Third-Party Software Selling

3 Ways To Do It Right

Akhil Mishra
April 03, 2024

And they do so without thinking about the long-term game, which causes them to lose money and time.

This whole partnership is typically done through a Reseller Agreement.

In a reseller arrangement, a third party is granted the rights to sell or license the vendor's software.

This kind of arrangement is quite common in the software industry.

It provides an easy method for the vendor to expand their reach and even explore new markets.

But.

Giving a license to a third party to sell your software comes with its own set of challenges, primarily loss of control over sales by third parties.

That’s why you should know the methods to put limitations on the third party to let the partnership work in your favor.

Let me share with you 3 such ways you can do this, and how we do this for our clients:

The most common kind of restriction on resellers is a “territory-based” restriction.

E.g., if your primary market is the United States.

And if you aim to enter the Dubai market, you may limit the partner to selling exclusively within the Dubai region.

You can even restrict the authorized territory to smaller areas such as a particular city only.

Vendors also use restrictions based on end-customer type.

Suppose you have a vendor that sells products across different parallels, such as both B2B and B2C.

Then you can put a restriction on the type of customer their reseller can cater to.

For e.g., only B2B.

Sometimes, there are usage-based restrictions as well.

This allows resellers to only sell for specific usages or applications.

Exclusivity agreements are another aspect to consider.

Resellers would often seek exclusive rights to sell within a specific territory.

Or to a particular end customer.

However, don't just do that because you are simply asked to.

First, evaluate the market size, partner capabilities, and available resources.

A Minimum Order Quantity, with a provision for periodic review, should also be set to maintain that exclusivity.

That's it.

Partnership done the right way is beneficial for both - vendor and reseller.

But because you are given a means to sell your product to a larger market doesn't mean you rush the process.

Vendors/Owners like you must exercise caution when it comes to entering into such agreements.

And if it's your first time, then a proper review of the agreement is required to protect your interests.

P.S. Have you ever gotten into a Reseller Arrangement?

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