Channel partnerships absolutely create revenue and facilitate growth for B2B SaaS companies.
That claim is easy enough to believe on its own, but at SaaS Connect 2019, Rob Belcher from SaaS Capital provided some data to back it up.
In 2018, Rob’s firm surveyed more than a thousand private B2B SaaS companies, and that survey generated some of the clearest insights available on the benefits of channel partnerships.
How popular are channel partnerships?
According to Rob’s data, a little more than half of private B2B SaaS companies rely on channel partnerships. Horizontal companies — those with a platform-oriented model — tended to rely more on the channel than vertical companies. Those splits were 57% and 48% respectively.
What’s interesting is Rob found that companies with a reseller program grew 5% faster than companies that sold directly. Businesses that take advantage of a channel reseller program do tend to see real growth as a result of it.
What types of partnerships do B2B companies form?
Interestingly, there is a wide spread among the types of partnerships represented in Rob’s data.
- 28% of B2B SaaS companies partner with a consultancy or implementation firm
- 28% partner with a software company
- 20% partner with a value-added reseller
- 20% partner with a complementary or non-software product or service
- 4% partner with other companies.
This suggests partnerships are highly contingent on the partnering companies. Each partnership is a question of fit.
Again, there are slight difference between horizontal and vertical companies. Among horizontal companies, 31% relied on consultancies and implementation partners. Among vertical companies, 35% partnered with other software companies.
How much revenue does the channel create?
Among companies that do rely on channel partnerships, Rob’s data found that 21% of revenue comes through the channel.
SaaS Capital segmented responses by each company’s annual contract value, and the results were pretty flat across the board: Whether the company charges $5,000 or $250,000 for an annual contract, roughly a fifth of revenue came through the channel.
Note that this is a change from 2017, where companies on the low end of the ACV segmentation only saw about 10% of revenue come through the channel.
Note, too, that horizontal companies tend to realize a little more revenue (6% more) through the channel, across all ACVs, than vertical companies do.
How are channel partnerships structured?
For companies that rely on channel partnerships, there are three ways the partnership can lead to sales:
- Via introduction
- Joint selling between the partners
- The partner sells on the company’s behalf
Across lower ACVs, partners more frequently sell on the company’s behalf via referrals or resells. Across higher ACVs, joint selling becomes a much more popular partnership model.
Just more than half (53%) of B2B SaaS companies have some kind of channel program, Rob notes. Channel partnerships are more common among larger companies, too.
Of those 53% of companies, on average a little more than one-fifth of revenue comes via the channel. Those companies tend to grow a bit more quickly than companies that only sell direct, too.
Finally, the data show no meaningful decline in retention rates for sales that come through the channel vs. direct sales.