Are you looking for the best business idea? If yes, you can become a software reseller. As a reseller, you will assist the software owner sell their product. Although software reselling sounds easy, it requires taking some legal steps. One of these is signing a software reseller agreement.
But you may wonder ”what is a software reseller agreement?”. It is a legally binding contract you need to sign before reselling any software. We will discuss it in detail below.
What is a software reseller agreement?
As hinted above, it is a legal document from the software supplier or owner. It represents an agreement between the software supplier and the entity intending to resell its product. Only the software supplier has exclusive rights to distribute their product.
No third party can sell the software without legal permission. They do have intellectual property rights in the software. Hence, only the software reseller agreement can give a third party the legal right to distribute the software to end users.
In other words, this legal document provides the license. In most cases, SaaS (Software as a Service) represents the best application of a software reselling agreement.
Who does the software reseller agreement concern?
We have answered this question: what is a software reseller agreement? Next, we will tell you who it concerns and why they need it. It is easy to assume that a software reseller agreement only concerns the software owner and the third-party reseller.
The end user or consumer is also part of the deal. They do not sign the contract, but they need the assistance of the supplier and reseller. If an end user faces technical difficulties, the reseller should resolve the problem by contacting the software owner.
Benefits of signing the software reseller agreement as a supplier
A software producer should value entering business with third-party resellers. This is their opportunity to penetrate the international markets in your industry. Even without creating branches in other nations, you can show your software to thousands of users via resellers.
They will give you the sales channels you lack and enable you to sell your software without meeting legal requirements or facing language barriers. Moreover, you can resell your product without setting up physical customer support offices in other countries.
A third-party reseller is not your staff. You have no legal obligations to meet their occupational health and safety requirements. Additionally, resellers are accountable for their actions. It is upon them to settle conflicts with end users and solve their business issues.
Software reselling can lead to higher profits from increased sales. All you need to do is to give the reseller their commission when they make a sale. If you treat software resellers well, they will feel motivated to drive sales and increase their commission.
They are better than your internal marketers because they earn a commission without doing more work for you. In contrast, employees receive the same monthly salary even if they sell more and might lack the zeal to work harder.
What clauses are in a software reseller agreement?
A suitable software reseller agreement should have clauses. As a reseller, you should read and understand these clauses before signing software reseller programs. The clauses you should focus on including the following:
1. Exclusivity
Exclusivity comes with a heavy price to pay. A reseller will not have it unless they achieve preset sales volumes. If they are already enjoying the exclusivity and fail to meet the sales targets, the suppliers can terminate the contract or cancel exclusivity rights. Exclusivity rights can cover a particular industry, country, province, or any other place where the reseller can achieve the set sales targets. As a reseller, you should focus on a supplier who easily provides exclusive software reselling rights.
2. Payment terms
What is a software reseller agreement for if it does not stipulate your payment terms? Software owners use different techniques to calculate the reseller’s commission. Some will pay a fixed commission every month and others every year.
These will not change the commission even if a reseller increases its sales volume. Other software suppliers may pay a flexible commission depending on the sales volume. In SaaS-based deals, software owners should state if they will pay the reseller when the end users renew their subscriptions.
3. Product pricing
Will the software supplier set the price of their product? If so, will they need your opinion or discretion as a reseller? It is necessary to consider how pricing happens because it can directly influence your marketing strategies.
4. Marketing and promotion
Ensure that the software reselling agreement gives you the right to advertise the item on the internet, television, or any other publication. Having permission to run marketing campaigns on media is not all. If you have exclusive rights to resell software in your state, you should know the number of adverts the supplier allows. Also, note their marketing budget and campaigning deadline.
5. Maintenance and software upgrades
A reseller should not handle software updates or maintenance work. The reselling agreement should clearly state that the supplier is responsible for this work. Hence, you will ask the software supplier to help the end users who want to update their software or resolve a technical matter.
6. IP rights
A software reseller contract should demand that the IP rights do not go to the reseller. Thus, a reseller cannot change the source code to transfer these rights to them.
7. Export ban
Reselling your software enables you to transact beyond your national borders. As this is a form of export business, you need to restrict some things. For instance, you can set a new price for each region you have enabled your reseller to sell. As a result, the reseller cannot change your price policy or find another region to distribute the software. The export ban in the reseller agreement will prohibit them.
8. Termination
It is necessary to know if you have a short-lived or long-term software license agreement. Some reseller contracts do not start unless you complete a trial period. Other suppliers terminate the contract as soon as the reseller fails to meet a given sales target after a certain period. Besides knowing how a software provider can terminate a reseller agreement, you need to know what would happen to end users. Would they continue to receive software support services after you stop reselling?
Conclusion
Software reselling programs are easy to join if you are ready to sign a legally binding document. Every stipulation in this document requires obedience as failure can cause legal repercussions. A reselling business benefits the software owner, reseller, and end users. However, this happens only if those concerned abide by the agreement.
Author Bio
Author Name: Martin Schwall
I’m Martin Schwall, an ex-CEO and founder of a Salesforce platinum partner. Through my experience, I have learned the different challenges of running a professional service business, especially for Salesforce Partners. Now I’m doing a job as a Managing director in Platinum Partner.
