I often speak to founders who have a new SME-focussed SaaS product they want to bring to market, or an existing solution they want to grow.

Understandably many of them want to tap in to the installed base of existing and well-established vendors serving the same market and want to know how much commission they should be paying to make it worthwhile.

I can only speak about how I viewed it when I was running KashFlow – other firms may well see it differently…

My View

Any SaaS business will be valued as a multiple of their recurring revenues. So offering to pay a one-off fee for referring new customers to you just isn’t exciting. If anything it’s a nuisance because of the admin that goes with it. So unless the amount you can afford to pay is substantial then it’s just not worth bothering with.

But if your model allows you to pay a decent ongoing commission every month and we’re likely to be able to send you a significant number of customers then the proposition gets a bit more interesting as it would add to our recurring revenue.

But the key here really is the volume of new users we can send you. If it’s not likely to be too high then it’s not worth the distraction from the core mission of building up revenue from our own user base. Also: effort. My primary job isn’t to to drive users to you. So don’t ask for or expect any significant sales effort on your behalf.

Better Than Commission

What’s actually more appealing when looking at partners isn’t the money, it’s the building out of the eco-system. If your product is likely to be of genuine use to our customers and there is a tight integration between your product and mine then this is an entirely different value proposition.

I know from actual data that if one of my customers is using another product from our eco-system then we get a higher life-time value from that customer. Customers become more sticky and more reluctant to switch to a competing product if that change causes ripples with other systems they’re using.

When you fall in to this category of potential partner you can expect a more structured approach to promoting your business to our userbase. A great example of this is the Xero App Marketplace.