Contracts: Distribution & Partnerships
When companies seek to grow their revenue streams, they have 2 main options: increase the sales team and do more direct sales, or work with partners. In my new contracts series, I discuss the most common partnership structures for startups and tech companies to consider as they scale their companies, with each post focusing on one partnership type and common key contracts terms.
In today’s post, I provide an overview of these partnerships to get you thinking about how to grow your business beyond direct selling.
Referral or sales representative partners are companies that source and refer potential customers to the product or service provider in exchange for a referral fee or commission, if a sale is made. In this instance, the referral partner or customer often submits a form that the provider reviews and approves. The provider has the discretion to approve or reject any potential customer, and if approved, the customer signs a contract directly with the provider and the referral partner gets paid.
A reseller sells the provider company’s products to the reseller’s own customers. A reseller relationship is useful for a company that wants to expand territory, industries, or otherwise access a different customer base than they already have, without having to hire sales teams in those areas. Resellers sometimes bundle their own products with the provider’s and earn commissions on sales made directly to their customers. Generally, any license for a SaaS or software product is between the provider and the end customer.
Tech companies often collaborate with other tech companies to integrate their products; in the case of SaaS companies, integration of tools is common for tech partnerships. These partnerships can enhance the entire product ecosystem, making it more attractive for customers who need more comprehensive solutions that work well with other products they already use.
OEM, or original equipment manufacturers, is a term that is used in several ways in various industries, which may create ambiguity and confusion. Today, I discuss OEM in the context of software and hardware. A supplier designs or formulates a product (and may manufacture it or outsource production) that an OEM incorporates into their own end product, often combining with other products. The OEM then sells the product under its own brand or attributes certain components to the supplier. Common examples are AI algorithms embedded in enterprise platforms and processors in personal computers. A SaaS OEM is a SaaS company that integrates OEM software into their products or services. The OEM software helps SaaS companies create tools for specialized use cases without having to develop them in-house.
In a private label relationship, a company manufactures goods or creates software for sale under another company’s brand name. This is distinguished from an OEM relationship because the brand owner is not doing any product development work and is merely selling a product under its own name, such as for grocery store-branded cereal. A brand owner selling a private label usually can only have that particular product supplied by the private label manufacturer, as the manufacturer owns the formulation, design or software.
In the B2B SaaS world, most products need to be configured and implemented for each customer, with some configuration being more complex than others, depending on the customer, complexity of the product, and how it integrates with customer systems. For more complex products and system integrations, it may not make sense for the provider’s team to handle implementation at scale. Instead, they often partner with third-party implementation partners, who are trained to configure and implement the provider’s product on their behalf.
