Selling solutions directly to end customers can be a costly endeavor. Did you know you could grow your business more efficiently with a partner program? Doug C. Brown welcomes Daan Donders, the Founder at SO Connect. SO Connect is a powerful online visibility tool used and trusted by over 50,000 local businesses. They grew to 5 million resellers in just two years. How can you do the same? Tune in to find out. You wouldn’t want to miss this episode!
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Advantages Of Growing Your Business With A Partner Program With Daan DondersOur guest is Mr. Daan Donders. He’s from the Netherlands. He owns a company called SO Connect. He’s got a great and interesting story where he built this company from $0 up to $5 million in the first two years using partners. He used partners in the form of what we would call resellers. I’ve always been a big proponent of extending our reach through independent partners, whether we use those in the form of referrals, agencies, resellers, private labels or whatever it might be. It’s a great option because, a lot of times, it is a higher profit margin than your actual direct side of sales. You need a direct side most of the time, too. However, pay attention if you would when he and I discuss the dos and don’ts of doing this since he has much experience doing this and I have a lot of experience doing this. You’re going to get a lot out of this episode. Daan’s a straightforward, honest guy. I found him to be very trustworthy and credible.
—Daan, welcome. It’s a pleasure having you on here. Likewise, Doug. It’s great to be here. You’ve been in the software and online world for a long time. I looked through your LinkedIn profile and we’ve had some conversations. You’re the Founder of SO Connect. SO Connect, from what I understand, provides business, especially local businesses, listing reviews, website optimization and reviews in general. The reseller doesn't work for you; they work with you. Click To Tweet Everything that helps small businesses be more visible-aligned, we have a set of products that empower them. You’re in the Netherlands. Is it European only or worldwide? It’s global. Probably 50% of all our customers are based in the UK, Western Europe and Australia. We started in North America with our own office in LA. That’s going to be our US hop. The story of how you built SO Connect is part of the reason I was so grateful to have you here because I’m constantly preaching to people, “One of the ways of growing revenues is to extend the number of your sellers.” It doesn’t mean that when we extend the number of our sellers. We have to be paying base salaries and all of that. We can use independence. You’ve done that very effectively with SO Connect. You grew to $5 million within the first two years using that component of it. I’d love to delve into that as a subject matter because there are so many people out there going, “You could do that?” They don’t know the philosophy about how to grow it correctly. You started like everybody, organically zero. You had this idea, “I want to grow this company.” Where did the idea come from about growing it with independent representatives? I have previous companies where we were trying to sell solutions directly to end customers and end customers as well as small local businesses. We’re selling a Wi-Fi marketing solution so something completely different from what we do in that company. The business owner was buying a subscription service, which would help them reach out to their customers. We have products that make them more visible-aligned. The model worked out. We were selling a SaaS solution to these businesses. The problem with selling directly to small businesses is that the acquisition costs were so high to get that customer in. We needed to have sales offices in every single country. We had offices in Spain alone. We needed to have offices in Valencia, Barcelona, Madrid, across Europe, everywhere. We need to have these local sales teams going that were out to these businesses and try to sign them up for our service. It went well, but the acquisition costs were so high that the customer was paying way too much for a solution. That was not the only problem. A lot of people will recognize this but selling to a local business owner is as difficult as selling to a business owner that has 50 businesses. Both the support load is the same as well sometimes. For us, in that business model, it didn’t no longer make sense to go out there with our salespeople and sell our solutions directly. That’s why I thought, “In my next business, why not get rid of that whole direct sales model and go through a partner that has an existing building relationship with that business already?” That means my acquisition costs are way lower than they were before. The end customer works with a supplier that they already trust, have a contract and a building relationship with. As a result, it’s not only the relationship. It’s also the fact that they pay a fifth of what they would normally pay when I need to go directly and sell the solution to them. That all sounds great, though, but then you need to execute that plan. That was the main reason why we chose for a completely different strategy at SO Connect. It’s interesting because, on a direct sales model, we have increased overhead. We had to charge more for the service that we were putting out for our particular end-user because we had to cover this overhead. Since we had high overhead and pricing, our profitability wasn’t as good as if I used an outside independent sellers network. Therefore, getting either direct sales from them because they’re doing the work or maybe even referrals. I can give the end-user a better price because I don’t have the overhead and my profitability is higher all the way around. If you are a small business, you probably have a couple of suppliers that you work with. How easy is it if the agency that you already work with for your Google apps or any other stuff is the one that is offering, in this case, our SO Connect product, under their brand? We don’t need to establish that relationship again with that local business. That’s something that’s challenging for any company selling into that market. You already have built-in trust. It might be somebody who has been working with that other company for ten years, their guy or gal if you will. With a direct sales team, you’ve got to build rapport, trust, and credibility if you’re calling out cold. All of that stuff has to happen. It takes over time but working with an independent partner that already has all of that because they’ve spent all those years in blood, sweat, tears and money to acquire that relationship. It’s instantaneous. You’re increasing the speed to sales as well. Select the right type of partners for your business. Click To Tweet We do. There are some negatives about this model. The first thing is you don’t have the relationship. That’s a plus. It also means that you’re not able to call the end customer and ask for feedback. You’re not able to handle the churn that might come inevitably. It’s the fastest way to grow. The other side is it’s hard to control it. You lose control in that sense because the partner that is reselling your product has control over that customer. That not only makes it impossible for you to control and handle churn, but in some cases, it could also mean that your company’s evaluation is slightly lower because you don’t have the direct building relationship with that end customer. Are you working through a reseller relationship at that point? Yes. We’ve learned that you’re selling a product into the SMB space, which is not generating a lot of revenue. Our products tend to sell anywhere between $10 and $20 per month, which is not a lot for business. That proposition has a standalone. It’s never going to be profitable for any partner to sell one by one as well because they’re going to end up with the same problems. Although they can have their relationship a little easier, we looked at how we can bundle our services into what the partner is offering to that customer? For example, our listings products are a platform from which local businesses can update older location information on 50-plus platforms, such as Google Maps and Apple Maps, in one go. It’s a great product, but they pay $10 to $20 a month for it. We needed to bundle that into a broader SEO package that this partner was offering to their customers or any other kind of package. Bundle it in means that you got a lot more sales because any sale that that partner is making, you’re in it. We’re trying to do that as much as possible. We also do campaigns on a complete customer basis with partners where they say, “I got 10,000 customers. I would like to upsell them.” We’ve made a whole flow where we can automatically give them all a free trial every business of them. Send them an email, say why we have launched this product and how they perform online. From that, they go to their dashboard without any further sign-up. They can start that trial. This is a 60-day free trial we offered them. It automatically enrolls into a paid subscription. No contracts in between. Nothing that you need to sign up to and direct access to your product. These are a couple of ways how we sell it. Especially the last one, we’re successful with that. Daan and I are talking about how to extend your reach through independent sellers because it’s a great technique. There are different models on that, Daan. You have that reseller model you’re working on and you have a couple of variations on that. I’ve run hybrid models where telecommunications companies are famous for running this type of model or expense reduction companies where they have the agent or the independent seller sell that, but then they will have direct control and feedback so the agent can step out of the customer service end of it. They’ll receive a commission every single month. In the case of telecommunications, it’s recurring commissions like it would be in a software-type play. You could have referral sales and then you can have direct to agent sales that are not reseller sales. There are different levels of this. The reason I bring this up is because I can imagine that people are reading this goes, “This sounds great. I got lower overhead. I have the ability to play with the pricing game and give a more fair price. I can make a higher profit.” It sounds wonderful, but it’s not as hands-free or easy as some people would come to think it to be. At least, that’s what I found when I was running my company. I’d love your feedback on this. One of the mistakes that people make is they try to treat this like a direct sales team. It doesn’t work out well when people do that. First of all, you don’t decide what the partner does. I call it partner-reseller, the same thing for us. The reseller doesn’t work for you. They work with you. You can’t control them like they are your direct sales channel. That’s not going to work. The first thing you need to do and something we’ve fit completely wrong in the first year is whoever wanted to sell our products, we welcomed them and said, “That’s great. Go out and sign up. We’ll give you sales trainings. We build your marketing materials and do all that and then you go out and sell it.” We ended up with having 100 partners and a handful only selling. The rest just signed up, sometimes even to minimum commitments, which didn’t make any sense. The first thing you need to do is be very selective. The model for us is if the partner sells and the customer pays, we get paid. If not, we don’t get anything. You better be confident in where you spend a lot of time on that they will be successful. That all starts with, “I’m trying to select the right type of partners.” The first thing we look at is we’re selling SaaS solutions. “Has this partner sold anything on a subscription-based before?” If the answer is no, then we’re not going to work together because that means that we need to educate them on how to build a SaaS company. That’s not what we want to do. The second thing is, “Do they serve the right type of customers? Do they serve local businesses?” That’s the customer that we’re after. If they do, good. The third thing is, “Did they have a size? Are these 4 or 5 guys getting started with the company? Do they have thousands of local businesses as customers that are happy with that customer? What is the relationship with that partner and so forth?” By being very selective on who to work with, you can enormously increase your chances of success. We get roughly 50 to 60 new partners every month that want to sell our product. We sign up 2 to 3 partners a month. That’s the number of partners we want to work with. That’s important because you feel flattered. Many people want to work with you and sell your products under their brand, but they still want to resell it. They love your product and are very enthusiastic about it. You need to say, “No. We’re not going to do it. Not even when you pay minimum commitment because we don’t believe you’re going to be successful selling this product.” That’s called win-win selling. It’s doing the right thing for them and the right thing for yourself. A lot of people don’t play this game on the direct side, the indirect side or the wholesale side. I love what you’re saying because you’re talking about the difference between a right-fit partner and an ideal-fit partner. There’s a difference and people don’t realize this. You have 50 people coming every month and many of them could be the right fit, but they’re not the ideal client profile for you, so, therefore, you have to say no. It’s analogous to a football team. There are a lot of talented people who come through who can kick that ball, score, defend and all that, but are they the ideal fit for the winning team? That’s a different story, the best managers and organizations, especially in sports. I’m a hockey fan. In the United States, the Stanley Cup is the big thing. If you want a Stanley Cup-winning team, we have to build the team on ideal fit, not just right-fit, because anybody can get on the ice and do what they do. Can your goalie stop those shots coming in? That’s where the rubber meets the road. In business, it’s the same thing. On the direct side, a lot of times, people talk about the right-fit client. They’ll look at parameters but what they’re not looking at is what’s the personal and professional return on investment that that actual client will get. Do they fit that mold? “I want to try this out and explore this possibility.” What advice would you give them? What steps would you recommend or top things to look at? I see a lot of successful SaaS companies that have a very successful enterprise direct sales model in place. They are trying to do partnerships like a couple of guys in a partner team. One guy that does resellers and another guy that does referrals. Maybe it’s a team of 10 or 20, even compared to the size of the company that’s small. I don’t believe in doing this as a little extra. I don’t think it’s going to work. I can’t be sure about it. I saw many companies fail with their reseller model because there was no focus if it’s such a small team working on it that handles it like a direct sales team. The only difference is that they bill it through a partner instead of billing it directly. That’s the first core decision you need to make. “Do I have the resources? Do I want to focus on this?” The second thing you need to decide on is, do you care about your brand being out there? Tens of thousands of businesses use our platform but nobody ever used a SO Connect dashboard because everything is white-labeled. It could be a Telstra dashboard, Orange Telecom dashboard or any kind of SEO company. If you want your brand to be out there, then that’s a decision you need to make. You have a model where you can sell your product under your brand through the partner or reseller. If we feel that if your brand is not super strong, you’re better off selling the solution for the partner under their brand, white-labeled, rebranded. That would mean that nobody would ever know your brand. That’s very true. It will also help because the partner would feel like it’s their product, business and thing and try to accelerate that. My experience is that they put a lot more time and effort into it when they feel it’s their product that’s integrated into the dashboard with the other products they already have. Those are probably the first decisions you need to make. After that, be very selective about what kind of partner you want and what kind of partner is successful. If 50% of your partners eventually sell, you’re doing a great job. That’s good. The biggest issue with getting a partner to sell is prioritizing. In this case with SO Connect company, the context of partner, the partner already has maybe 10, 20 or 30 different other products that they sell for years. Here is this new software tool. They like it. They’re taking good care of the portfolio and then they start upselling, bubbling and then whatsoever. To get to that point, they need to prioritize that at some stage. That’s the hardest part because they probably have 1,000 other things they could do and getting your product would be the highest priority for them. That’s still our biggest challenge every day with the partners we work with. When I ran agencies, built agencies or even had my own and then built independent partner programs, it was the same challenge we had. I’d have 100 contracts, but I only sell maybe 7 or 8 of them. I’d have 100 different ones, but I always went to my preferred vendor in that capacity. It comes down to the first thing that you would recommend people to do. Who and how are you going to treat these people? If you’re going to treat these independents as direct employees and treat the program like that, the program’s not going to be that successful. These are people who have free choice. They’re reselling. How you support them to help them be more successful is a higher priority than even on a direct sales team. On a direct sales team, that’s also very important. We got to have coaching and all the things that are in there. I love that point that you brought up that this has got to be a division, funded and supported like any other division that would be taken seriously in the company. I see that as a big mistake. A lot of times, I see people doing this and they’re failing at it. That’s the major reason. They have a direct sales team of 60 people and they have Joe and Eddie in the back room. They’re supposed to go out and get partners. It’s that type of thing. The partners have questions, but they don’t have the budget to support this and that’s why it fails or stutters to a point where they can’t even move. It’s one of those deals. This has been great. I appreciate you being on here. Daan, if people go like, “I want to know more about what you do and what the company does,” how do they get ahold of you? You’ll probably share my contact details or LinkedIn. I love to discuss this subject with other SaaS founders. I’ve learned so much from other entrepreneurs in my space as well in the past. I would love to share my experiences and maybe learn from them as well. I can talk about this model for ages, but I would love to help them out, especially when they’re getting started. Perhaps also knowing for yourself if the partner model is the right fit for their company. That’s also a fair question to ask. It’s not for every company and every product you can have or set up a successful reseller partner model. What I have found over time is almost any company can do this but not all companies. People who are reading this sometimes think, “Is it right for me?” Reach out to Daan and ask. If you want, reach out to me. Either way. We both built partnerships and these things. A lot of people don’t realize that many and even larger companies have private label programs. I don’t know if Zoom still has it or not, but I remember when I was looking at a SaaS offering, I was going to incorporate Zoom into what I was offering. I didn’t want the Zoom name at that point. I wanted it to be a white-label solution. They were agreeable at that point. Since they become what they are, I don’t know if they’d be so agreeable anymore, but the reality is that any company can explore that option and then do it right as you’ve done. You’ve proved it out. You went from 0 to $5 million in 2 years just on this model and you continue to keep growing. I love the fact that you’re selective about it. That’s the other mistake I see people making all the time. They’re like, “I got 3,000 resellers.” It’s like, “How many are active?” Know for yourself if the business model is the right fit for your company. Click To Tweet I had the knowledge. I still made a mistake in the beginning, too, because you feel flattered. Everyone wants to sell your product. I’ve learned from that. I’m happy to help anyone with questions, for sure. Daan, I appreciate you being here. This has been a great discussion. I know people have gotten a lot out of this. I appreciate you as a person. Thank you so much, Doug. Likewise. — That was pretty cool. We talked about the dos and don’ts of building a partner program. One of the big things about a partner program is that you’ve got to seriously treat it like it is as important as your direct program because it is different. Even though it’s highly profitable for you, you’ve got to have resources, budgets and things allocated to it. If you don’t, what will happen is the program will stall a bit. It’ll get bumpy. Partners need to be supported in some cases more than direct sales reps. When you’re building a partner program for yourself, please make sure that you take and fund it seriously as you would a direct side. If you have any questions on that, you could reach out to Daan. I’ve built many agencies and helped people do that. If you want to do something like that, by all means, reach out to me, Doug@BusinessSuccessFactors.com. If you liked this episode, please give it a five-star rating. Let me know what you’d like to see for upcoming episodes, content and information. I’m here for you. I’ll be happy to bring you whatever I can. Until next time. Go out, sell something. Make it a great day and be profitable. To your success.