If you are a SaaS reseller, you sell software that belongs to someone else. Your business is marketing and selling the software to clients and customers for a profit.
But before you start your business activities, you need a SaaS Reseller Agreement with the software owner.
Such an agreement is crucial for transparency in your business and for preventing business management and finance-related misunderstanding.
In the absence of an agreement, you may suddenly find that you do not have any business or do not have the right to sell the software you are selling.
This article will discuss the 15 most important points when reselling software as a business so that you are ready and compliant from day one.
15 Points to Remember Regarding Your SaaS Reseller Agreement
1. Who is the SAAS Reseller Agreement for?
The SaaS Reseller Agreement is for you, the reseller.
It ensures that you have the required right to resell the target software. It clearly states the scope of your business relationship with the software owner.
But it is also important for the software owner. The owner needs to know who they are doing business with and under what terms.
The reseller agreement serves both parties. It is a document of legal consent.
2. Where do customers stand in a SaaS reseller agreement?
The reseller agreement states how the reseller can contract with customers to provide them permission to use the software in question.
In a reseller agreement, customers are termed as the third party.
The terms of service that customers expect are not different whether you are the owner or reseller.
Customers want to know that the product or service is legit, safe to use, and does what it states.
As a reseller, you are responsible for ensuring your customers get what they pay for.
3. What is a top-down arrangement in a SaaS reseller business agreement?
As a reseller, you can choose between top-down and bottom-up arrangements.
If you choose the top-down reseller arrangement, you will serve your customers according to the standards set forth by the software owner.
It happens that most standard SaaS reseller agreements are top-down agreements.
For example, you cannot sell Microsoft, Adobe, or Google products without following their terms.
The owner will draft a standard agreement for you. You can be a reseller only if you agree to the terms stated in that agreement.
4. What is the bottom-up arrangement in the SaaS reseller business?
Bottom-up arrangements are complex but not uncommon.
You have seen many companies selling software advising their customers to contact them if they needed a custom quotation.
For example, if the regular offer is for 200 accounts for a software plan, the reseller must create a custom plan for a customer requiring 200+ accounts.
Creating a custom plan requires investment and logistic support. But as a reseller, you may not afford to lose a customer offering you a huge business opportunity.
Many SaaS companies offer such custom services.
For example, if you have more than 200,000 contacts on your email list and you want to send business emails to them, the MailChimp pricing page will show you the following:
5. SaaS reseller agreement is a requirement to protect you, the reseller
You cannot sell or resell something that does not belong to you.
The reseller agreement entitles you to sell the stated software. It states that the intellectual right of the software belongs to the software owner; however, you have the right to resell it.
The agreement will keep you out of legal battles with the owner.
Copyright cases can be ugly. Instead of being profitable, your business may have to declare bankruptcy if you resell software without an agreement.
6. Reseller agreement states how trademarks may be used
Trademarks are intellectual property. They come with distinct policies.
If you want to be a reseller for your target software, you need to know the trademark policies of the software owner.
The policies will help you properly use the company’s trademarks in marketing materials, campaigns and events.
7. A reseller is not an agent or a distributor
SaaS resellers are not agents of the owners. They are not distributors either.
Resellers sell software with business or service terms clearly stated in customer service agreements.
Agents are middlemen providing referrals to the owner or reseller. They do not assume service responsibility.
On the other hand, distributors work for software owners or resellers. They do not have service-level agreements with customers.
The Saas Reseller Agreement states the scope of your responsibility towards your customers.
But it is possible that you resell a software product or service where you mostly work like an agent and make a profit. The software owner has mechanisms to handle any complaints your customers may have regarding the product.
The software owner may have a call center to help customers.
You must know your role as a reseller to avoid any misunderstanding. The reseller agreement will help you do just that.
8. You are an integral part of the software owner’s business
Do not underestimate yourself for being a reseller.
It is true you resell software that does not belong to you. But reselling is as important as selling to the owner.
Why does a business need resellers? Maybe it does not have enough resources to reach its target customers. Maybe it has a business model designed around recruiting resellers like you to make its business successful.
In addition, maybe you are selling software that is not local or even from your country of business.
Maybe the software owner does not speak the language of the target customers.
Whatever the reason, you are important to the software owner.
The SaaS reseller agreement will identify how you will serve your customers and act as part of the software owner who is not there to serve them.
9. Your local law must be consulted before drafting your reseller agreement
Serving customers in a locality must be done under the jurisdiction of local law.
Your SaaS lawyer will check your agreement to ensure it conforms to local law.
The SaaS lawyer will also have the latest information regarding any policy changes in the locality where you will resell the software product or service. They will be able to advise you on what to add or modify in the reseller agreement so that you conform to the local trade and business policies.
If you are reselling an overseas product (or a product coming from another continent or special economic area or zone), you really need to pay attention to local laws.
Your law may even say you cannot sell your target software in a target geographical area due to certain conflicts of interest.
Fortunately, your SaaS lawyer will be able to guide you to do the rightful.
10. Terms of financial engagements, including payments and taxes
The SaaS reseller agreement will state the following:
- How you will pay the software owner
- How you will charge customers taxes on the purchase price
The agreement will also state:
- What happens when you fail to pay the owner on time or at all
- What happens when you or the owner goes out of business
11. Termination of the business relationship
Everything is possible in the ever-changing world of business.
Let’s imagine a few scenarios when you can go out of business.
- The business is not as profitable as you thought it would be
- A better business has come up. There is no reason to drag a business that does not serve your financial interests to the fullest
- A natural calamity has hit the area
- Changes in the political environment have impacted the business
- You are involved in a business-related liability
- Something has drastically changed in your personal life
Your SaaS reseller agreement will contain the clauses of terminating your business relationship with the software owner.
12. An agreement to keep the competition at the lowest level for you
If you, as a SaaS reseller, sell a certain software product in a specific area or demography, you need to have a minimum number of customers to be profitable.
You do not want another reseller to sell the same products to the same demography of people within the same locality.
That will raise competition and, ultimately, your customer acquisition cost.
Generally, vendors, or owners, will have identified this issue in their resell offer agreement.
For example, if you want to set up a Shell gas station, Shell will have a policy not to allow you to set it up within a certain distance from another Shell gas station.
The same goes for the Subway sandwich franchise or Starbucks.
But this needs to be clearly stated in your SaaS reseller agreement.
13. Business and education go hand in hand
Software products are not for everyone.
People need certain tools or equipment or network in place to use them.
At the same time, they need to know how to use them.
That is why you see many companies offering free training for their software products. Those training deal with the software installation and activation to solving any mechanical or technical problem that may arise while using the products.
Producing those educational materials may be expensive and beyond your financial ability.
Besides, as a SaaS reseller, you may not have the technical ability to create such material.
Your SaaS reseller agreement should contain a clause to identify who will do what if such materials need to be created.
14. Should you use a SaaS software reseller agreement template?
Templates help save time. They are handy when you want to reach your target faster.
A SaaS reseller agreement template can help you develop your agreement fast.
But you still need a lawyer to prepare it for you.
Consider the following reasons:
- Templates may be old. They may not be regularly updated
- They may not reflect the very nature of your business relationship with your software owner
- They may not reflect your local law
- Recent policy changes may be beyond their scope.
Your SaaS lawyer may already have a template to start work. If not, you may find such templates on the internet. But make sure it has gone through a lawyer before putting your pen to it.
15. Components of a SaaS reseller agreement
A standard SaaS reseller agreement will have the following components:
- Names and addresses of the parties entering the contract
- Terms of the contract
- Terms of the services
- Payments or fees
- Date the contract comes into effect
- Signatures of the parties
- Date
The terms of the service will contain the following:
- Your roles and responsibilities as a reseller
- The software owner’s roles and obligations as the vendor
- The SaaS products under the scope of the agreement
- Existing customers of the software in the service area
SaaS Reseller Agreement: Final Thoughts
Now that you know what you must remember before starting your software reselling business, we believe you will take the time to make your Saas reseller agreement right.
Once you have the right agreement in place, you have already taken the first step toward making your business profitable.
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