November 25, 2022

How to Build a Channel Partner Agreement Template

Learn how to create a channel partner agreement that protects both you and your partner.

how-to-build-a-channel-partner-agreement-template

Have you ever joined a channel partner program and felt it wasn't as structured as expected? Trust us, it happens more than you realize.

We've all been captivated by the perks of a successful partnership. From the alluring rewards, or even the idea of creating a prosperous network. However, to enjoy these advantages, procedures and contracts must be adhered to, which is where a channel partner agreement comes in.

The good news is that creating channel partner agreements (CPA) doesn't have to take a lot of time and money. All that is needed is a fixed framework that will guide decisions about what will be in the agreement and who will be involved, whether it is multiple teams or just two main parties.

Let’s jump into how to build a channel partner agreement template.

What is a Channel Partner Agreement?

Channel partnerships are formed when two brands or businesses decide to market and sell services together. However, to do so in a structured manner, a channel partner agreement must be established to guide these relationships.

Some of the most common sections included in channel partner agreements are:

  • Definitions

  • Confidentiality

  • Terms of payment

  • Incentives

  • Marketing terms

  • Termination

  • And many more!

It's important that both you and your partner understand what is included in the document and why it is integral to the success of your relationship.

Why is a Channel Partner Agreement Important?

The channel partner agreement is more than just a list of partnership requirements.

The importance of a channel partner agreement stems from the fact that it gives the parties involved an enforceable and binding agreement to ensure that everyone is aware of their rights and obligations to one another. 

More importantly, it provides both parties with protection in the event of a breach or non-compliance, as well as guidance on how to establish the rules of engagement in the event of a dispute between the partners. Lastly, it protects the partners' investments in the business as well as the intellectual property of the product and establishes the conditions under which it may be transferred, sold, or used in any other way.

Important Sections of a Channel Partner Agreement

We've talked about what a channel partner agreement is and why it's important. Let's take a look at the key sections you must include when creating your channel partner agreement.

Definitions

Did you know that if you are a Sesquipedalian, your contracts will inevitably be excruciatingly long to read? Particularly if the reader has Hippopotomonstrosesquippedaliophobia.

(See what we did there?) 

Admit it, it would be easier to understand the meaning of the words if we explained it at the beginning of this article, right? The same is true for any contract.

We are all accustomed to contracts being convoluted and challenging to understand, especially with all the fancy jargon, so it is best that all partners understand what is written, no matter how serious you may want to be.

Make sure to start your agreement with a glossary that identifies the parties and defines any legal or marketing terms used in order to make it as clear and concise as possible. 

P.S. Sesquipedalian (pronounced: Sess-kwi-peh-day-leean) refers to a person who enjoys using (or overusing) long words.

Hippopotomonstrosesquippedaliophobia (pronounced: Hippoh-poh-toh-mon-stroh-sess-kwi-ped-ah-lee-oh-foe-bia) ironically refers to a person who fears long words.

Confidentiality

A confidentiality clause establishes ground rules for safeguarding your and your partners' businesses from the disclosure of confidential information. Establishing these ground rules at the beginning helps build trust and transparency with the partner.

Please note that any party that violates the confidentiality agreement's terms may be held liable for damages as well as for breaching the contract in question, or the parties may choose another course of action that has been agreed to in writing.

Terms of Payment

As in any contract, payments are an essential element and, occasionally, are the portion that everyone pays the most attention to.

Your contract's payment clause should include payout conditions for rewards and benefits, such as how much money your business will pay for a particular outcome and when it will do so.

If the payment must be made in installments, it should also include the mode of payment and the due date. It should also state who will be responsible for paying any additional fees that may arise during the program.

Incentives

Now comes the exciting part, incentives!

It would be a fallacy to say that partners join into partnerships without seeking incentives, whether monetary or otherwise. As a result, incentivizing is a clear and effective strategy for motivating businesses to form a joint venture with your company.

Having said that, keep in mind that there are several ways for a corporation to reward potential channel partners, some of which do not involve money. Companies occasionally mix several kinds of channel partner incentives, including free or discounted goods, trips, certifications, and much more.

It is important to describe exactly what forms of incentive incentives are available for business partners and how they may obtain them in the clause of your partner agreement.

kiflo-rewards-incentives
Build unique rewards and incentives for each type and tier of partner in Kiflo.

Appointment

The appointment clauses, which are frequently found in reseller partnership agreements, grant partners the nonexclusive and nontransferable right to distribute software to end users in their market and designate partners as nonexclusive "Authorized Software Enterprise Partners".

Other things could be:

  • Relevant geographic limitations for advertising your items

  • When partners should actively promote the product

  • How long the partnership will last

Marketing Terms

Partner marketing is exciting, and each party can be as creative as they want in marketing the product, but there is a limit. As with everything else, there are do’s and don'ts of marketing guidelines that can protect your brand and product from portraying false messages, images, and, most importantly, verification.

With that said, it is essential to include strict marketing guidelines in your channel partner agreement.

This section should include:

  • Partner marketing strategy

  • Marketing materials; for example, should the partners only use the material provided by your company, or are they permitted to modify it to suit their specific clientele?

  • Content sharing

  • Ownership and Reservation of Rights

  • Resale agreements

  • Do's and don'ts of how they intend to market the product

And lastly, it should also include how to modify the partner marketing strategy if necessary.

Indemnification

The indemnification section of the agreement covers costs incurred by the other party that your company is willing to pay, and the clauses can vary greatly. Some are as simple as "liability is excluded," while others are more formal agreements that exempt the service provider from specific consequences if they occur. ‌

And, to protect your company from unexpected costs, include an indemnification section that specifies what you're willing to pay for and what you're not willing to pay for.

Key components to have are:

  • Parties to a contract

  • Protection of loss

  • Essentials of the channel partner agreement

Termination

It is natural for things to come to an end. However, just as in the beginning, it would be preferable if things ended smoothly and without too much complication.

The termination section includes several clauses and examples of how a partnership can end, ranging from a breach of contract to finding new ventures that partners may want to pursue.

So, in order to protect yourself and your partner, of course, the termination section is your savior in the event of a partnership's demise due to unforeseeable circumstances and should include the following:

  • What actions to take if a contract is breached.

  • The process by which shares will be distributed.

  • Who pays the damages should the contract be terminated prematurely.

  • Planning for continuity or succession in the event that a partner leaves the partnership.

  • A description of the financial management plan for the partnership.

  • Details of how and when a partner may decide to terminate the agreement, including the number of days' notice required if they want to do so.

Channel Partner Agreement Best Practices

The partner ecosystem is constantly changing, particularly in this fast-paced and competitive industry, so it is necessary to update the process and agreements on a regular basis to reflect the evolving business. 

However, because change is constantly required, it is best to stick to some best practices that you can continually refer to when changing the terms of your agreement.

Simplicity

Simplicity is key.

To succeed in the partnership, both parties must agree on their future goals and expectations. However, before one can succeed, it is critical that each party has a clear understanding of what is entailed in the channel partner agreement. 

And sometimes what hinders that progress is the agreement's overcomplication.

So, make it as simple as possible for all parties to understand, and avoid using jargon or terms that may confuse others. Include a glossary in this agreement if you must include a term but are unsure whether or not someone will understand it.

User-friendly Design

Sometimes the issue is not excessive word complexity, but design. It's critical to create an agreement that your counterparty will understand and feel compelled to sign.

Use links and images to break the document up, make documents easier to sign, and try to keep the layout as simple as possible.

Use Automation

Automation is today's superhero for many business practices, including, believe it or not, agreements. Many businesses use it to streamline operations, clean up data, and quickly reach agreements with new business partners.

Automation enables you to:

  • Simplify workflows for partnership agreements without sacrificing efficiency.

  • Make sure an agreement's terms and conditions are acceptable to both parties.

  • Eliminate human error.

  • Automatically transfer a signed contract to a database.

Conclusion

When working with a channel partner, it is simple to become overly invested in a project and lose sight of the bigger picture.

Always make sure that any predetermined expectations you have are stated explicitly in your agreement so that there are no misunderstandings regarding what you will contribute. In the long run, it can benefit both parties by lessening potential conflicts.

Last but not least, remember that you are partners. Consider the drafting of a contract as a partnership. You're settling on a negotiated foundation that will benefit both of you. ‌

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Frequently Asked Questions (FAQ)

How do you create a channel partnership agreement?

There are many free templates available online to assist you, but the basics include specifying the type of business you're running, partnership details and goals, including duration and most importantly, termination clauses.

Who’s involved in channel partner agreements?

A channel partner agreement can involve c-level executives, partnership managers, and sales or marketing representatives from each company.

How do channel partner agreements help partners?

The agreement outlines the legal and contractual obligations, protection, and expectations of a partnership.

What needs to be included in a channel partner agreement?

The agreement should, among other things, outline the terms of payments, confidentiality agreements, marketing plans, and terms, as well as the beginning and end dates of the partnership and all necessary financial clauses.

Where should I keep my channel partner agreements after it’s signed?

Keep the signed channel partner agreement in your PRM software so both you and your partner can access it at any time.

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