Day 47 · Phase G

A channel never sells for you. It catches the people who already wanted to buy

Direct vs distribution vs agents · what a partner is actually calculating · platform leverage · channel conflict·4 moves · 4 diagrams
Sign a hundred resellers and sales don't grow by themselves. Channels only amplify something that already works — what you can't sell yourself sells worse in someone else's hands, and now half the margin is gone too.
"We're selling too slowly ourselves, let's find some agents" — that sentence has the causation backwards. A channel is an amplifier, not a demand generator. One move per part. One, separate the part you can outsource from the part that will always be yours. Two, a partner isn't your salesperson; he's ranking his own hours. Three, borrow the reach, never park the relationship on someone else's land. Four, conflict is settled by rules drawn beforehand, never by arguing afterwards.
MOVE 01

You can outsource the moving. You have never once outsourced the persuading Split the deal in two before you decide whether you need a channel at all.

direct vs distributiontransaction costsasset specificity
Every deal contains two jobs. Persuading — working out his situation, translating value into his outcome, absorbing objections. Moving — quoting, ordering, shipping, invoicing, support. Moving outsources beautifully. Persuading almost never does: it runs on knowledge only you have, and the cost for a partner to acquire it is usually higher than what he earns on the deal. So the question isn't whether you're short-staffed, it's how much persuasion a deal carries. Low persuasion, thin margin, fast decision — doing it yourself is what loses money. High persuasion, big ticket, customised — handing it over means handing your core to somebody who won't learn it and doesn't want to.
Place the deal in a box before you choose a route margin per customer ↑ persuasion needed per deal → Self-serve, people only for big deals Expensive but easy to understand: let him buy, show up only for the whales. Direct — can't be outsourced Diagnosis, customisation, objections. Learning it costs a partner more than he'd earn. Channel / platform / distribution Thin, fast, nothing to teach — closing them one by one loses money. Danger box — no channel will fix this Hours of talking for very little money. Simplify the product, or find richer customers. One company usually sits in several boxes: small customers on a platform, mid to partners, large direct. Segment first, then write channel policy — do it the other way round and everyone gets the same commission.
Checklist · three numbers decide keep or give away

1. Hours of persuasion per deal: from first contact to signature, how many hours did you actually spend? Past five or six, stop expecting a partner to replicate it — he has neither the patience nor your background.

2. What a partner earns per deal: your margin × his rate, divided by the hours in step 1, is his effective hourly rate. Below what else is on his desk, no percentage will move him.

3. The answer is rarely either/or: keep the persuading, give away the moving. He sources leads, makes first contact, handles invoicing and front-line support; you take the meeting where the decision is made. Split commission the same way — a small rate for a referred lead, a full one for a closed deal.

Turning down a bad channel: "The customers you can bring aren't the ones we're set up to serve, and rushing it would let both sides down. If you ever have the XX type, come to me and we'll do it as a referral."

Why it works

Mechanism: whether to do a thing in-house or buy it outside comes down to which side carries the higher transaction cost. When the work depends on highly specific knowledge and quality is hard to measure, the market is expensive and doing it yourself is cheap. For standardised, measurable work it's the reverse.

  • Hard theory (two Nobel prizes behind it) · transaction costs: Coase (1937, Economica) argued the boundary of the firm is set by transaction costs; Williamson (1985, The Economic Institutions of Capitalism) turned it into three usable variables — asset specificity, uncertainty, transaction frequency. The higher the specificity, the more it belongs inside. In selling, the "specific asset" is the diagnostic ability that only works for your product.
  • Hard evidence (real industry study) · when to build your own sales force: Anderson & Schmittlein (1984, RAND Journal of Economics) tested this on electronic-components data: what actually drove firms to integrate their sales force was asset specificity and difficulty of measuring performance, not sales volume or environmental uncertainty. Plainly: if you can't tell how well a partner is doing except by looking at closed revenue, you will end up taking the work back.
  • Industry convention (checkable, not a research finding) · commission ranges: channel margins in software and hardware distribution commonly run 15%–40%, and lead-only referral fees 5%–15%. That's the range you'll find in published partner policies, not an empirical law — a starting point, not a justification.

Boundary: this framework assumes you can calculate margin per customer and hours of persuasion. Early on, with a handful of deals, nothing lands in the right box — go and sell a few more yourself and learn the process. A channel amplifies certainty, not hope.

MOVE 02

A partner isn't your salesperson. He's comparing you to everything else on his desk You're not competing for his goodwill. You're competing for a slot in his ranking.

partner incentivesscarce attentiontwo-sided moral hazard
Signing an agreement means you're on his shelf, not that he'll push you. His hours are fixed and his desk is full, so he pushes whatever earns the most per customer contacted with the least chance of blowing up. What you're competing for isn't his goodwill, it's a position in that ranking — and four variables set it, of which the commission rate is only one: what he actually pockets per deal, how many contacts it takes to close one, how long he must study before he dares open his mouth, and who pays when delivery goes wrong. Most people only ever push on the first, then wonder why nothing moves. The leverage is usually in the other three.
Same partner, two products — which one does he push your product what he pushes today he pockets per deal 4,000 (25%) 2,500 (15%) contacts per closed deal 1 in 5 1 in 3 time to learn it two days of training half a day who pays if delivery fails he compensates the client the vendor covers it Expected earnings per customer contacted: yours 4,000÷5 = 800, theirs 2,500÷3 ≈ 833. Ten points more commission and you still lose. Win it back on close rate, training time, and who carries the risk.
  • Give him something he can read off the page: a one-page customer profile, five opening lines, three objection answers. Partners never write your script, they only use a ready one — that page beats five extra points of commission.
  • Take the hardest step yourself: he books the meeting, you run the demo. His close rate goes from one in five to one in three, his hourly rate doubles, and you paid nothing extra.
  • Take the liability off him: put it in writing that failed delivery is on you. What he fears isn't earning less, it's losing his own client.
  • Then ask for some investment: certification, a joint case study, a shared visit. Partners who've invested keep pushing — but only ask after he has seen the first cheque. Reversed, it just drives him away.
  • Feed the top three: twenty signed and idle is worse than three that actually sell. Partner count is the easiest number to fool yourself with.
Why it works

Mechanism: an agent's goals are structurally different from yours — he optimises his own total income, not your volume — and his constraint is time, not willingness. So there are only two ways to make him sell more: raise his output per hour, or cut his cost per hour. The second is usually cheaper, because it spends your marginal time rather than your margin.

  • Hard theory · agency and two-sided moral hazard: Jensen & Meckling (1976, Journal of Financial Economics): whenever an agent's effort is unobservable he under-supplies it, so incentives must tie outcomes to his own income. Lafontaine (1992, RAND Journal of Economics) tested this on franchise-contract data and found support for two-sided moral hazard — franchisees shirk, but so do franchisors on support, so contracts leave variable income on both sides. Translation: if you want a partner to invest, you have to have something at stake too.
  • Medium strength (bounded, flagged) · investment breeds valuation: Norton, Mochon & Ariely (2012, Journal of Consumer Psychology), the "IKEA effect": people valued items they assembled themselves markedly higher than identical finished ones — but only when they completed the build. Those who failed or were stopped showed no effect. In channel terms that's the ordering rule: let him close one deal first, then ask for certification and joint investment. The reverse gets you blocked.
  • Honestly flagged (field practice, not a research finding): "feed the top three" and "a one-pager beats five points" have no controlled trial behind them; they're inferences from the mechanisms above plus common practice. Testable: rank your partners by deals closed in the last 90 days and see what share the top three hold.

Boundary: this arithmetic assumes a rational businessperson, which independent agents, resellers and referrers broadly are. If the person is an employee inside a large company (a systems integrator's pre-sales, say), his ranking also contains internal targets and departmental politics — there, what you influence is how he's measured, not his commission.

MOVE 03

Borrow the platform's reach; never park the relationship on their land The traffic is rented. Only the relationship is ever yours.

platform leveragetwo-sided marketssingle point of failure
A platform is generous early because it needs supply: it subsidises you, sends traffic, takes a small cut. Once both sides are dense, extracting rent from your side becomes its optimal move — the take rate rises, organic reach narrows, visibility starts costing money. That isn't a platform turning evil, it's the structure of a two-sided market. So there is exactly one correct posture: treat it as an acquisition channel, not as the place your customer relationships live. On every order that comes through it, do one thing at the moment of delivery — turn that person into someone you can reach directly. Fail at that and you're working for the platform, with the rent going up every month.
The traffic is rented; the relationship is yours platform reach someone else's attention first sale the most expensive cut bring him over at delivery the only step that's yours repeat and referral no cut taken Three moves for step three — all at delivery, when he likes you most · include something only direct contact can get: a manual, a template, one Q&A session · make the support channel your own (within the rules) and pick up a lasting contact · ask for a platform review in the same breath — ranking still needs feeding, no conflict Concentration line: once one platform or partner is over half your revenue, your pricing power is theirs. One rule change and you have no leverage — so a second, independent route has to be running.
Script · bringing the relationship over at delivery

Situation: you've closed an order on a marketplace, content platform, app store or services site, and you're delivering.

"It's on its way. There's one thing that won't fit on the platform — I've put together a {pre-install checklist / sizing chart / answers to the common questions}. Message me at {contact} and I'll send it straight over, and you can ask me directly later instead of waiting on a support ticket."

Why it works: you're giving a reason, not making a request. "Add me for discounts later" asks him for something; "there's a thing that won't fit on the platform" gives him something — and actually gives it.

Red line: don't route around the platform's payment and transaction rules. You're pulling the future relationship over, not stealing this order; the penalty for the latter is usually a closed shop, and they can detect it. Playing the inside of the rules hard is enough.

Why it works

Mechanism: a platform doesn't price by allocating cost. It subsidises the side that's harder to attract and more price-sensitive, and charges the side that's more locked in and more willing to pay. You start out as the scarce, subsidised side; once supply like yours is plentiful you've moved to the side that gets charged. Withdrawing the subsidy isn't betrayal, it's repricing.

  • Hard theory (Nobel-backed) · two-sided pricing: Rochet & Tirole (2003, Journal of the European Economic Association) showed the optimal platform price structure is deeply asymmetric — low or negative prices to the side contributing more network externality and more elastic on price, recovered from the other. Parker & Van Alstyne (2005, Management Science) reached the same direction. Tirole took the 2014 Nobel in economics for work on industrial organisation and platforms. Implication: take-rate changes are structural, so don't expect goodwill to exempt you.
  • Checkable public fact · order of magnitude: the standard commission on the major app stores has long been 30%, with 15% under small-developer programmes. That's published company policy and directly verifiable.
  • Industry estimate (not peer-reviewed, contested methodology, use with care): the analyst firm Marketplace Pulse has estimated for several years that total fees paid by Amazon third-party sellers — commission plus fulfilment plus on-site advertising — approach half of sales. It's reverse-engineered from public filings and sampling and different methods differ widely, so don't treat it as a precise figure; the direction, platform fee share rising over time, is visible across several platforms.

Boundary: not every platform ends up extracting heavily — regulation, competition and what stage the platform is at all change the pace. This isn't a prediction, it's risk management: arranging your customer assets on the assumption that rates will rise someday costs very little; arranging them on the assumption it will always be good to you costs the whole business.

MOVE 04

Channel conflict is never argued away afterwards — it's drawn on the map beforehand Partners don't complain about being cut out. They quietly stop bringing customers.

deal registrationfairnessprice consistency
Channel conflict has one root cause: the same customer can be reached by two paths and nobody said in advance who gets paid. The damage isn't the argument, it's that partners stop investing — nurture an account for three months, watch your direct team close it in the last step, and he stops bringing you customers. The reaction runs deeper than sellers expect: people resist an unfair split hard enough to forgo their own gain. So the fix is entirely upfront: divide the map by segment, territory or product line, add a registration process, and keep the price identical whichever path the customer buys through. Drop any one of the three and the conflict comes back.
No lines: whoever gets there first your direct team the partner the same customer Whoever signs last takes it all — cut a partner out once and he won't argue, he'll quietly stop bringing you deals. You lose every future deal, not this one. With lines: segment, then register small · standard package self-serve or distribution; direct team stays out mid · needs a human partner-led; registered accounts are his for 90 days large · named accounts direct only, and the list is published in advance Three floors: list published early · registration first-come · one price per customer An inconsistent price exposes him in front of his own client; what he loses is his credibility — that kind of grudge lasts.
Template · the one-page channel rules (put these four in the agreement)

1. How the map divides: which customer segment belongs to partners, which to direct, and which named accounts nobody touches. The list must be published in advance — declaring an account strategic after the fact admits the rules are yours to rewrite.

2. Deal registration: the partner submits a named account, you confirm within two working days, and it's his for 90 days regardless of who ends up negotiating. First come, first served — and your direct team runs the same process.

3. One price: same customer, same configuration, same price whichever path he buys through. Discount into the partner's margin, never into the customer's quote.

4. Who arbitrates: name the person and the number of days to a decision. The value of a rule isn't being right every time, it's that he knows there's a ruling and it comes fast.

When it does collide: "By the registration record this one is yours — direct is standing down, and I'll put A on it for technical support." The cost is one deal; what it buys is the credibility of the whole system.

Why it works

Mechanism: people judge a split not only by their own share but by whether the split itself is legitimate, and once they read it as exploitation they resist hard enough to give up their own gain. So the first job of a rule isn't to decide correctly, it's to make a partner believe in advance that what he invests won't be taken. Without that belief his optimal move is to invest nothing.

  • Hard evidence (replicated across cultures) · unfair splits get rejected: the ultimatum game (Güth, Schmittberger & Schwarze, 1982, Journal of Economic Behavior & Organization): one person divides a sum, the other can only accept or reject, and rejection pays both nothing. The rational prediction is to accept a penny; the actual result is that offers below roughly 20–30% are frequently rejected. Henrich et al. (2001, American Economic Review) repeated it across fifteen small-scale societies — the numbers vary a lot by place, but self-costly punishment of unfairness shows up everywhere.
  • Hard evidence (fMRI, specific brain region) · unfairness runs on the disgust circuit: Sanfey, Rilling, Aronson, Nystrom & Cohen (2003, Science) ran the ultimatum game in a scanner: unfair offers produced markedly higher activity in the anterior insula (associated with disgust and bodily discomfort), and the size of that response predicted rejection; the same offer from a computer produced a much weaker response. Sample of 19, and inferring mental process from activation has well-known limits, but it points where the behavioural data points — being taken advantage of feels closer to nausea than to bad arithmetic, and you can't argue it back with arithmetic.
  • Channel-specific evidence (survey research, medium strength) · procedure beats share: Kumar, Scheer & Steenkamp (1995, Journal of Marketing Research) surveyed resellers in a vulnerable position: procedural fairness — transparent rules, two-way communication, a route of appeal — mattered more for their trust and commitment than the distribution of outcomes, and significantly reduced conflict. Anderson & Weitz (1992, same journal) show mutual specific investments reinforce commitment. Both are cross-sectional surveys, so discount the causal claims.

Boundary and red line: lines exist to make the rules predictable, not to lock a partner in. Don't turn "protecting the channel" into "the customer may only buy the way I say" — restricting his choice eventually costs you close rate. It holds for individuals too: agreeing what counts as your introduction, for how long, and at what fee, before the fact, is far less damaging to a friendship than splitting it afterwards.

Your Day 47 Action

Ninety minutes on whatever you're selling right now.

One (25 min) · Place them in boxes: sort your customers into two or three piles by persuasion per deal and margin per customer, and see which box each lands in. Anything in the danger box: no channel yet — mark it as a product problem.

Two (20 min) · Compute a partner's expected hourly rate: pick someone you want to work with and write the four numbers — what he pockets per deal, contacts per close, time to learn it, who pays when delivery fails. Then ask honestly whether he has something better earning on his desk. If he does, fix one of the last three numbers rather than raising the percentage.

Three (20 min) · Concentration check: list where the last six months of revenue came from and what share each channel holds. If the largest is over half, write down today the first action of a second route.

Four (25 min) · Write the one-page rules, even with a single partner. Four items: how the map divides, how registration works, one price, who arbitrates. Send it over and ask "does this look fair to you?" — that question is itself procedural fairness.

Boundary: all of it assumes you can already sell the thing. Building a channel before you've closed a deal yourself isn't amplification, it's copying something unvalidated to people with no patience.
Think It Through
1. I've signed a dozen resellers and almost none have closed anything. Is it them, or are my terms too thin?
Probably neither — you've been treating the signature as the result.

Signing costs a partner essentially nothing: one more product on the shelf, no downside. So "how many we've signed" always looks good and will happily convince you that something is progressing. The only number worth watching is how many closed a deal in the last 90 days.

If that's zero or one: the problem usually isn't the terms, it's that you haven't nailed the process yourself. Nobody can replicate what you can't articulate. Go and close a few in a row, write down which customers buy, how to open, and the three common objections, then go back to recruiting.

If two or three are selling and the rest are idle: that's a normal distribution, not a failure. Put everything into those few — joint visits, leads, a shared case study — instead of signing more. The classic mistake is spreading limited support evenly across people who don't sell.

If terms really must change, change risk and difficulty before percentage. Going from 20% to 25% for someone who has never sold one is multiplying zero by 1.25. Helping him close the first deal turns the zero into a one.
2. I work alone (freelance, small studio). I don't really have channels — does any of this apply?
Very much so, and the solo version is simpler: your "channel" is whoever can introduce customers to you — peers, upstream and downstream suppliers, platforms, past clients. The persuading can't be outsourced, but finding people absolutely can, so what you're building isn't a distribution network, it's three to five reliable referral sources.

Use the hourly-rate table on referrers: why would he hand you a client? Three possible returns — he gets paid (an explicit fee), he looks more capable to his client (you covered something he can't do), or you'll refer back. Make at least one of them real. Referrals resting on goodwill alone stop within three months, not because he's bad but because nothing is sustaining them.

State the rules in advance here too: "Anything you introduce, I pay you 10% on close, and it counts as yours for six months from signature." It sounds formal and does the opposite — it lets him speak up, because he no longer has to worry about looking like he wants something. Vagueness is what shuts people up.

Concentration is more dangerous for individuals: if one client or one platform is 80% of your income, that isn't a business, it's a job without an employment contract.
3. Platform fees keep climbing. Should I just leave and sell only through my own list?
Usually not either/or, because the two are doing completely different jobs.

The platform does "a stranger is willing to trust you the first time" — reviews, escrowed payment, refund rules solve an expensive problem: why would someone who doesn't know you pay first. Building that trust yourself from zero costs far more than the commission. So don't read the fee as pure cost; part of it is buying trust infrastructure.

Your own channel does "someone who already trusted you comes back" — which the platform can't help with, and still charges for.

So the sane structure is a division of labour: platform for first acquisition, your own channel for repeat and referral. Which side to push depends on your repeat rate. High repeat, and investment in your own channel pays back heavily. Near-zero repeat, in a genuinely one-off category, and the platform is the main battlefield — don't force a private list, spend the effort on first-time conversion and reviews.

When leaving is genuinely right: when commission plus advertising eats your margin and your own acquisition cost is clearly lower. That's a calculation, not a mood — and before you run it, credit the platform with the repeat business it brought you.

One middle option gets overlooked: stay, but sell only the entry product there. Acquire on the platform with something standardised and easy to deliver, and close the high-margin, conversation-heavy work on your own side. The cut then falls on the cheap half, and the half that actually makes money isn't shared.