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Tori Barlow: Welcome to the Partner Channel podcast, The Voice of the Channel. I’m Tori Barlow, VP of Marketing at Allbound. Excited to be here with Richard Israel, Vice President of Channels at Navistone. Welcome, Richard. We’re excited to have you today.
Richard Israel: Thank you. Tori, I am thrilled to be here.
Tori Barlow: Yeah, you’ve got a lot in your bag. I’ll list a few things. But over the past 15 years, you’ve worked with a variety of marketing service companies from around the globe as far away as Australia, and revenue ranging from half 1000000 to 400 million a year, which is a big range. You’ve been incredibly fortunate to work with some of the best and most respected brands in marketing services like Constant Contact, a leading ISP call rail, the leading call tracking service, and bento Box, the leading all-in-one digital platform for hospitality. So when it comes specifically to marketing services and working in the channel with marketing agencies, you’ve pretty much seen the whole gamut. So we’re excited to have you today.
Richard Israel: I have to say, I’ve seen a lot, although I don’t know if I’ve seen everything, but sometimes it feels like, yeah, I’ve been there, done that. So again, excited to be here.
Tori Barlow: Well, there’s still a couple of months left in the year. Maybe you can see almost everything at that point.
Richard Israel: You go.
Tori Barlow: All right, you’re the perfect person for today. We are recording this in October, and a lot of folks are thinking about prepping for next year. I think there’s a lot of interesting uncertainty with the economy, what that means for partner programs, and more importantly, how to plan and prepare for the following year under these conditions. And I think if you take everything that you’ve learned in your career, you know, how do you really successfully model indirect revenue for budget planning to get everything approved is kind of in line with what we’re talking about today. But before we get there, what have you been up to?
Richard Israel: Well, let’s see. I joined Navistone in January as VP of Channels, as you already mentioned. The company’s technology has actually been around for about six years. But this spring, shortly after I joined the team, we launched a new MarTech platform specifically to cater to marketing agencies, which is why I came on board. This is a really unique solution because it enables marketing agencies to remarket to their unknown web visitors by focusing on those that have the highest purchasing intent. So this produces a higher conversion than traditional digital retargeting by providing marketing agencies with the ability to break through all the digital clutter to deliver higher conversion, leveraging a direct mail postcard as a delivery vehicle. And so my role initially was to first come in, create our channel strategy, and I’m now executing that strategy to build out my marketing and sales team and build a world-class partner program for marketing agencies. And so far, nine months in, we’re thrilled with the results. Our agency partners are excited about the success they’re having and being able to expand their service offerings and add to their service portfolios and generate additional service revenue.
Tori Barlow: That’s what’s interesting. I come from an agency background on the marketing side, and retargeting was always a pickle. So we’ll have to check out what you guys offer. And I guess with building your world-class partner, team marketing and sales team, you know, what are a few things that you think about first when modeling for the following year, specifically around indirect revenue.
Richard Israel: Yeah. I mean, that’s a great question. So when I think about modeling, the first thing I always turn to is the impact that each of the key levers is going to have on your KPIs. And so I always try to look at things in things of threes, and I try to take a three-level approach to this. So when you think about building your go-forward revenue model, irrespective of how old your or mature your partner program is or how young or new it is, like in the case that I’m at with Navistone, I look at number one partner acquisition. Number two is revenue and number three is partner success. And so I kind of drill down a little bit further into those. So the first, lever partner acquisition, it’s really actually the easiest to model, but it’s the most difficult to get right. I know that kind of sounds like, well, if it’s the easiest to model, how come it’s so difficult to get right? Because there are more variables in partner acquisition than anywhere else throughout the funnel. Obviously, you have everything from your source to conversion to the sales cycle. You’ve got all those three things competing. So that adds to, I think the difficulty in getting partner acquisition right. But again, it’s the easiest and probably the most important to model out of the gate. The second one, revenue will, it’s kind of a given, right? Everybody’s going to leverage revenue and use your revenue stats going forward. And then the third one is partner success, that lever is really all about the three let’s call them three sub-levers, partner activation, partner productivity, and then churn, both partner churn and partner client churn.
Richard Israel: So once you look at those three levers, you basically go back and take a history or snapshot of those three levers. And depending on how far back your history goes, that’s going to dictate how much data you can look back at from there. It’s just really graphing it out to see your historical trends, along with what I like to refer to as the expected acceleration from those trends based on the new strategies and tactics that you are deploying heading into the New Year. And then voila, you should have hopefully a pretty good model to start off for the new year. One example, let me give you an example that might help. So to kind of help folks visualize it, if you are averaging, let’s say 250 marketing-qualified leads a month in the last let’s say 12 months, but your new strategy projects that you’re going to increase your marketing-qualified leads by 50%, which would be right. That’s fantastic. Everybody’s excited about that. So that means you’re going to go from 250 MQLs to 375 MQLs. So if in the past 12 months, let’s say you’ve averaged recruiting 50 partners per month or 20% of your mix resulted in a recruited partner, then naturally you could then project going from the going 50% increase going from 250 to 375 that would result in not 50, but now 75 new partners per month going forward. And then you just simply carry that all the way through your model. So I hope I’ve simplified it for folks. I know it’s a lot more complex than that, but it really is that simple in terms of how you plan and build out your model.
Tori Barlow: Right? So partner acquisition, revenue partner success about the revenue piece for a minute, I know there are some different ways to look at revenue. There could be partner-influenced revenue or bottom-line revenue from partners, which is the right way in your eyes to look at it.
Richard Israel: Influences really hard to track. I mean, I go back years when I think about we had a whole program built at constant contact all around partner influence. It is. I don’t I’m not a proponent of leveraging influence in the model because it’s just so hard to track today. And so I really want to rely on from a revenue perspective, my R and R as my North Stars. From a revenue perspective, I’m not going to look at anything else again when it comes to revenue because I feel like that’s the most dependable, most accurate source that you have, both from a historical perspective and what you can, what you can project, especially when you combine that by looking at partner activation and partner productivity and you can boil it down to the top percentage of your channel partners that are driving your measure. And then you start getting into the proto rule and we might talk about that in a little bit, but I tend to stay away from the influence piece, even though I know it brings value, but I stay away from it from a modeling perspective. And usually, when I’ve gone down that path, CFOs don’t like it anyway.
Tori Barlow: So you’re right, I was going to say, I feel like if you are aiming to get approval for next year, budget approval, whatever it may be, the CFO will care about. Bottom line, what are you bringing in? I think indirect because look at the influence pipe or revenue on. An.Internal basis of what might be working to pull these levers, but not to take to exact to get approval.
Richard Israel: Absolutely.
Tori Barlow: And then what are a few things, I guess, you’ve learned over the last couple of years that you recommend partner leaders should absolutely avoid when creating a model.
Richard Israel: I’ve learned a lot and I’ve made my fair share of mistakes. Let’s just say I would probably put it into three buckets. Again, there’s that. Richard likes three. Generally speaking, I think partner leaders should avoid the misallocation of resources. I think resource allocation and balance are the most critical. Parts on the indirect side then versus the direct side of any enterprise. So that’s why I like to group that into three. So the first one would be the overall allocation of resources at the bottom of the funnel in direct or indirect proportion to the under allocation of resources at the top of the funnel. I have seen this. I’ve seen channel organizations do this over and over again where they will start adding partner account managers, also known as PMS, with the hope that this is going to increase revenue. And the problem with this is that if you’re not recruiting the ideal partners for your program or you’re just simply not recruiting enough partners, then no additional number of resources at the bottom of the funnel is going to help drive revenue acceleration. So you can’t drive revenue acceleration, as we all know, from the wrong partner types or too few of the right types. So that would be the first thing that I recommend to partner leaders. You’ve got to avoid that. And so you really want to focus on balancing your allocation of resources. The second one is and I’ve seen this again, not as often, but I do see it is not prioritizing bottom-of-the-funnel sales activities based on productivity. I mentioned a few minutes ago the pivotal role in channels holds true, especially in marketing services.
Richard Israel: I’ve seen where let’s say 80% of revenues are being driven by 20% of the partners. And even if it’s 70-30 or 60-40, I think your prioritization must be based on the productivity side. So the way the bottom of the funnel should be managed is through the prioritization of first, your most productive partners, followed by the next level of productivity, and so on. Whereas those partners at, let’s say the bottom end, who let’s just call them the ones who haven’t activated yet, they’re not even doing anything, let’s leverage marketing automation as your appropriate resource allocation, because of course it’s not nearly as resource intensive and there’s a lot of ways you can do mass communication and mass marketing and even in some cases mass sales outreach, leveraging automation. So it really comes down to, again, I think, prioritizing how you’re going to be productive. And then the third kind of takes us back to where I started, which is. The partner leader hopes that this or that might work. I learned a long time ago that hope is a terrible strategy and I’m guilty of it too, from time to time. Yet I’ve seen many partner leaders rely on hope rather than a well-thought-out defined partner channel strategy. And I think we all know that partner leaders that are trying and failing with multiple strategies are going to be successful, because if you’re not failing, then you’re not going to move the needle because you’re not failing, You’re not means, you’re not trying. You’re not trying hard enough if you’re not failing.
Tori Barlow: Overallocation of revenue at the bottom of the funnel, not prioritizing bottom-of-funnel sales activity. And then hope is a terrible strategy. Could hope also be maybe a B testing? Or what if you also don’t have a strategy at all your net new to accompany a partner program and they’re asking you to put a model together. What what does that look like in terms of hope?
Richard Israel: Well, first it’s to hire a consultant who’s been there, done that, and that would be the first thing I think you should do. If you’re new and you’re walking into that kind of a situation. And I. I made my living for many years doing that, just that. But if you don’t have the budget or you don’t have the ability to do that, I think you have to take whatever you’ve learned and what you know to be true from at least from a go-forward strategy. And yeah, yeah, you’re going to have to take some chances. But I do think to your point, doing some sort of split testing of that strategy, I mean, let’s just talk top of the funnel for a minute because that’s a little bit easier to talk in that context. Right? So maybe you’ve decided there are three potential partner types that we think might be a fit for our product or service. So then do an A, B, C, split test, right? So start recruiting all three and manage and track the activities of all three, all the way through the funnel to the bottom to activation and then ultimately productivity, because that will eventually dictate which of those partner types is the best partner type for you. Otherwise, yeah, you’re never going to find that out. So I think that’s a good strategy, doing it that way, especially if you’re your channel is just kind of getting started. There’s nothing wrong at all with recruiting multiple partner types. In fact, I recommend you do that unless you know for a fact one is our ideal channel partner profile and we’re going to nail it. Like in my case, I’m pretty fortunate because I’ve been working with marketing agencies for 15 years and I’ve been in the marketing services space for 15 years. And we know that marketing agencies are a fit already, but you don’t always know who the right fit is, especially if you’re new at this. So I think an A, B, and C split strategy is a good way to go.
Tori Barlow: Let’s pivot for a moment and get outside of modeling, for example. But how do you really think about asking for additional headcount budgeting for it? You know, I think when I think about myself on the marketing side, having to go to a CFO asking for additional headcount and does this fit within the target model for revenue, how partner leaders think of additional headcount and who’s the first person if they could only get one headcount for the next year when asked for three, like who should you hire? How do you think about that?
Richard Israel: Yeah, going through that right now so I can kind of speak to it from my current perspective. So I think there are several ways you can think about how you go about budgeting for additional headcount and looking at how you make your case. The first one I usually go to the four pillars of a partner channel. So in my practice, I’ve always thought of the channel broken out by recruitment, onboarding and training, sales enablement, and partner sales. And there’s just trying to put everything kind of a night in nice, neat piles, I guess you could say, for the four pillars. Um, so under that scenario, let’s just say you value the contributions equally across each of the four pillars, right? So recruitment is as important as onboarding and training, and that’s as important as sales enablement and partner sales. It’s never like that, but let’s just say it is then that makes it kind of easy. So we need one headcount for each one, right? But of course, it never works out that way. So that really requires you to start thinking, okay, so where do we really need to apply our resources, and what’s most important? The general rule of thumb. And this doesn’t always apply to everybody. But General Thumb is in a younger, more immature channel program. You do want to put more of your headcount at the top of the funnel. And less of your headcount at the bottom of the funnel. And I speak from experience. I’ve been in organizations where they were extremely bottom-of-the-funnel-focused to the point where they don’t have any headcount at the top of the funnel.
Richard Israel: And all the partners that you’re bringing in aren’t productive, and you just keep adding more salespeople thinking that that’s going to get it done and it didn’t get it done. Well, part of the reason was they were not recruiting the right partners, so let alone they didn’t have the right resources at the top of the funnel, but they didn’t have the headcount distributed properly to enable them to bring in the right partners. That’s kind of more of an extreme example, but I certainly learned from that the value of, again, in a young or newer partner channel environment, I will put more of my emphasis at the top of the funnel from a headcount perspective. But for a more mature channel organization, it’s going to be the flip of that. You’re going to want to lean in, and more heavily towards the bottom of the funnel with a. Kind of a target towards that center. So onboarding, training, and sales enablement headcount are important. But of course, now we start getting into things like automation and PRM and all the other solutions that are going to help drive that. But you’re still going to need a headcount in the middle of that journey to be successful. So there’s a second way that you can also leverage and I’ve done this successfully, which is I use a 3-to-1 model.
Richard Israel: So for every three headcounts on the direct side of the business, you should in theory only need one headcount on the indirect side, especially in sales. Marketing can be a little bit more complicated, but generally speaking, it should hold true. But either way, it’s really important. I think, that you weigh your partner program based on where it is in the journey. So the more mature your program is, then the more likely you can achieve that 3 to 1 ratio, direct versus indirect. The newer the program, it’s harder, but in some cases, it’s more important to do that because that is going to help you drive or accelerate revenues. So sometimes you have to go to the leader and say, I realize this isn’t necessarily 3 to 1, it’s maybe 2 to 1. But by going to a 2 to 1 ratio for the next year, we will more quickly accelerate revenues and we will end up at a 3 to 1 ratio very quickly thereafter. So give us extra money, please. I mean, of course, the other way to do it is by taking the CFO approach, which is purely a P&L perspective. When you just look at revenue per sales and marketing headcount, including customer cost of acquisition on the direct side, and you compare that to the same counterpart on the indirect side and you go from there and chief financial officers like that model the best, it is understandable why they like it. I don’t recommend starting at that point, but some channel leaders have will go that route and there’s nothing wrong with it.
Tori Barlow: Richard, we’ve talked about a few things in threes today, and one is how do you even start with modeling the three pillars; partner acquisition, revenue, and partner success? We moved to what do you absolutely avoid when thinking about modeling? And then what do you think about headcount? You have been a world of knowledge. Thank you to our guest, Richard, Vice President, of channels at Navistone. And thank you to you, the listeners, for joining us here, the Partner channel podcast. If you like what you heard, subscribe to our podcast episodes wherever you like to listen to podcasts.
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