Software reseller business model 101: How to make a profit

If you’re in the agency or marketing/sales world, you may have come across the term “software reseller business model.” What is that exactly, you ask? And why should you consider it?

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To explain, think about the way you shop for products and services today.

When you visit the local coffee shop, you’re not technically buying everything directly. The beans and espresso machines have been sourced from reputable suppliers, while the barista adds value by making that perfect latte you love, recommending the donut of the day (made by the bakery on the other side of town), and serving those items in branded packaging.

Or perhaps you’ve gone to a local computer store to buy a new PC that lets you play video games at the best possible graphic settings. A service agent provides recommendations and the technician builds and tests your new system. But all of the parts are sourced from the likes of Samsung, Nvidia, and Intel and re-sold to you as a package.

These experts bring the elements together so to speak.

If we contextualize this same concept around the agency world, you can see the meaning of the software reseller business model phrase begins to make sense. Agencies and other digital experts don’t have capability to develop software that lets local businesses do everything they need to from a digital marketing perspective. So, many opt to resell solutions made by software-as-a-service (SaaS) providers under a software reseller business model.

In this post, we break down how this method of doing business works and why it’s beneficial for agencies and other parties interested in being a broker of software.

Why consider the software reseller business model?

In the above example of the coffee store and computer store, imagine if the barista had to grow their own beans, or the technician needed to manufacture their own parts with intellectual property protections. Their businesses would almost certainly be unviable.

In the same vein, most agencies can’t possibly hire teams of developers, rent fancy offices and raise capital from markets in order to fund the building of digital marketing software for local businesses. It’s simply too complicated and financially unfeasible.

Under the software reseller business model, agencies and other marketing experts partner with a SaaS company that has already done the work in building the software. The agency simply becomes a SaaS reseller to make a profit, while the technology provider gains broader distribution.

The advantages of this approach from a reseller’s perspective are that they can:

  • Resell software that has already been created by a SaaS company
  • Often white label the software under their own brand to build credibility with clients
  • Build recurring revenue streams, manage costs, and improve margins
  • Offer their clients the digital solutions they need, when they need it
  • De-risk their own business by not getting involved in software development

But to really appreciate the benefits of the software reseller business model, we should consider where a software reseller is at in its business growth phase.

The benefits of software reselling for established agencies

Established agencies are financially profitable, usually have over 10 employees, but often face challenges with:

  • Growing revenue faster than costs
  • Expanding and upselling new product and service offerings
  • Improving sales and marketing processes

These agencies are generally renowned for their deep expertise in areas like brand management, copywriting, and public relations—tasks which require fulfillment by expensive, skilled staff.

But they often aren’t in a position to win more of their clients’ business because they don’t sell the other products and services they might be interested in purchasing. For example, a website builder, a PPC reporting platform, or an SEO platform.

That’s where a software reseller business model can shine.

Rather than your client needing to use multiple agencies or software vendors for these different needs, you can simply package and resell other solutions from third-party SaaS companies, often under your own brand using white labeling.

That way, your agency gains a bigger share of clients’ wallets, builds deeper relationships, and increases earnings without adding to cost. There may also be, as an example, synergies where an agency can leverage its own content team to manage a customer’s online presence or website copy through the re-sold service, creating a new business vertical. All of that goes towards scaling profitability and improving margins.

The benefits of the software reseller business model for newer digital agencies

Smaller agencies have ambitious dreams and goals to build multi-million-dollar businesses while being able to pick and choose when they work for a better lifestyle. They’re generally good at doing one thing, such as creating logos and designing websites.

But in between doing the work, prospecting and selling, the reality is managing a solopreneur business can often be overwhelming. It can feel like the rewards don’t stack up against the effort required to stay afloat.

Smaller agencies face many rejections because clients may already have the one thing they’re trying to sell. The agency owner has no choice but to keep prospecting for that one type of business they specialize in because they can't offer anything else on their own.

The software reseller business model can help smaller agencies overcome many of these challenges. They can branch out and sell new software products. They can go to market quickly once the reseller agreements are signed. And they have the tech support they need to support their clients through the third party.

So rather than burning out and doing all the work for clients, the software reseller business model lets you spend time with clients and drive their marketing strategy. The best part? You can earn a recurring revenue stream for each solution sold.

The ability to white label software as your own

The world of digital marketing is all about creating perceptions. In the same way a coffee shop puts all its branding on its packaging to create brand excitement and loyalty, agencies want to generate the perception that mostly everything they resell to clients is their own.

This is why checking whether your SaaS provider enables or empowers you to become a white-label software reseller is fundamental to the software reseller business model.

As an example, when you resell white-label apps, those apps contain not the third party’s branding but your own agency’s logo, branding, and colors.

How to get started as a software reseller

There are a number of considerations when it comes to adopting the software reseller business model.

Target your niche or audience

The biggest part about selling is understanding the customer or industry. So naturally, you want to pick niches that you understand very well so you can create tailored and empathetic messaging as part of your sales process.

Now bearing in mind that while joining reseller partner programs offers the prospect of attractive recurring revenue streams, you also want to ensure the sustainability of those profits. A part of that is great service, but also the financial strength of the client and industry they operate in.

Think about what you’ll sell and how

It’s important to not overwhelm prospects and sell them everything under the sun. Try to strike a balance and connect the dots between their needs, what you understand, and their budget.

You could also start with one element of their strategy. For example, if your clients mostly need productivity tools and cloud solutions, you could start by becoming a Google Workspace reseller. Is optimizing page rankings their top priority? You could join an SEO reseller program and become a local SEO reseller.

Research and find your SaaS partner

You want to work with a SaaS partner that has a reputation for amazing software and exceptional service. You also want to join a partner program that provides you with all the support you need so that you can understand how to best sell, implement, and maximize the value of the digital solutions being re-sold to clients.

Importantly, the products offered should be a strong fit for what your clients need. From the reseller’s perspective, there needs to be healthy margins for you. Here is a checklist of questions to ask:

  • Is the software great? You may be a great salesperson, but if the software you’re reselling to clients is clunky, complicated and hard to use, you won’t have any long-term clients. Be sure to work with a SaaS provider that is relentless on creating a great and simple user experience. Google Workpace, Microsoft 365, Constant Contact, GoDaddy, and ActiveCampaign are examples of some of the best reseller partner programs available today.
  • What is the reselling arrangement? There are many types of reseller partner programs which involve partnering with individual SaaS companies to resell individual software solutions. If you decide to partner with individual SaaS companies for every digital marketing, email, reputation management, and SEO software program, you’ll find both you and your clients will be overwhelmed with multiple relationships, bills, and logins. A SaaS provider that offers multiple reseller partner programs within one software marketplace can help you reduce vendor clutter and simplify life for you and your clients.
  • Is there flexibility in pricing resold services? Healthy margins are crucial to the success of agencies. SaaS companies are built on the premise of resellers earning recurring revenue streams in a way that’s sustainable. You pocket the margin between what it costs to activate the product and the price negotiated with your end client.
  • How much does the SaaS provider charge? SaaS providers typically charge subscription fees for using their service. Look for one that offers affordable pricing and a variety of packages based on your agency’s needs and circumstances.

Define your pricing, service proposition, and value

Once you’ve picked your SaaS provider and understand exactly how the solutions you want to resell work, it’s time to consider pricing. You want to ensure you’re making money on every sale, while ensuring the cost of your resold software is sustainable for your clients. Don’t undercharge or overcharge. Agencies generally aim to make an approximately 50-percent margin on sales.

However, the pricing and your margins are highly dependent on the type of product and the value you’re adding to your end client.

You may be reselling reputation management software and services as a package to help a restaurant manage its reviews, listings, and social media accounts from one place. The restaurant owner or one of their employees may be happy to perform the underlying tasks of responding to reviews and posting content on social media themselves. In that case, there’s very little effort required on your part after you’ve resold those solutions. This is the do-it-yourself (DIY) approach.

On the flip side, the mechanic down the road isn’t confident in managing their online presence and is happy to pay you to do it all on their behalf. In that case, you’ll probably want to think about pricing your package differently because fulfillment work is required on your part. This is the do-it-for-me (DIFM) approach.

In all instances, you want to make sure you’re delivering value by showing clients the results, and this is where it’s important to ensure your SaaS partner has top-notch reporting capabilities.

For example, Vendasta’s Executive Report shows clients how their online performance has been improving over time with your help—everything from the growth in their star rating, listings accuracy, social media engagement, search engine performance, and more.

By showing proof-of-performance, you can help your clients recognize the value you’re bringing to the table and be keen to deepen their relationship. This provides you the opportunity to resell additional products and make your journey as a software reseller a success.

Software reselling: The low-risk, high-reward method to make a profit

The software reseller business model offers a low-risk, high-reward method of doing business for agencies and other digital marketing experts. You get to leverage the work of a SaaS provider and resell solutions with a price and service proposition that suits your client, while increasing your profits and relationship with clients.

And that’s it! It’s time to start (re)selling!

About the Author

Vishal Teckchandani is a Content Marketing Specialist at Vendasta. A newcomer to Canada, he spent the last 14 years of his career in Australia as a financial services reporter and TV host. He has written extensively about how technology companies are transforming business processes and lives, and interviewed the CEOs of global banking, payments, SAAS, and cloud storage providers including Afterpay, ELMO Software, Macquarie Group, National Australia Bank, NextDC, and Zip Co. When he’s not creating content, Vishal loves to cook, explore Saskatchewan with his family, and volunteer for his community.

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