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Negotiating terms with resellers


#1

Does anyone have any experience, good or bad, of selling through resellers such as SHI? There have been a few posts that touch on this in the past on this thread though nothing that gives a decent, Setting Reseller agreements 101. Would be brilliant if anyone was able to share their thoughts or even point me in direction of some good blogs/content.

Thanks in advance.


#2

SHI have approached me a few times too as they do a lot of reselling for one of my products. Unfortunately, the margins are not high enough for me to really give them a better cut. I’d love to hear someone else’s experience on the topic.


#3

Thanks Cheez, interesting.

Let’s not get started on why your margins aren’t enough, why don’t you put your prices up and increase margins…? :slight_smile:

When you say they have approached you a few times as they do a lot of reselling for one of your products, do you mean that they are selling your product and taking a cut of X? Why would you want to give them a better cut? Are they asking/demanding one? What would happen if you don’t agree?

Are you selling through them and getting revenue at the moment? (What I originally thought when I read your response)

OR

Are they approaching you with a ‘A company we won’t name wants to buy your software and we will sell it for you if you give us a discount of X’ that you can’t justify with your particular product? (They seem to have some history with this. Not necessarily a bad thing if you are getting new customers at a profitable margin).


#4

I actually did recently increase my prices so hopefully things will go well in that regard.

The process is like “hey, customer A wants to buy your software, do you give a reseller discount?” “No” “OK, we’ll buy anyway”.

Recently, I guess because they have a bunch of sales over the years, they have approached me about taking a cut but I tell them no. On average, they buy about $1K of software from me per purchase.


#5

Very interesting. How do they make money? If they pay full price for your software, they must either charge a big company for a ‘purchasing service’ or take a cut of the money the customer pays. I have heard from multiple sources that if you just don’t allow a reseller discount they will buy or you can offer a reseller discount on certain volumes.


#6

Yep, that sounds about right. Why should I have to pay for the big company outsourcing their purchasing…


#7

Andy nails it here - https://successfulsoftware.net/2009/03/18/the-two-types-of-reseller/

Is the reseller acting as an ‘outsourced procurement’ then why give a %? They have been told to “go buy X” by the end customer. Giving a discount or not doesn’t effect if they buy so why throw money away?

Truth is for the vast majority of us an agreement with a reseller won’t do anything to increase sales.


#8

Andy is the xkcd of the ISV world.


#9

I love the term “Value subtracted reseller” - that has been my experience of them as a software provider / seller. I only sell 2-3 units a month through resellers (value ranging from $100-$5000 the latter more rarely than the former sadly), but it always involves more work that the customer just buying directly from me (for both myself and the customer).

In my experience it is typically larger corporates who have an agreement with SHI, Insight or someone else that all software much be purchased through them. The benefit for the purchaser is that the reseller deals with most of the paper work (W8-BEN-E for example), for paying a premium on the product.

The benefit for the seller? Yet to see one (the sale happens I suppose).

Of course sometimes the reseller manages to get a discount (when Microsoft sort of volumes are involved), but whenever I get an e-mail from a reseller asking for a discount I know its going to involve more work and am very tempted to give them a marked up price (haven’t yet).

There are also the odd small reseller (and small companies pretending to be big ones by using a reseller) who say things like “please don’t send the customer the invoice”, to which I typically reply “sure, but my prices are clearly shown on the web-site, your customer will see them…”).

Anyway, for value subtracted resellers, unless they can provably increase your revenue (and you have a contract to go with that), I’d tell them to get stuffed when they ask for a discount

(I’m bitter about it as I’ve got two low value purchases going through resellers atm)

Allan


#10

See the post I wrote about this topic linked in the @rhino post above.

In my experience resellers such as SHI vary from a minor pain (I would prefer to deal with the customer direct) to incredibly incompetent (can’t work out how to make a PayPal payment - really). I never give them a discount bigger than I would have given the end-user. They still buy.

The one place where they can be useful is dealing with red tape. For example, if a big US company or organization demands that they buy from a US company or want lots of paperwork filled in, then I tell them to buy via SHI.

I believe they add on a percentage. The fact that they sometimes ask you not to send your quote direct to the end-user makes me think that this percentage might be quite substantial. Serves the end-users right if their poor accounts department is too lazy to deal with us direct.


#11

http://discuss.joelonsoftware.com/default.asp?biz.5.236074.13 is an interesting discussion on this. There are many there: https://www.google.com.au/search?q=+resellers+site%3Adiscuss.joelonsoftware.com


#12

Interestingly I just got sent the invoice that the customer gave their client. My invoice to the reseller was for $549. The customer’s invoice was $616. ~12% markup.


Avoiding signing stupid, large, contracts with big orgs for SaaS startups
#13

This just made me laugh - I have a reseller who wants to sell to another reseller, who will sell to their customer. For a €109 sale the amount of paper work…


#14

My best reseller story…

I had a request for a quote for a renewal for an existing customer from a reseller. Nothing unusual there, as I have several customers who prefer to buy through resellers for admin purposes.

However, a couple of days later I got another request for a quote from a different person at the same reseller. I sent them the quote with a note: “This is the quote I already provided to x”

Then I got a 3rd request from someone else from the same reseller. I said I had already supplied the quote to 2 people there, and asked if there was a problem?

They said no, but the customer was a government department and was required to get 3 quotes. They send the request for a quote to 3 different companies, but those companies all funnel the request through this 1 reseller, who then obviously go back to the one company (me) for each request.

Presumably each layer in this process is adding their own margin on top of the price I charge… your taxes at work!


#15

Had this quite a few times too.