04 How we earned two long-term partners for our $10,000 mistake

Our company’s priority is growth, not profits. A bit counter to some startups but we measure our success in key two factors with that being said:

  1. % of new buyers per bundle
  2. % of companies that will work with us again

Those are the only two things we optimize for. We of course love our existing customers and do other things but we strive to really improve those two numbers.

We are new and young and have experimented with many models for best incorporating partners in our bundles. Pay them all equally for being in a bundle, don’t pay, pay some arbitrary %, pay a % of the value they are generating among a few other variations. One thing we also tested was only paying companies when our customers redeemed on their site. It was the honor system. I heard Groupon did it and thought it seemed fair to all partners involved.

We did this a few times and have an agreement with partners that spelled this out in clear English. YOU WILL ONLY GET PAID ON THE REDEMPTIONS ON YOUR SITE.

We did an AppSumo.com bundle, it sold pretty well and then it was time to pay the partners.

Noah: Hey (name removed), how many customers redeemed on your site?

Partner: 100.

Noah: Okay, $10 * 100 = $1,000. Where should we send the check?

Partner: Weird. How many did you guys sell?

Noah: Around 700.

Partner: I want $7,000. What the F are you guys doing?

Noah: Huh? The contract you signed says you only get paid on redemption. There are only 100 words on the agreement so there is no fine print.

Partner: Man, this is a horrible and I doubt I’d work with you guys again.

Noah: The money is yours. It’s our fault for not making it more clear.

That happened with two partners. What did we learn from that experience?

  • Think Long-term, not short-term. If our priority was profit then we may have wanted keep that money, not focus on partner retention.
  • Make things ultra clear and agreed upon before working together.
  • Have priorities / values and stick to them.

About Noah Kagan ()

Noah Kagan was one of the first employees at Facebook.com and Mint.com. Noah doesn't like referring to himself in third person. Later, Noah started kickflip which became one of the leading Facebook app companies and then transformed into getgambit.com, which powered payments for Zynga, Playdom and more.

Recently, Noah launched appsumo.com a site for amazing deals on amazing software and RewardLevel.com to help companies reward their visitors.

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