By Becoming a SaaS reseller or white-label software reseller is a great way to generate revenue while meeting more of your clients’ needs. Reselling software solutions to your clients can also save you time and money. You might wonder about your obligations as a reseller. You might also ask about the software company’s obligations to you. In this article, we explore the basic principles of software reseller agreements.
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Understanding the ins and outs of software reseller agreements can help you choose the right partners and maximize your profits.
What are software reseller agreements?
The first question business owners usually ask is, “What is a reseller agreement anyway?” Software reseller agreements are legal contracts developed between at least two parties. Normally, these are the software publisher, or vendor, and the reseller.
All types of reseller agreements are considered licensing agreements. In them, you’ll gain the rights to resell the publisher’s software to your own clients.
One example you might already be familiar with is Google Workspace. To become a Google Workspace reseller, you enter into an agreement with Google. Once you’ve agreed to the terms, you’ll have a license to sell the Google Workspace software to your clients.
Reseller partner programs benefit both the vendor and the reseller. In the vendor’s case, they can distribute their software to a wider network. This is especially true of smaller vendors with niche products. It can also reduce the burden of sales, marketing, and even customer service. That means the vendor can focus on making the product great.
As the reseller, you pick up the tasks of selling the solution. You can also offer value-adde onboarding, set up, and customer service to your clients. If your team already uses the software, then you can offer more hands-on insights for your clients. You also get a “business-in-a-box” that lets you go to market and scale up faster than if you developed software from scratch.
Why do reseller agreements matter?
Once you know the answer to “what is a reseller agreement?”, you’ll probably ask why you need one. After all, a software reseller agreement is designed to protect the vendor.
Yet, the agreement also protects your rights as the reseller. An example is a clause that breaks down what happens if software ships with known issues.
A reseller agreement also defines where you’re allowed to sell the software. It might also define the length of the agreement or discuss margins.
The agreement also outlines your responsibilities as the reseller. One important aspect to review is the payment terms: how and when are you expected to pay the vendor?
You should carefully review language about approved ways to represent the software as well.
SaaS reseller agreements will typically outline:
- Ownership terms, such as whether the agreement is exclusive
- Intellectual property rights, such as whether you can use the vendor’s logo
- Applicable law, indicating which jurisdiction’s laws govern the agreement
The agreement should also outline how maintenance and updates will happen. Finally, the agreement should go over services that you need to provide, such as onboarding, set up, and training.
Always look for a reseller agreement that is clearly worded and well-defined. If you’re not sure or the wording seems vague, it might be time to consult with a lawyer.
Types of software reseller agreements
There are several different types of reseller agreements out there. You’ll need to pay close attention to the structure and wording of any software reseller agreement template you’re considering. It’s not a bad idea to have a lawyer go over the terms before you sign up for anything.
Some software reseller agreements are made between the vendor and the reseller. In other cases, you may have the deal brokered by a third party. These arrangements can change your responsibilities. You’ll want to be clear who is a party to the agreement and to whom you’re responsible.
Two-party agreements involving the vendor and the reseller are the most common. They fall into two categories:
- Top-down agreements
- Bottom-up agreements
With top-down agreements, the vendor dictates how the reseller will contract with clients. There will be measures included to ensure proper record-keeping, auditing, and so on.
Bottom-up agreements give the reseller more leeway in creating contracts for end-user customers. This is helpful if you’re working with corporate customers who need custom solutions.
Exclusive vs. non-exclusive software reseller licensing agreements
You’ll likely encounter the terms “exclusive” and “non-exclusive” in any reseller agreement example. What do they mean?
Non-exclusive agreements are the most common, since these tend to favor the vendor. A non-exclusive license grants you the right to resell, but it means you won’t be the only reseller. In some cases, you may not even be the only reseller in your area for a particular solution.
An exclusive SaaS reseller has much less competition. This doesn’t always mean they are the only reseller in the world. Many vendors divide up their rights by geographical area (Incorporated.zone). A reseller may be the only licensed reseller for, say, North America or the European Union.
An exclusive software reseller license agreement usually includes performance requirements as well. If you should fall short of expectations, the vendor might terminate the contract.
White-label reseller programs
Another software reseller license agreement term you might come across is for white-label reseller programs. This agreement allows you to rebrand the solution with your own company name and logo (Forbes).
Suppose you joined a local SEO reseller program. This program is white label, which means your customers only see your company’s brand. This may mean that the client portal or SEO dashboard they use has your branding on it. The customer also receives reports and other information on your letterhead.
This is different from other reseller programs that don’t let you rebrand. In these cases, you’ll represent the vendor’s brand. Attempting to pass their software off as your own might be a violation of the agreement.
White-label reseller agreements let you deliver outstanding solutions while also growing your brand.
Different payment structures in reseller agreements
One aspect of any software reseller agreement you’ll want to pay close attention to is the payment structure. Generally speaking, there are three payment structures across all types of reseller agreements.
Here are some software reseller agreement example payment structures:
- Margin
- Commission
- Subscription
The commission structure is the simplest. You earn a percentage of the license fee paid by each new client. Margin-based structures require you to buy the product first. You then sell it to your client at what you determine to be a reasonable markup.
Subscription-based agreements are the trickiest to manage. What percent of the end-user’s subscription fee is due to you as the reseller? Every agreement will be different, so review these terms carefully.
Software reseller agreement example template
Examples of a software reseller agreement template do exist (Template.net). Keep in mind, though, that vendors often develop their own reseller agreements. For example, a local SEO reseller program provider will create terms that make sense for their product. Adapting this software reseller agreement template for other products may not make sense, as some of the terms may not apply.
These types of reseller agreements might be boiler-plate contracts that the vendor offers to all resellers. Some vendors will allow you to renegotiate some of the terms. Others will have ironclad agreements.
No matter the situation, spend some time going over a software reseller license agreement with a fine-tooth comb. Most vendors will develop agreements that favor them. You should review the terms and responsibilities to be sure you can uphold your end of the bargain.
Other key points to consider include whether the terms of a software reseller agreement template are enforceable under your local laws. Also look at terms for renewal and termination of the agreement.
Many of the issues around reseller programs stem from poorly worded agreements. By reviewing software reseller agreements carefully, you can be confident you’re getting solutions that work for your business.
Take the guesswork out of software reseller agreements
Now you can answer, “What is a reseller agreement?”, and you probably have a good idea of why one is important. If reading licenses still makes your head spin, though, resell digital marketing products through a software marketplace instead. Vendors are already vetted, so you know they offer great products. Being part of the Marketplace can even remove barriers in joining reseller programs.
Discover the solutions your clients need and get up to speed sooner when you partner with the right vendors.
