The Partner Channel Podcast Episode #3

How to Build a Channel Ecosystem From Scratch

Show Synopsis

In this episode, Daniel talks to Aaron Cullip, Executive Vice President at HKA Enterprises, on how to build a channel ecosystem from scratch. Channel Partners are wonderful! However, make sure you translate those referrals into real revenue for your company. Daniel and Aaron give you an executable partner relationship strategy from the ground up.

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The Script

Daniel: Welcome to The Partner Channel Podcast. The voice of the partner channel community. In this episode, I Daniel Graff Radford. Sit down with Aaron Cullip the Executive Manager of Regional Sales at HKA enterprises. Today we’ll be discussing how to build a channel ecosystem from scratch.

Welcome Aaron. Thank you for being on our show. Could you start us off walking us through your background, how you ended up in HKA Enterprises. And some of your experience here in the channel. 

Aaron: Yeah. So, so to answer your question, it really started back in 2008, 2009. When I worked for Propel here in Greenville, South Carolina. And their VP of Sales and Marketing. And I started dabbling with, working with at that time various channel partners and what I discovered I didn’t have very many, and I didn’t know a whole lot about building a channel network, but just in a little bit of experience that I had in acquiring some partners, I realized that I was working smart, not hard.

And my sales volume started to dramatically improve from just referrals that I would receive on a weekly basis. And I started to realize, wow, there’s really something to this. You know, all I need to do is go out and spend more time business development and find these network partners and build more relationships with them, create an equitable compensation or equitable arrangement with them.

So that they’re treated fairly. I started to learn on my own and figure out nobody really taught me PRM at all, or the channel never really had a mentor to do it. It’s something now that I’m doing with my sales team. Here at HKA is I’m teaching them PRM and what that means to go out and acquire partners. So obviously over the years, I’ve been able to really grow and perfect in some way, shape, or form.

Uh, when we implemented it, at Pay Pro over an eight year span, we saw tremendous growth generated. I don’t know, two, three, maybe 400 different partner relationships. During that period of time, it was substantial. So we did a lot of contracts with partners and our revenues climbed it got to the point where I was getting three or four referrals a day.

Daniel:  I love that sort of transition from realizing that you could sell on your own, or you could have other people refer in and create your own lead gen as a sales person and how you’ve transformed that into a channel led sales approach.

Given your background, having built these things from scratch, a lot of people hear the buzzword channel ecosystem and it does mean different things to different people, but you really are building this out where you’re at and you’ve done it before for people that don’t know what that is can you define how you see channel ecosystems and what you think they are?

Aaron: Yeah. So, basically when you, are you talking about a channel or a channel ecosystem and creating partnerships, you know, there’s really, in my opinion, you’ve got two general types of selling.

You have direct selling where you’re, you know, calling the direct end user directly, whether it’s telemarketing, whether you’re going door to door, however it is that you go direct.

 What I like about channel is it’s a wholesale approach to selling what I’m injecting is a middleman into the conversation. Okay. So the middleman now is between me and the end user. What that does is it adds a relationship to the sales process that I don’t have when I call direct. With direct, I have to establish a relationship with the end user and they may or may not be receptive to my pitch.

When we’re talking about wholesale channel development. Now I’m receiving a referral. Once I establish a relationship with my wholesale distributor, whoever that might be their wholesale distributor is bringing me the business that fits the qualifications that I give them. And as a result, I’m compensating in some way, the wholesale distributor for bringing me that relationship.

As a result of creating a wholesale relationship with a channel or a distributor, okay, whether you’re selling products in widgets or services, as a result of that, I’m closing 50 or 60% of the business that is brought to me. Whereas if I’m going directly to the market, I might close 10 to 20% of all the business that I work on because they don’t have that relationship.

And I’m trying to create one. So that’s really the difference between the two. And that’s what channel is. It’s just inserting a middleman into the sales process. 

Daniel: I think that makes a lot of sense in terms of what channel versus direct is. And, you know, the term channel ecosystem from an Allbound perspective typically means that there’s a group or type of companies out there that become that wholesale channel.

And so for some of our customers, those are marketing firms and others, they’re accounting firms and others, they’re HR consulting firms. And so there you have a certain type, if you will, you can tap into that ecosystem and find natural or, uh, people that are adjacent to their business can become part of that ecosystem and you can kind of group them in a category.  Do you see it kind of the same way? 

Aaron: Yeah, I do. So the key when you’re developing a channel in your business, whatever industry that you’re in, is who you want to look for, a partner that would give you have some congruence with your company where you’re not, you don’t obviously want to target a competitor or anybody that, you know, you would threaten their business, in some way, shape or form, you really want to target, a channel or a vertical that is complimentary.

So an example would be uh, back when I worked for Paychex in 2007, we targeted CPAs as a channel. So, and that’s still a channel for Paychex today, so I’m not in the pay payroll quote, unquote payroll space. Now, like I used to be. So, you know, I can speak more freely about this, but that was a great channel.

Still is a great channel for them where CPAs are referring the sales reps, quite a lot of business in part, because most CPAs don’t prefer to process payroll. They like doing corporate accounting and different types of tax work and et cetera, that’s really their cup of tea. So they’d really like to hand that off to a payroll vendor.

And then of course, you know, Paychex has, you know, an equitable program for them. And so that’s really what you’re trying to find and, you know, it could, it’s going to be something different. It could be that targeting financial advisors is a good outlet for you and your business because they work with high net worth individuals or business owners.

Right. You’ve got to find where that channel is. A lot of it’s trial and error too. Um, I’ve tried my hand with banks and financial advisors and insurance agencies, and I’ve tried all kinds of stuff to find them the right fit for my company and what would be a good partner.

Daniel: I think that’s great. You’ve built these, different ecosystems, as you said, you know, one place at CPAs and another place. It could be consultants at different places. If we were to get granular for the listener that wants to build himself or herself an ecosystem from scratch, can you walk us through the steps you show up there’s no, there’s no channel in place and you’re going to start guessing at who these people are in testing it. And walk us through kind of some of those steps that you take to figure it out when, since you’ve done this a few times. 

Aaron: Yeah. So I mean, great, great examples. What I’m doing now at HKA, right?

I’m six weeks into this role where I’m overseeing, as an EVP here, overseeing our account managers and our salespeople. And so part of my responsibility here, or why I was brought in was to develop, you know, a channel and network sales, you know, instead of, so our salespeople are currently doing what a direct selling.

We want to partner with other channels. So what I’m doing from the ground up is essentially my first step is I use LinkedIn as a great tool. I think LinkedIn is a tremendous tool to target, consultants and business relationships and certain channels, a specific channel that I’m targeting right now through LinkedIn.

And I’m reaching out now, through InMail, to these specific individuals, you know, really presenting myself and not a very pitchy way. It’s very relaxed. It’s very casual because we all get those LinkedIn emails that are very much solicitory. I really try to temper my tone and make it so different from that and make it very conversational.

I never, bug people, I’ll follow up once or twice and if I don’t get a response, I’ll let it go. To my surprise. Even in the past, you know, two, three weeks, I’ve had tremendous response from people I’ve contacted on LinkedIn that are interested in my product or service. I’ve had as a result, I generate phone discussions with them and that’s it’s at that point that I tell them about what I do and how I can benefit them.

I’m not concerned about what they can do for me. That’s not what the call is about. If they were to provide me with a client of theirs or prospect of theirs, what’s in it for them, how do I help their business grow? If that’s how you approach your channel development  then you’ll be very successful. Cause at the end of the day, that’s really what the channel partner is looking for is how does partnering with HKA going to help me? And so that’s the step by step process, right? 

Daniel: As a CEO, I get a lot of LinkedIn messages every day. And the ones that I respond to just like what you’re saying are the ones where they have something that they’re sharing about my company or about what I’m doing as the opener. So, I got a really good one from a marketing automation firm the other day that, had some data about our, social networking score and had some ideas about how we could do better. Could we have a meeting? And so they had to take the time before the meeting to learn something about us and had  potentially a data point and I thought it was a great opener. And, to your point, it wasn’t that they started with the sale or what they wanted. They started with something relevant and conversational, and I thought that was a good approach there. 

Aaron: I think a perfect example, Daniel, and I mean, it’s just ironic that we’re having this discussion because Gina, the Sales Manager from your company approached me on LinkedIn. In a very, very, well done, very well written email. Actually, the way she came up was very authentic, very genuine, not really, you know, pitch Allbound as much as just talking to me about channel and network partnerships and we developed a great dialogue over LinkedIn um, and then it was only after we develop dialogue that I even really began to learn about your product. So I think again, using Linkedin, being very careful, the way you craft your language, be very authentic, reference their name, get personal about their profile. Keep it professional. Obviously don’t get too relaxed or too personal when you’re sending out those initial emails. 

Daniel: I think that makes a lot of success. Now let’s talk about some of the problems that happen. A lot of these channel relationships die in the vine or they fail or they become unsuccessful.

Can you talk a little bit about things that you work on to make sure that they’re sending you that number of referrals you were describing earlier per day so that your team can hit their numbers? What are some things that don’t work? 

Aaron: I’ll tell you the number one reason why I think that networks fail.  So for instance, I can’t meet with two to 300 partners a year in person I’d like to, so, you know, now I might meet with my top 50, right. So I generally will prioritize my referral partners and the ones that have an active relationship with me. I’m really going to devote more time for in-person, you know, coffee or a lunch, or coming by their office and really continue to give them that. For those that are, you know, sporadically referring, we have a relationship.

I still want to be in front of them. So some months it’s just an email that comes out, you know, for someone it’s a phone call. Right. And so there’s something that sometimes there’s a lot of partners that I would just reach out to quarterly. Right. Never, never annually or semi-annually. But what I found is, is that I find where I dropped the ball with the partners where I wouldn’t talk to him for six months to a year, the relationship stalled.

I never got anything from him. Nothing ever happened. It’s kind of like and Daniel, you can understand this, you ever gone out to lunch with somebody and you’re so excited to talk about a referral arrangement and nothing happens. You both leave the restaurant. Everybody’s excited. Six months down the road, nothing was ever created.

No relationship happens. And most lunch meetings end like that when it comes to referral partnerships. Mean, we’re not staying in front of our partners. So I think that’s the biggest breakdown.

Daniel: I love that as an answer. And a lot of times, you know, we at Allbound talk about that monthly partner engagement and we’re looking at what the partner’s doing, but I think it’s really important for our listeners to think about how often are you able to get in front of them.

And if you can’t dedicate enough time, expect that relationship to die on the vine, there’s only so much automated interactions that you can do. And so if they are, or are not worth your time, make a decision there. We have a lot of customers that come to us with a huge number of partners and they see through that level of interaction, which partners are probably ones that they need to let go of so that they can focus their time on those that, that are actually the right ones and then build off of that as a model. I think that’s a really, good example. 

Aaron: Yeah, I do too and I would say let me inject one other quick thing. The second thing, cause I want to give two points here. The other reason for a breakdown in your partners is, is your relationship is not equitable. Um to give you an example and the listeners and example what I found that, I mean, people may disagree on LinkedIn and that’s totally fine cause everybody has their own way of doing things. But what I’ve found for me personally, is that doing a referral for referral relationship is generally um in 2020 not effective, meaning that Daniel, if you give me a lead and I give you one, we kind of trade business back and forth. You know, the problem that I’ve seen with that is if I give you a referral, Daniel, now, all of a sudden there’s inequity, because now you feel indebted to me that you owe me one.

So, what generally happens is let’s say I give you two and they work out and you close the deals, but six months from now, or a year from now, I haven’t gotten anything back from you. And I say, Daniel, Hey, what’s up? Do you have anything I can work on? And you’re like, no, Aaron I really don’t I’ll keep you in mind.

Well, now all of a sudden I feel there’s inequity. Like I’ve given you something. I have gotten nothing back there. Our relationship is not doing very well at that point. And so you feel the pressure, you know, the person that owes the referral back always feels the pressure. And what I found happens. Is it that the referral partner that owes the lead generally will give a junk lead back just to get somebody off their back.

Right. So now all of a sudden you might give back to me one, you know, and just to appease me, you give me one or two referrals. And when I call them, they’re not even qualified. They’re not even very good leads, but in your mind, you’re like, hey, at least I gave him one or two to just kind of give him some.

And so the relationship there just never was able to take root and grow. Cause there’s always inequity. Somebody’s always owing something. So my approach has always been that I try to create equity with my partner. In my case, I like it to be compensatory. So I like to compensate financially a referral source, if they will take compensation.

I generally like to do that. So when they give me a lead, I’m compensating them accordingly and my compensation needs to be generous. Okay, so there are a lot of people that compensate their partner, channel partners, but they don’t pay very well. 

Daniel: Right. 

Aaron: If you’re not going to pay them well, they’re generally not going to refer you a lot of business.

You got to give them incentive. So we pay really well. We pay every month we pay in perpetuity, we don’t cut off our payments. So our revenue partners can grow a revenue stream. And then there’s constant equity. They refer, I pay. We’re constantly in balance. That to me is what really makes a good channel partnership.

Daniel: No, I think that’s right. A lot of people, need to think about the regular payments as well as you’re saying generous and I’ll call it meaningful. So for each type of partner, 

Aaron: thank you that’s another great word. 

Daniel: It’s different numbers that are meaningful for everyone, but I think you’re, you’re spot on there, So, so you’re, you’re building an ecosystem again and for those people that are also getting started, what do you look for as the one, two or three year demarcations or hallmarks of success. So, you know, this is not built overnight and you know, here’s some sort of recruitment of partners that converts and things like that.

What are things that are reasonable for, for the types of business you’re involved with, when you’re looking for those levels of success from year one forward. 

Aaron: Yeah, success for me, it’s determined differently for every company. Right. Cause every company can measure success differently.

Okay. So I don’t, you know, I don’t want to speak for every other industry out there, but generally from my position, what is ineffective when I have somebody that’s new, that’s trying to build up a channel partnership, build up their network. Well, first of all, it’s kind of like you just said, it takes time.

It’s six to 12 months before you really start to get any traction. You know, developing these relationships does not happen overnight. It is very much a long term thing. So you have to be able to really work with people to allow them to build it. The next thing is, is that you’ve got to, I always measure the number of referrals, as a success point.

Right? So now it’s okay for you to go out and generate relationships, but are you getting referrals out of them? Right? That means like we talked about earlier, staying in front of them, communicating with them, building a relationship with them. If you do those things, they will refer you business. In my previous job at Pay Pro, what I found is, is that building friendships with my partners and going and visiting them, I always do generally walked out with a referral almost every time. It was amazing, like, clockwork. And my old boss would tell you that it was amazing to see the response because I got in front of them. So you got to get referrals from them.

I know a lot of people that have partners and they’ll say, Hey Aaron I’ve got, you know, 50 partners. Okay, great. How many referrals have you gotten this month? I’ve gotten one or two. Okay. And it’s like, why aren’t we getting more, you know, walk me through your strategy, of what you’re doing to get more referrals.

So there’s an art, it’s not just creating partnerships, Daniel, there is an art behind extracting referrals from your distribution network, so that you’re successful. So I measure success based on what kind of volume are we getting? You know, last year at Pay Pro, I think we have 300 referrals for the year, right?

Three or 350 referrals for the entire year. It was tremendous. Okay. So that’s a great measurement output. And then finally, the last and most important measurement output as a sales director is, are we taking those referrals? Number one are they qualified referrals? Are they meaningful referrals or are they just junk leads that we’re getting?

So are we training our referral sources on what to provide us? Right. So they’re giving us good business. So you got to train the referral source and say, Hey, this is what I want. This is what I want. You can’t just take whatever they give you. You wanna to train them. And so are you getting good qualified referrals?

And are you closing them? Is it translating into revenue? Right? Because your channel will do no good unless it’s translating into revenue for your company. 

Daniel: I love that. So, so it seems like a lot of people early on might be focused on recruiting the right channel partners, which is great. And then they need to set the right cadence of interacting with those partners that then generates the referrals, look at the qualification of those referrals. Look at whether they’re generating revenue over what period, and then set some growth metrics around these things that make a lot of sense.

So this is really good advice and, um, you know, said succinctly, but also is a really hard work to do. And, uh, I can see why you keep getting the role of building and running these things. 

Aaron: Thank you. 

Daniel: You know, we always have our final four questions and, if you’re ready, the first one is if you had a superpower, what would it be and why?

Aaron: You know, if I had the ability to read somebody’s mind, Daniel. I would be a much more effective sales director. And, in some ways, I don’t know if I want to read everybody’s mind, right. Because, well that kind of be scary, but think about it when you’re in sales. You’re always wondering what your buyer’s thinking.

You’re always wondering what you’re, even in my case, when you’ve got employees come into your office, you know, what are they thinking right now, as I’m walking through this with them, you know, that would be a really good superpower to have. 

Daniel: That makes a lot of sense. And I think there’s more and more of these recording tools that are offering real time sentiment analysis. I wonder if one day we’ll be able to use, you know, people’s body language too, so to speak your mind, it’ll be interesting. 

Aaron: I think so. I think it’s a big part of it, there’s a lot of sales training out there by body language, but you’re definitely on to something there. 

Daniel: The second question. Can you give everyone a, an example of a mistake and a success that you’ve had in the channel?

Aaron: Yeah. Mistake would definitely be, actually two that I can think of, but number one would be, is that early on in creating network relationships at PayPro, especially I just grew too fast. I had way too many channel partners and I couldn’t manage them. I, I didn’t have a system to manage them. And, you know, I had hundreds and hundreds of partnerships and relationships and in different states, like in six or seven different states, whatever it was, and I just couldn’t get in front of them all. And it was a mistake because I couldn’t maximize the relationship fully because I was over tasked. And, so I had to, I had done it over again. I would have had more of a slow and steady growth. And maybe starting out managing 50 to a hundred relationships and really focusing on those 50 to 100 and making them profitable.

Generally just like anything else, it’s that 80/20 rule, you know, and it was the same in my referral network, let’s say I’ve had a hundred partners, 20 or 30 of them are referring very, very actively and they’re very good partners. The other 60 or 70 referral partners, I might get one a year from okay.

Or one every two years. That was okay with me. But I still would have slowed it down and just really managed a smaller group of referral partners. I think I’ve actually would have done more revenue that way. I mean, I did a lot of revenue, but I wouldn’t think I would have done more and getting more out of less if you will.

Daniel: That’s a great example. And, uh, for those listeners that one day want to, you know, build channel ecosystems from scratch and be a leader of teams that do this is there an example or a business book that you really like that you’d want to recommend to that person? 

Aaron: You know, I’m not seeing specific the channel, but I do have a book that I always recommend that even my salespeople read as the Sales Bible by Jeffrey Gitomer, it’s been out for 15, 20 years, maybe longer Um, it’s one of his, his early on books and it really walks you through the stages of sales and you have to use those stages and developing channel relationships. You’re essentially selling a channel partner on why they need to do business with you, work with you or give you their client. 

Daniel: That makes a lot of sense. And, uh, last question here, we’re living in an odd time during COVID, but if you were to look five years in the future, what are some of the major changes in the channel that people should be thinking about right now?

Aaron: Yeah. So even a lot has changed over the last five years, even now, you know, it’s hard to see too far down the road. We know technology plays a big part in this and so I think that, uh, for me, I think I’m going to be going more and more away from any kind of email correspondence with referral partners and more text messaging.

What I’ve found is that if I can locate the text message or a mobile phone number of a referral source, they’re going to talk to me on text. Everybody’s curious when they get an unknown number on their phone, when you get a text, everybody’s curious who it is, and most likely you get a response. 

Daniel: Well, great. Well, thank you to our guest, Aaron Cullip from HKA Enterprises. And thank you to you the listeners for joining us here at the Partner Chanel Podcast. If you like what you’ve heard, subscribe to our podcast episodes, wherever you like to listen to podcasts.

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