This is a common headline on posts and often a reaction from GTM leadership when programs aren't performing. It's a natural conclusion when only 10–20% of your partners are driving results and the rest are… "Paper Partners."
This is a pervasive problem, and if you follow me, you know a key topic I talk about is Partner Activation — a strategy and process to get partners activated and performing.
But let's take a step back… Do you have too many? Or not enough? How do you know?
As I talk to partner managers, leaders, and founders, I've found that far too few really know how to approach sizing their ecosystem and recruiting needs. Somebody decides they need a partner program with an emphasis on Partner Sourced revenue (e.g. referrals). Then they task a partner manager or team to go get partners. There might be a high-level target for partner-sourced ARR, but not much detail on how to get there.
Going into it blind is likely to dramatically miss expectations that were never set realistically… and time or budget wasted without the right plan. So here is a simple framework for approaching this:
Pipeline Need
Assume we have a $1M ARR partner-sourced target. The first task is to understand how much pipeline you need to produce that booked revenue. Partner leaders who don't have a sales background might not think about this critical metric: a pipeline multiplier based upon your close rate. If you don't know… ask your VP of Sales. They know.
For B2B SaaS, it's probably somewhere around 20–25%. We'll use 22% for illustration purposes. That means you need more than $4.5M in partner-sourced pipeline to get $1M. If you've never looked at that number before… it may be an eye-opener.
Activated Partner Need
Let's unpack this further to try to answer the question of how many partners we need. Again for illustration and simplicity, let's assume an ACV of $100K. Now assume your activated and engaged partners will source 2.25 deals a year on average. With a 22% close rate, that means we need 20 partners to drive $4.5M in pipe to attain $1M in booked.
There is your number: 20 (21 if we round up).
Partner Prospects Needed
But wait… what if you don't have 20 that are activated and performing yet. You don't just need to "go recruit 20 partners." Maybe you haven't thought about this part of your business plan either. Your recruiting has a conversion rate too… some won't convert to partners at all. Some will convert on paper but fail to Activate.
So to plan for those factors you need to model your Partner Activation Rate. Assume 25% of those you try to recruit actually convert, activate, and produce those 2.25 deals. That means you need 80 prospects in your partner pipeline to get to the 20 you need.
To summarize this exercise based upon the assumptions above:
To obtain $1M in booked revenue for this program, territory, or segment, we need to Activate 20 partners. In order to have 20 activated partners, we need to be recruiting 80 targets who fit IPP.
Final Thoughts
Keep in mind, the illustration above does not consider ramp time — the lifecycle of recruit → activate → source deal → close deal. When you think about that factor, you'll realize you really need all 20 producing on day 1 of Q1 of the FY. So… you probably need a multiplier to factor in the recruiting ramp and sales lifecycle latency.
If you are like me in the early days, you may have just been doing the activity of the job and have never modeled this. And looking at it this way may be overwhelming at first. But you need to understand the order of magnitude for each part of the partner ecosystem funnel to evaluate your resources, allocate your time, and evaluate your progress.
And don't worry, you've got this. The partnership ecosystem and community has got your back!