Partnerships come in many forms from affiliate to technology and referral partners. One of the most popular partnership types however is the reseller partner. The SaaS Reseller business model is a popular one because it allows businesses to expand their reach and sell their software through a network of resellers, rather than relying solely on their internal sales teams.
When done well it can not only increase revenue, but also expand market reach and overall company brand exposure.
In this blog post we will explore the SaaS reseller business model, including what it is, how you can build a successful software reseller partner program for your business, whilst also touching on the benefits you can expect to receive if setting up one correctly.
Understanding the SaaS Reseller Business Model
We mentioned that a reseller is a type of partner that is unique. So what is a reseller partner and how does it differ to some of the partner types outlined at the start of this blog post?
A reseller partner as is obvious from the name is a partner that takes your software and resells it to the wider market. The reseller partner has their own marketing and sales teams that will promote your product with the wider market and in turn close deals on your behalf. This differs from referral partner programs that are common, where they are simply referring business your way, and your sales team then picks up these leads and closes them as normal business.
From the commercial side of things, resellers typically will pay a wholesale cost for your licenses and then add margin in order to make the business profitable. The commonalities with other partner types and resellers is still the overall training and management needed in order to be successful. As we will explore in more detail later on in this blog, there is still a requirement to provide training, support and marketing resources in order for the reseller and their respective teams to know about your product and how to position it to the market at large.
Different Types of SaaS Reseller Business Models
Inside of the software reseller partnership model there are two distinctive types of reseller partners that are worth mentioning.
Managed Service Provider (MSP) business model
The Managed service partner is a type of reseller that focuses on offering subscription-based services to companies, typically on a monthly basis. Their primary objective is to increase their Monthly Recurring Revenue (MRR) by providing continuous support, maintenance, and management of IT services to their clients.
Partnering with MSPs has some nuance to it, as they will typically manage your software on the clients behalf, acting as almost a de facto customer success manager on the account. This might add some complexity to your business, and need a change in overall process, if every account is traditionally serviced by a CS.
(For more information on how to work with MSPs check out out “Guide to working with MSPs”)
Partnering with MSPs has some nuance to it, as they will typically manage your software on the clients behalf, acting as almost a de facto customer success manager on the account.
Value Added Reseller (VAR) business model
The other type of SaaS reseller business model worth detailing is the VAR. VARs or value added resellers have a slightly different model to the MSP in the way in which they usually make their money through adding additional services or solutions on top of your software offering. These services could include implementation or customization of your overall product offering.
Partnering with VARs, adds some up front effort in terms of training and enablement as they need to be fully aware of what your product does, and how to get it set up in order to layer in additional service offerings around it.
(For more information on how to work with VARs check out our “Guide to working with VARs”
Benefits of a SaaS Reseller Program
When executed correctly, a SaaS reseller business model can provide numerous benefits, including:
Increased sales and revenue
Utilizing a reseller network can expand your customer base, boost sales, and revenue significantly. Partnering with resellers can primarily enhance your revenue by leveraging their outreach and resources. By collaborating with resellers, you get access to their entire sales team, eliminating the need for hiring your direct sales reps.
This enables you to benefit from the sales team of your reseller partner, who can actively seek potential customers, present your solutions, and close deals on your behalf. Your primary responsibility is to ensure that they are adequately trained and informed about your products and services to maximize their efficiency in pitching to customers.
Access to new markets and customers
Setting up an efficient SaaS reseller business model can provide you with an additional advantage of accessing more markets and territories. If you’re a SaaS company looking to venture into different markets without the initial expenditure of establishing a headquarters and recruiting a new team to explore the new territory, then opting for a reseller business model can prove to be a beneficial strategy.
Collaborating with a reseller who already possesses the required infrastructure in that market and allowing them to test the waters can not only help you establish a presence but also provide you with a cost-effective way of testing a new market before investing in the necessary infrastructure to establish a real presence.
…recruiting a new team to explore the new territory, then opting for a reseller business model can prove to be a beneficial strategy.
Cost savings and efficiency
The final benefit and one that we have already touched on lightly above, is the obvious efficiencies your business can realize through creating a SaaS reseller business model. If you are a small, scaling company, oftentimes hiring more marketing and sales resources isn’t feasible.
By building out your reseller partner program, you automatically get an outsourced sales and marketing team to drive demand for your business, without you having to do much more than give them a discounted rate on your product or service. From a cost of acquisition perspective, the revenue generated by the reseller partners is extremely valuable, as you can avoid the high expenses typically associated with hiring and training a new team of sales representatives.
Moreover, by leveraging the existing infrastructure and expertise of reseller partners, you can achieve operational efficiencies that may be difficult to attain through internal efforts. These efficiencies can come in many forms, such as reduced administrative and operational overheads, streamlined processes, and more focused efforts on core competencies.
By building out your reseller partner program, you automatically get an outsourced sales and marketing team to drive demand for your business
Creating a SaaS Reseller Program
So how do you create a SaaS reseller business model? There are a number of key things that need to be considered.
Identifying and recruiting the right reseller partners
When selecting reseller partners, it’s essential to consider factors such as their experience, expertise, market reach, and reputation. You should also evaluate their sales and marketing capabilities, as well as their ability to provide technical support and customer service.
In addition to these strategic considerations, it’s important to ensure that your reseller partners share similar values and culture with your company. This alignment can help build stronger relationships, increase trust and communication, and ultimately lead to more successful partnerships.
Another critical aspect to consider when selecting reseller partners is their willingness to invest in the relationship. Ideally, you want to work with partners who are committed to building a long-term partnership and are willing to invest time and resources in training and promoting your solutions.
Determining commission and pricing
Another critical part of a successful reseller partnership business model is getting your commission and pricing structure set up in a way that is not only beneficial for you but also attractive to the partner.
If the pricing and commissions are set too low, reseller partners may not see the value in promoting your solutions and may choose to focus on other products that offer better returns. On the other hand, if pricing and commissions are set too high, it may result in lower sales volumes, reduced profitability, and potential conflicts with other sales channels. Spending time getting this right up front is critical, as it can significantly impact the success of your reseller partnership business model in the long run.
For more insights into choosing an optimal payout plan for your SaaS reseller program, read Best Practices for Channel Partner Commission Structures.
Creating a robust onboarding program
Partner programs require ongoing effort beyond the recruitment phase, particularly in onboarding and training reseller partners to effectively promote your products.
Establishing a comprehensive training program is crucial for ensuring that your reseller partners and their sales teams have the necessary resources and knowledge to confidently promote your products to their target audience. Without this, they may struggle to understand how to position your products or which customers to target.
Providing resources such as battle cards, sales decks, and recorded mock calls can be invaluable for getting reseller partners up and running quickly. These tools can help familiarize partners with your products and enable them to communicate the value proposition effectively to potential customers.
Want additional guidance? Read Allbound’s tips to perfecting the onboarding process.
Providing ongoing support and management
Maintaining regular communication with your reseller partners is key to tracking their performance and ensuring their overall satisfaction with your program. By keeping a close eye on their progress, you can identify potential issues early on and take appropriate action to address them. This proactive approach can help you build stronger relationships with your reseller partners, ultimately leading to more successful partnerships.
One of the most common issues that can arise in reseller programs is channel conflict, where multiple partners may compete for the same customers or opportunities. Regular communication can help you identify and manage these conflicts in a timely and effective manner, minimizing any potential negative impact on your business.
Challenges and Risks of SaaS Reseller Programs
Throughout this blog post we have detailed the many benefits of SaaS reseller business models in addition to discussing the major benefits that companies can derive from starting such a program. As with anything however there are some challenges and potential risks of a software reseller partner program that are worth detailing in order to get a complete understanding of the model as a whole.
The major risks are are as follows:
Maintaining consistent branding and messaging across resellers
One of the primary challenges of a reseller partner model is ensuring that your resellers are representing your product accurately and effectively to potential customers.
Because resellers are the ones taking your product to the market and selling it, you may be one step removed from the sales process. This lack of control can make it challenging to ensure that resellers are using the right branding and not misrepresenting your product during the sales process.
To address these challenges, it’s important to keep a close eye on the marketing collateral that resellers are using and to listen to end-customer feedback. If customers frequently complain about your product or service due to misrepresentation by resellers, it may be time to retrain them on product positioning and sales tactics.
Regular communication with resellers can also help ensure that they are following your brand guidelines and effectively representing your product to potential customers. Providing ongoing training and support can further reinforce your brand message and ensure that resellers have the necessary resources to promote your solutions effectively
Ensuring you have a robust partner program
Establishing a strong and effective partner program requires significant upfront investment and ongoing effort.
Launching a successful reseller partner program can be a complex undertaking, requiring careful planning and investment in the right areas to ensure that partners are properly trained, enabled, and supported to drive results. This investment may include providing resources such as training materials, sales collateral, and ongoing support to help partners overcome any challenges they encounter along the way.
However, for newer partner programs, limited budgets can pose a significant challenge, particularly when it comes to investing in expensive PRM solutions. Without access to these tools, managing reseller partners becomes a manual and time-consuming process, making it much more difficult to scale the program effectively.
Mitigating risks such as channel conflict and competition
One of the primary challenges of reseller partner business models is the potential for channel conflict and competition with your direct sales teams.
To avoid this conflict, it’s essential to establish guardrails around areas such as pricing, ensuring that reseller partners are not offering cheaper deals to customers that your direct team is also selling to. Failure to do so can lead to direct competition between your reseller partners and direct sales team, which can ultimately harm your partner channel.
Another challenge is the potential for conflict between reseller partners themselves. To minimize this risk, consider assigning exclusive territories to each reseller partner, allowing them to work specific deals in designated areas without competing against each other.
Managing these potential conflicts requires ongoing effort and clear communication with your partners to ensure that everyone is on the same page and working towards common goals. By prioritizing the needs of your reseller partners and working to minimize conflicts, you can build strong and profitable partnerships that drive growth for your business.
(For more information on how to manage channel conflicts in your SaaS reseller partner program read our guide on “Strategies on how to resolve and avoid channel conflict”)
Primary Takeaways to Apply to Your SaaS Reseller Business Model
In conclusion, a SaaS reseller business model is a popular and effective way to expand your customer base and increase revenue. By partnering with resellers, you gain access to their sales and marketing teams, enabling you to reach new markets and territories without the need to hire additional sales representatives.
However, creating a successful reseller program requires significant upfront investment and ongoing effort. It’s essential to identify the right partners, set up a commission and pricing structure that is mutually beneficial, and provide comprehensive training and ongoing support to ensure that resellers are effectively promoting your products.
It’s also important to mitigate potential risks such as channel conflict and competition between reseller partners and direct sales teams. By establishing clear communication and prioritizing the needs of your partners, you can build strong and profitable partnerships that drive growth for your business.
Overall, a SaaS reseller program can provide numerous benefits, including increased sales and revenue, access to new markets and customers, and cost savings and efficiency. With careful planning and investment, a reseller program can be an effective strategy for scaling your business and reaching new heights of success.
If you are thinking of starting a SaaS reseller model, you might want to consider using a PRM like Allbound to automate some of the tasks that we have talked about during this article. To check out the platform book a demo, and for more partnership content read more in our blog, or listen to the Channel Partners Podcast.
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