What is value-added reselling and how can you start your own VAR business?

One of the keys to running a successful and profitable business is ensuring that you provide your customers with immense value. Regardless of the industry you’re in and the products and services you’re selling, value is what drives sales. 

Excellent marketing campaigns can attract thousands of prospects, but what seals the deal is the understanding that they’re getting a ton of value for their money. Most businesses are aware of this and are constantly keeping a finger on the pulse of the market. This allows them to monitor the ever-changing needs of their customers and fine-tune their products and services accordingly.

The value a manufacturer or developer can provide with their product is often finite. Despite the best efforts of these businesses, it is nearly impossible to customize a solution to perfectly fit each customer’s needs. This is especially true in the IT and electronics industry, where the software alone isn’t enough, and customers might require additional services like training, implementation, and consultancy.

This opens up countless opportunities for value-added resellers (VARs) to purchase the solutions from original equipment manufacturers (OEMs) and resell them at a higher price after increasing the solution’s original value. 

How does the VAR business model work? 

The core principle is quite simple — VARs buy the products from original equipment manufacturers or distributors, add value in forms of features and/or services, and resell these products as “turnkey” solutions. 

The idea behind this business model is to offer customers fully-tailored, comprehensive solutions that perfectly fit their needs. 

To do so, VARs can add value to the existing product in multiple ways. They can:

• Add new feature to the existing software solution

• Offer additional services such as implementation, training, consulting, and support

• Outsource components from multiple vendors and create a new system that will meet the customer’s requirements

This implies that VARs must have extensive knowledge of the products they offer. If they’re reselling software, for instance, they must be well-aware of its functionality, capabilities, and customization options. 

Providing support is also crucial when it comes to software, so VARs must be knowledgeable enough to iron out the bugs the customer might run into and help them overcome any problems they might have while using the software.

Following the sale of turnkey solutions, VARs commonly nurture the relationship with their customers in order to ensure repeat business. 

Why do companies work with VARs?

The short answer is — they get everything they need in one place. Rather than having to acquire a solution and respective services in various different places, working with a value-added reseller ensures that the organization gets a complete solution that’s fully customized to satisfy their business needs.

Let’s say a company wants to transition to the Cloud and store all their valuable data online. They can enlist the services of a Cloud company and get a solution that, at least on the surface, solves their problem. 

However, they would likely need to hire a cloud security engineer to maintain it and ensure their data is protected against cyber threats. The hiring process can be quite time-consuming and tiresome, and there’s also the monthly compensation they’d have to pay the expert. 

Value-added resellers offer a better alternative. They can help the organization make a smooth transition to the Cloud while also providing training, maintenance, and security services. In the end, the customer saves both time and money, while a VAR capitalizes on the opportunity without having to develop the actual solution. 

Put simply, value-added resellers:

1. Offer comprehensive solutions

2. Save organizations both time and money

3. Provide significantly more value compared to simply buying the solution from the developer

Key characteristics of value-added resellers

When it comes to the IT industry, a software solution rarely solves all the problems or covers all the needs of the end customer. More often, software as a service (SaaS) covers a specific aspect of their business, without even attempting to solve the adjacent problems the business might be having. 

Let’s take lead generation software as an example. Although a software solution might perfectly satisfy the need to capture new leads, it alone can’t help the business convert those leads into loyal customers. You’d need other mechanisms to aid with that conversion, such as a powerful email campaign. 

Here, a VAR can offer these additional services and present the customer with a complete solution that addresses all the aspects of their business. Naturally, this allows VARs to charge higher prices than product manufacturers who simply offer the solution and leave the end-users to their own devices.

With that in mind, the key characteristics of VARs are:

1. VARs focus on customer needs

2. The duration of additional services is based on those needs

3. Some additional services are time-based 

4. Additional services lead to more opportunities

5. They get to showcase their knowledge and expertise

VARs focus on customer needs 

As we’ve already established, VAR’s primary focus is on identifying and satisfying the needs of individual customers. To accomplish this, they must fully understand what the solution they’re reselling provides and what the adjacent problems the customer might need help with are.

These can be:

• Design services

• Professional advice

• Help with implementation 

• Advice regarding their marketing strategy

Whatever the case, you must identify what your customers need that the software alone cannot provide. 

You should rely on the technical knowledge and expertise you (or your team) have and figure out the best way to deliver additional value with the product. 

Base the duration of additional services on those needs

Depending on the nature of the product or service and the needs it satisfies, value-added services can either be ongoing or one-time. 

Sometimes, providing your services in a single instance will be sufficient. For example, you can organize a workshop and provide training for the customers that will help ensure their team can make the most out of the solution they purchase. Or, they might need help with creating an email template they’ll be using for future campaigns. Once the need is met and you’ve provided the additional services, you won’t have to do it again.

In other cases, the need can be ongoing. The customer might require:

• Consulting services

• Data integration

• SEO services

• Data analysis

These are all needs that have to be met on a regular basis. Continuously providing these services is a great opportunity to create a recurring income stream, while ensuring you maintain a good relationship with the customer. This, in turn, will make them more likely to purchase additional solutions from you in the future.

The point is to avoid linear thinking. Instead, keep your options open and adjust the added-value services you provide according to what and how often the customers need.  

Some additional services are time-based

Another thing to consider when providing additional services is timing. Some services have innate value regardless of when they’re provided, while others may be a lot more valuable if they’re offered at an optimal time.

Going back to our lead generation example, say you’re also providing design services that will help enrich the customer’s email campaigns with stunning visuals. Depending on when they plan to launch the campaigns, they might have no need for these services at the current point in time. However, if they’re planning on launching special campaigns for holidays, like Easter, they are far more likely to request the aid of your designers. 

The best approach is to introduce them to all the different additional services you can provide at the start. Later down the road, when the time is right, you can easily remind them of specific services and give them the opportunity to utilize them when they need them. 

Additional services lead to more opportunities

Value-added resellers almost never limit themselves to a single solution. The most common approach is to acquire a bundle of related products that aim to satisfy different yet adjacent needs. 

This allows them to pitch additional solutions to satisfied customers. Say you’re providing email templates as a solution, and offering creative services and strategic consulting as additional value. Once the customer sees the impact of the services you’re providing, they might be inclined to look to you for other solutions regarding, for example, project management.

Forging a strong bond with a customer will also open up new business opportunities, as they might recommend you to their partners. In any case, rather than having a narrow approach and latching onto a single software solution, you should always consider what other complementary products you could offer. 

This is a great way to maximize your profits while providing great value to your customers. It’s a win-win in our book! 

You get to showcase your knowledge and expertise 

Another key characteristic of a successful VAR is that they’re extremely knowledgeable about the solutions they are providing. As an expert in a specific field, you’ll have a much easier time convincing potential customers to acquire additional services you’re offering. 

If you show that you’re an expert on the matter, you’re automatically gaining credibility. This, in turn, helps you forge a stronger connection with the customer, that will last longer, and likely result in repeat business.

Therefore, when deciding to become a value-added reseller, you should choose solutions based on your own knowledge and expertise, rather than based on what you think might sell better. 

The advantages and challenges of being a value-added reseller

When deciding to adopt a certain business model, you must always consider all the advantages it provides and the inherent challenges it comes with. This will help you compare it against other opportunities, so you can weigh your options and choose the best approach.

Let’s take a closer look at all the advantages and potential challenges, so you can get a better idea of whether becoming a value-added reseller is for you.

Advantages

VAR is a popular business model because it offers plenty of advantages and is quite straightforward. Provided you forge partnerships with the right supplier, this business model is also low-risk. 

Here are the biggest advantages of the VAR business model:

1. Consistent revenue stream

2. No development cost

3. Flexibility

4. Low capital investment

5. The ability to sell at your own margins

Consistent revenue stream

VARs typically purchase products in bulk at wholesale prices. What this means is that you’re obtaining the products and solutions at a price lower than the market price, while selling them at a higher margin, thanks to the added value you provide. 

If you connect with reputable suppliers, you’ll ensure that the products you’re reselling are of the best possible quality. This guarantees customer satisfaction and leads to repeat business. The added-value services will also increase customer loyalty, making VAR a quite lucrative business endeavor, when executed properly.

No development cost

As a VAR, you’re purchasing and reselling ready-made solutions. This saves you a lot of time and money you’d otherwise spend on market research and product development. 

VARs can offer a wide range of products from various suppliers, without ever having to worry about the development process. They can simply focus on marketing and selling their solutions and services and forging strong relationships with their customers. 

Flexibility

As we’ve mentioned, as a value-added reseller, there’s no reason why you would focus on a single solution or product category. You can continuously forge new relationships with suppliers and expand the array of solutions you’re offering in order to meet the needs of the evolving markets. 

Low capital investment 

Another reason why VAR is an excellent new business opportunity is that it doesn’t require a huge upfront investment. Value-added resellers don’t have to worry about inventory management since they get the products directly from the suppliers once they’ve already been ordered by the customers. 

Given this, and the fact that there’s no research and development cost, you can start a VAR business with a smaller initial investment, compared to other business opportunities. 

You can resell the solutions at your own margins

Being a value-added reseller doesn’t simply come down to buying products at lower prices and selling them with higher margins. Remember, you’ll be adding value to the solutions, meaning you can also price them accordingly. 

Depending on the additional services you’re offering, you can increase your margins exponentially and generate a decent profit. This flexibility will give you greater control over your financial success while giving you the opportunity to generate substantial revenue. 

Challenges

As with most business opportunities, VAR comes with its own set of challenges. Before dipping your foot in value-added reselling, it’s important to be aware of all the obstacles you may encounter. The common challenges include:

1. An overwhelming amount of products

2. Frequent price changes

3. Price variations between the distributors

4. Time-limited promotions

5. Constant learning

An overwhelming amount of products

If you’re considering the IT industry, be aware that suppliers and distributors often have thousands of different products in their portfolios. Although this might appear like a huge benefit, since you can sell all kinds of different solutions to your customers, it might be difficult to promote all the different products and services, especially if you’re working with multiple suppliers. 

Frequent price changes

Say you’re selling hundreds of different products. Regardless of the industry you’re in, you’ll need to consistently monitor the price changes and adjust the prices on your website accordingly. This can be quite time-consuming. There’s also the possibility that newer technology will affect the price of the products you’re currently selling, especially in IT, and you might end up with extremely low margins. 

Price variations between different distributors

As you can imagine, prices for the same solutions may vary greatly between different distributors. As a VAR, you will have to compare the prices between them to ensure you’re always buying at the best possible price. Every dollar you spend on a higher-priced product is a dollar you’re effectively losing with each sale. 

Time-limited promotions

Different suppliers will often have promotions at different times. You must regularly check for these promotions, to ensure that you’re always taking advantage of the best deals. However, these time-limited promotions are extremely difficult to predict. A product you buy in bulk can very well go on sale a few weeks later, or you might miss out on the promotion by a day or two. In both cases, you’re losing money due to the opportunity cost. 

Constant learning

As a software added-value reseller, you must always keep track of all the changes and emerging technologies within the industry. This means you’ll have to keep up-to-date with the goings-on of the industry, as well as regularly update the product catalog and the prices.

A great way to start your VAR business

As you can see, there are quite a few things to consider before starting a VAR business. You should always pick an industry that you’re knowledgeable about and have experience in. Then, you must find reputable suppliers and brainstorm what additional services your customers need that go hand-in-hand with the solutions you intend to sell.

If you’re an IT expert, Sell SaaS offers you an excellent opportunity to start a VAR business, the easy way. We’re offering a wide range of white-label software solutions, including:

1. Lead generation software

2. Email marketing templates 

3. Email, phone, social media extractors

4. Chatbot solutions

5. Online review management software

For example, you can include this software as an additional service while reselling hardware, or you can use it as a core offer while providing other services like design, consultancy, and strategy. 

The opportunities are virtually endless, and you won’t have to try and wrap your head around hundreds of products and worry about constant price changes. You can resell the software as your own at the margins of your choosing.

Partner with us and start your VAR business today!