How reselling works
The vendor and reseller sign a reseller agreement that sets the wholesale price or discount, territory, branding rules and support responsibilities. The reseller then finds customers, negotiates with them and signs them to its own contract. It pays the vendor the wholesale price and keeps the difference between that and what the customer pays.
Because the reseller owns the billing relationship, the vendor may not have a direct contract with the end customer. Most programs still ask resellers to register each deal so the vendor knows which accounts are in progress. See deal registration.
Types of resellers
- Pure resellers sell the product with little added work and compete mainly on relationship and convenience.
- Value-added resellers bundle the product with implementation, training or support.
- Managed service providers include the product in a monthly service they run for clients.
- White-label resellers sell the product under their own brand.
Reseller vs other partner models
Compared with a referral partner, a reseller does more of the sale and keeps more of the revenue, and the vendor gives up some control over pricing and the customer relationship. The affiliate vs referral vs reseller guide compares the models with the same deal worked through each one.
Example
Signal Partners, an IT consultancy, signs a reseller agreement with Fjord Analytics. Fjord's list price is $1,000 per month, and Signal buys at a 25% discount, or $750 per month.
Signal registers Kestrel Foods as a deal, Fjord approves it, and Signal closes Kestrel on an annual contract at $950 per month. Signal invoices Kestrel $11,400 for the year and pays Fjord $9,000, keeping a $2,400 margin. Signal also sells Kestrel a $6,000 setup package, which it delivers itself.