, but fast growing startup where the integration is even tighter? That might make you more money, and create more revenue, than a tiny attach rate to a big co. At a minimum, don’t discount the power of sharing 10% of your customers with a smaller partner vs. 0.1% of your customers with a huge one.
- You need dedicated resources. Biz Dev, Channel Manager, whatever. You need dedicated resources to manage your partners, at least once you can afford them. And put them on quotas, generally … but ones they can achieve.
Be patient. This stuff takes time. But it usually works.
Some great learnings here from Gorgias on how, like Shopify and HubSpot, 40% of their almost 20,000 customers come from partners:
(image from here)
The post Yes, Referral Programs Work for SaaS. But You Gotta Put in the Work. And The Time. appeared first on SaaStr.
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Jason Lemkin, Khareem Sudlow
