How to Compensate Your Partners

David Belove, CEO at Prodly, joins me, Jen Spencer to discuss investing in the channel, compensating your channel sales reps, and more on this episode of The Allbound Podcast.

Jen: Hi everybody, welcome to the Allbound Podcast. I'm Jen Spencer here at Allbound, and today I am joined by David Belove, who is CEO at Prodly. Most recently he served as Vice President of Sales Operations and Productivity at Nitro. Welcome David. So good to have you on the show today. Can you share a little bit about yourself and about kind of some of the roles you played in sales operations?

David: Well, first of all, I've had three distinct careers. I started out as a marketing professional and then I had a sales career, and now I'm refocused on sales operations. So that spanned almost three decades. So I've been making that transition from marketing to sales to sales operations over the last 10 years, I would say.

Jen: That's great.

David: I'm just going to stay in that process so I moved from selling hardware to software and now I'm to the SaaS software.

Jen: I love that, you know, you've had experience in the marketing side, sales, sales operations. I think it's great today to have that breadth of knowledge. You know when it comes to SaaS… you mentioned that you are at Nitro, you had roles at Apttus and eFolder and Cloud9 Analytics. You're pretty well-versed in SaaS sales at this point and I'm curious, you know, over the course of your career, what are some consistencies that you've seen that have really created successful SaaS partner channels? Because selling SaaS through partners and with partners can be different from selling traditional software or hardware even?

David: So, several things come to my mind. One of them would be that, vendors in particular but also that channel partners have to have a super clear picture of their go-to-market strategy. So if you think about go-to-market strategy as where you define your market segmentation. And then the way you pursue these segments, you've got to have a really clear picture in mind so that everybody knows what their role is. And the goal is to avoid sending conflicting messages to your partners and to your direct sales team. You want them to play nicely together. So for example, at Nitro, partners play a pretty clear role. Nitro has Geographic and that's a small company, has geographic and language coverage limitations. And so partners are absolutely crucial in many parts of the world. But also, you know, having a clear picture of which verticals you can cover yourself and which vertical partners have to have expertise to cover for you, or situations like integration. If your product involves integration with other products, partners are going to be really important. It's really hard for a vendor to cover every different instance from an integration perspective. So, in all three of these cases you would have a really clear ROI, and that would make it much easier to explain what your partner's role is in. But that's one point, it's understanding the roles.

And then, the second point would be making sure that you have dedicated marketing and sales resources assigned to the channel. And it's kind of hard because, most especially when you first get going, and in particularly in a SaaS environment where direct sales tend to be the first approach to the market and dedicating these resources is kind of hard to justify. It's an investment because the bookings are probably going to be coming from the direct sales initially and so you're kind of betting on the [come?] that the channels gonna contribute. But if you don't have dedicated channel marketing and channel sales resources you'll never gonna make any progress.

So, one quick story - at Apttus, we were very interested in signing up SI's to help us with not only opportunity generation but implementation. And so we kicked off the program but we didn't have the implementation training programs put in place, and so nothing really happened. We were disappointed with the results. Once those training programs were put in place everything at the top of the funnel started to fall in place.

Jen: That makes a lot of sense. I was really kind of like really curious about… you made a kind of statement about how channel can allow a SaaS organization to not pivot but to kind of expand into another part of business that maybe they couldn't previously move into. Like, whether that's moving from targeting small and medium size businesses to enterprise or going the opposite direction enterprise down to a more of an SMB market. I know that there's... It's one thing to say, "Okay, let's bring on this partners and they're gonna have this expertise so they're gonna get us into these deals or they're gonna get us into these opportunities." I wonder if you can share a little bit about what makes that kind of a shift or taking event into that kind of opportunity successful. What does an organization need to do in order to really embrace that kind of opportunity to expand beyond a target market that they've already sort of claimed?

David: Yeah. Well, it's tough but it would be similar to expanding into a new geography or if you are expanding your product line, those are both examples of investments that you have to make. Well, expanding your go-to-market strategy to include channels is similar. You've got to be willing to invest, putting in place that dedicated channel resources and training programs and being willing to essentially share the market with your partners is critical.

Jen: What else do you think is really critical for a channel leader who's working on maybe building out or exchanging a channel partner program? Maybe there's… there's a lot of folks we talk to who, you know, they've got these channel partner programs. They sort of were created almost organically, maybe not a lot, maybe not very intentional, and now they've got these program and things are maybe a little bit out of whack or a little bit out of sync. What do you think are some of the most critical elements that a leader should consider when going into... I mean, I hate to use the word "repair," but really optimize their channel program?

David: You know, I think there are various reasons why things break down or need to be optimized, to put it in a positive way. One would be having vague agreements with your partners. If partners are not fully committed to your program, if you don't understand their motivations, there's going to be a problem. The second thing is making sure that you're properly motivating them. Do you have a compensation program for them that makes sense? I mean, moving into SaaS is hard for everybody. Especially if you are transitioning from software, to perpetual software, to SaaS, all of the sudden your revenues are stretched out over a longer period of time. Well, the same thing happens to the channel. They're going through this transition where instead of booking everything upfront, now their revenues are booked over a long period of time, or recognized over a long period of time. So understanding that there's going to be some shared pain there, and making sure that your partners are willing to accept that pain that transition is critical. And not everyone is willing to do that and so you've got to pick your partners carefully. I think one critical role or one idea is to focus on partners who get it. Focus on partners who have accepted the SaaS model and are compensating their sales people that way and are making the transition themselves.

Jen: Yeah. I think that's really a good advice because you really got to work, you know, with you and your partner, vendor and partner have to work as a team together. You really wanna make sure those partners are really on the same page that you are for certain… that makes a lot of sense. And I'd love to hear a little bit more about... you know, it's so interesting to me, I sort of started sorting this sentence okay, and how do I frame this? So when I think about sales operations, this is a very growing field right now. I feel like I'm seeing more and more organizations invest in sales operations.

David: Yup.

Jen: And I'm really focusing on being productive, being efficient, maximizing resources. You know, probably a lot of this has to do with things like growing technology stacks, things like geographically dispersed workforces. So I looked at sales operations professionals as being the fixers in an organization, right? So, it's like, here's what we wanna do…

David: Yeah.

Jen: … and like, all right? Like, we got to go to this, it's like you're an engineer, like help kind of construct this and make sure we think kind of stays inline. So I'm sure you've seen a lot of challenges. I'd love to know about some of the big challenges that you've seen when it comes to management and collaboration of direct and indirect sale programs. People talk about channel conflict a lot. We talk about, you know, how do you continue to have harmony between your direct and your indirect efforts. But you probably see the pain more than anybody else in operations?

David: Yes. Like you've said, we're often tasked with straightening it out, because in some sense we're the Switzerland in that situation where…

Jen: Right.

David: … we, you know, supporting both the channel group and the direct group. But it comes down to a couple of things. One is we have to be able to integrate a channel into the CRM system, so to speak, with the sale stack. And so, it's an extra complexity when you've got to be able to measure channel leads and channel bookings, and be able to integrate that with the direct channel, and know how things are attributed. So do these come from a channel partner or does it come from a direct source? Which one was inbound, which one was contributing? So there's lots of attribution issues. There are CRM tracking issues. And then there are sales process things like, how do you roll out a new price book? You can't forget the channel.

Jen: Right.

David: You're gonna have probably two price books instead of just one. And these are things that a lot of times that SaaS providers are not accustomed to. So, during the integration, and thinking about the channel, whenever you make changes and whenever you plan a new enhancement is really important. The second aspect is in terms of compensation. How do you compensate your channel managers? And a lot of times you have to think about these in terms of their contributions. Is the channel the source of the opportunity or is the channel manager essentially reacting to an opportunity that a direct sales person has located or essentially playing matchmaker. In those two cases, you might want to pay them a different amount of money or a different percentage of the deal. So compensation is an issue, integrating the pipeline, the funnels of the two channels, direct and partners. So there are lots of implications.

Jen: Do you have any war stories you can share with us? Anything maybe that you've experienced that was a major lesson learned or at times maybe you painted yourself into a corner?

David: Well, I think the one that comes to mind would have to do with compensation where their quotas have to be aligned with the quotas of the direct team. And there you have to decide whether they're gonna share that quota or not.

And so, I've seen on a couple of occasions where the quotas for the channel team were aligned more towards run rate business. Say a large number of small deals, and then a large deal comes in. And maybe that large deal is a million dollars or more, and so the channel person blows out their quota but the direct team doesn't. So whoever is in the compensation plan need to be carefully architected to ensure that you don't have a channel manager totally blowing up their number but the direct team doesn't.

Jen: Right, right. That makes a lot of sense. Have you ever experienced any challenges where like internal struggles with revenue share with partners? So you talked about compensation for the channel, the channel manager who works for the vendor.

David: Right.

Jen: What about for partners? Is that something that you've experienced, you know, challenges in that area as well? I find that a lot of people… they're not sure like how much should we be spending, like how much should we be giving and there seems to be like some philosophical battles that I've seen people sort of face when it comes to that.

David: Yeah. There's a couple of different challenges. One challenge would be that the vendor doesn't wanna part with a piece of their SaaS revenue stream.

Jen: Right.

David: And so they'll try to get the partner to accept some sort of a finder's fee or a fixed upfront fee and then forgo the annuity. And of course, if a partner accepts that then they're really not participating in the best part of the SaaS business. And so they're not going to be as committed to you as they would be if they had annuity for an ongoing revenue stream.

Jen: Right, right. So if you want your partners to bring you SaaS business you should be expected to pay them as such, and pay them the commission, is that what you're sharing?

David: That's right.

Jen: Yeah.

David: Yeah, and it should be not some sort of a fixed finder's fee, so to speak upfront. But we want them to share in the ongoing revenue. And of course a lot of SaaS companies are very direct sales oriented and they see that as a major sacrifice for them. So that's something that everybody has to work through. It's the idea that partners should be sharing in the revenue stream. And so that's one scenario. And then, another scenario would be where partners are having to shift their role in the sale from a software model where they're making their money by doing provisioning and the licensing and installation and upgrade, and things like that, to providing more of a strategic consulting role, where they're helping their client with business transformation and with integration and security. And that may be… I mean, I don't think that's new to many established partners today, but five years ago that was a major transformation.

Jen: Right.

David: So essentially they have to upgrade their value to their clients to take into account the difference in the way a SaaS product is delivered, versus a software product.

Jen: I'm just curious also, over the course of your career, and you have mentioned kind of like three decades of working in marketing and sales, and sales operations, let's just go back five years ago, you know. I mean technology has advanced in the last five years but not so significant. So what's a piece of advice that you would have told yourself five years ago based on what you know now about sales, about the channel, about business, just wondering what you'd like to tell yourself in the past?

David: Well, just to kind of keeping at the theme of this conversation, I would say that five years ago I still probably had some doubts about how the channel would participate in SaaS.

Jen: Yeah.

David: I think I was still unclear about that. But so I would reassure myself, my younger self that SaaS is something that the channel can participate in, must participate in, and that there's a major role there. Like I've said, it's gonna be different in many cases. They're gonna have to develop a more essentially business expertise, meaning expertise in their vertical expertise, in system integration, in security; things that are more difficult than just focusing on the delivery of hardware and software.

Jen: Right. And perhaps there's a role that the vendors can play in helping to coach their partners and bring them along for the ride, and treat them like that natural extension of their sales and marketing teams that they have and truly partner together…

David: Yeah.

Jen: … so those partners aren't kind of felt like left off in an island by themselves.

David: Yeah. So I think this has been going on but essentially the partners contribute their vertical expertise and their integration expertise. Well, the SaaS vendors can share their expertise in how you manage a SaaS business. How do you pay SaaS sales people? How do you make this transition from selling software to software as a service? That's something that vendors have been forced to go through and to figure out and they can share that with their channel partners. That's essentially comes right like a franchise where the franchisor is teaching the franchisees how this sort of business works, how the model works.

Jen: Right, right. Here you go, right. Here's the kit, here it is in the box, right. Here's everything you need to know in order to be successful. I think that's a great example of franchisers have been doing this for decades, really setting their franchisees up for success. I think there's definitely a lot we can learn from that model for sure.

David: Yeah. There are many of examples of channel partners now that do understand SaaS and are making that transition but there are ongoing lessons to be learned that vendors can share.

Jen: Always, always. Well, David, before I let you go, it's been great talking to you about sales operations and the role of operations in and the channels in SaaS, I do have… at the very end of all my podcast I ask some more personal questions just so we can get to know you a little bit better. Our listeners feel like they get a little bit more of a glimpse into your life. So I got four really simple questions as long as you're willing?

David: Sure. Fire it up, Jen.

Jen: All right, all right. So first question is what is your favorite city?

David: My favorite city, other than my hometown of Los Altos where I've lived for most of my life, I would say it's Santa Fe, New Mexico.

Jen: Oh, nice. I haven't been there yet. But it's one of the places I really like to go. What do you like about Santa Fe?

David: Well, the atmosphere is amazing. For example, if you go in the summer time, the monsoon clouds build up over the Rio Grande Valley and they charge across the valley and move to Santa Fe, you'll get a 3 P.M. rain shower. And then the whole thing kind of dissolves into bright blue skies again.

Jen: Yeah. Sounds a little bit like the way some of the storm that get into Tucson, Arizona. I went to college there and have amazing, amazing lighting storms. Where amazing monsoons where it just keeps pouring rain and the streets would be flooded and we'd be trudging that from class, with like water up to your knees. And all of the sudden, it just stop and the sun was out and skies are blue, and it look like it had never rained.

David: Yeah. Like nothing happened.

Jen: Yeah, unbelievable. It's really cool, nature is amazing. Second question for you, would you consider yourself an animal lover?

David: Oh yeah, for sure. My dog is sleeping on the couch next to me here.

Jen: What kind of dog do you have?

David: A Goldendoodle.

Jen: Oh, very cute.

David: Yeah. She's looking at us now, "Are they talking about me."

Jen: Yeah, that's right. Okay, next question, Mac or PC?

David: Well, I started out as a big Mac fan and I still first use iPhones and iTunes and all that. But I'm pretty accustomed to using a PC at this point. One short story is that my parents were one of the first distributors for Apple computer.

Jen: Wow.

David: This was in the 70s. They were the distributors from Mexico.

Jen: Wow, that's crazy. So you had a Mac early on, you had an Apple computer early on?

David: Yeah.

Jen: That's interesting. A lot of people I talked to when I ask that question they said, "Well, it was always PC. And then they started working for this company, and they gave me a Mac, and now I'm using Mac." So I haven't heard a lot of people share the opposite way around. It's interesting. My last question for you is, if I were able to offer you an all expenses paid trip, where would it be to?

David: Oh gosh. This is really hard. I would say Venice.

Jen: Nice. Have you been there before?

David: I have been to Venice once before, and I remember to this day getting off of the train and looking out across the Grand Canal and seeing the gondolas, that was just magical. I think I would want to go back.

Jen: Excellent, excellent. Well, I would love to join you. I've been to a few different places in Italy but I never made it to Venice, so my only knowledge of Venice is basically like the Venetian in Las Vegas, which is really embarrassing to admit I don't know why I just said that. But that's all I can picture in my head besides pictures in books. So, one day I'll get there as well. Thank you so much for spending some time with me today. It was a pleasure just chatting channel with you. If any listener would like to reach out to you personally, maybe to dig in, ask you a few follow up questions about your experiences, what's the best way for them to get ahold of you?

David: I would say, just ping me on LinkedIn @davidbelove, BELOVE. And yeah, I'll respond that way.

Jen: All right, perfect, easy enough. Well again, thank you David. I really appreciate your time and thanks to everyone else for tuning in and we'll catch you next week for all new episode.

Narrator: Thanks for tuning in to the Allbound podcast. For past episodes and additional resources, visit the resourcecenter@allbound.com. And remember, #NeverSellAlone.