One successful approach for expanding sales used by manufacturers is to sign up channel partners. The partners market the producer’s products and services, often through a cobranding arrangement. If your company plans on forging a channel partnership, make sure you create an effective agreement that maximizes your return and reduces the probability of problems with your partners.
The agreement should specify the date a company is authorized to be a channel partner, indicate that the agreement is nonexclusive and, if limited geographically, in what areas the channel partner may market the company’s products and services. The term of the appointment also should be indicated. For example, a term of one year is specified with the term being renewed annually.
The method and timing of payments to the channel partner should be outlined. Issues should be addressed, such as customer returns. How will returns be deducted from payments to the partner? If the channel partner and company terminate their relationship, on what basis will final payments be made?
To assure that the channel partner makes reasonable effort to market the company’s products and services, the company should require the partner to provide sales forecasts and plans with supporting planned promotional activities.
To protect the company engaging the channel partner, the agreement should state that the channel partner will not disclose company confidential information, such as proprietary procedures, customer lists or other material marked confidential to any third party. The confidentiality terms should cover the period during which the channel partner has an agreement with the company and after that period if the channel partnership arrangement ends.
The agreement should specify under what state, or country if an international arrangement, the terms are governed. In most cases, the governing locale is the headquartered location of the company seeking a channel partner arrangement.
The conditions upon which either the partner or the company may end the relationship also needs to be noted. For example, "Either party may end the relationship with 60 days advanced notice."
Independent Contractor Status
The agreement should state that the relationship between the channel partner and the company is not that of employee and employer. The company is not responsible for providing employee benefits nor paying taxes on behalf of the channel partner.
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