At some point, many software owners will consider the various options for marketing and expanding their reach. Engaging a third party to sell or distribute your SaaS on your behalf can allow you to sell more licences, increase brand awareness, and target new markets. For example, you might engage a referrer to introduce prospective customers to you. Alternatively, you might engage a reseller to purchase SaaS licences from you and re-sell as is or integrate your SaaS with additional software and hardware. Either way, you should detail each party's obligations in a well-drafted referral or reseller agreement to ensure a mutually beneficial relationship.
A referral arrangement can be very beneficial in marketing and promoting your SaaS. However, you must have a clear referral agreement where you put a referral arrangement in place. This agreement will outline each party's rights and obligations, particularly the referrer's responsibilities, and how payment will work.
Let us explore several clauses you should include in your referral agreement.
Consider including an exclusivity clause that prevents the referrer from entering similar arrangements with other SaaS providers. Of course, such a clause should not be overly restrictive to prohibit the referrer from conducting their business. Still, it can be a valuable tool to ensure that the referrer is directing all potential customers to you and to limit any risk of a confidentiality breach.
Consider what fees you will pay the referrer for introducing a customer to you. For example, you may pay them a fee per introduction. On the other hand, you might only pay them once a lead becomes a paying customer. Furthermore, determine whether fees will be a fixed amount or based on a percentage of the SaaS fees. You must set this out in the referral agreement.
The referral agreement should explain how your referral partner introduces you to potential customers. For example, specify whether you expect a minimum number of quality leads. Similarly, outline whether the referrer needs to introduce potential customers to you via email or an online platform.
Confidentiality and Privacy
You will likely share confidential information with your referral partner.
Where this happens, a confidentiality clause in your agreement should specify the following:
- the restrictions around this;
- instances when your partner can and cannot share this information; and
- that they must delete or destroy any of your confidential information at your request and notify you if there is a potential breach of confidentiality.
As a SaaS platform, you may be subject to privacy laws. It is vital that suppliers you work with, including your referral partner, do certain things to help you comply with these laws. Your referrer should warrant that they have permission to share the personal information of potential customers.
There are similarities between a referral and reseller arrangement. However, where a referrer will usually introduce potential customers to you, a reseller will purchase licences for your SaaS and resell them to their customers (who become your end users).
Like a referral agreement, a reseller agreement will address exclusivity, confidentiality, privacy, and additional bespoke clauses discussed below.
Resellers may resell your SaaS as is, and often they will integrate your SaaS with their hardware and software. They may also offer the following:
- bespoke customisation;
- extended warranties;
- consulting; and
Some resellers have expertise working with organisations in specific industries, such as healthcare or financial services, and therefore understand their customers' unique technical and regulatory requirements. A reseller can act as a single point of contact between multiple IT vendors or SaaS providers, making it easier for organisations to purchase and manage a variety of technologies.
Restrictions and Licence
It is important to consider the nature of the appointment or licence given to the reseller. Not only will you license your SaaS to them, but you will also permit them to onsell your SaaS. Your reseller agreement will set out the parameters within which they can operate. For example, you may restrict the territories and markets into which they can resell.
Pricing and Payment
In a reseller arrangement, the customer will pay the reseller, and the reseller will pay you.
Therefore, your reseller agreement should detail the following:
- who is responsible for chasing up a customer if they fail to make a payment and whether this affects your right to invoice for your portion of the fees; and
- what happens if a reseller is late in passing on the payment from a resale to you. For example, you may wish to charge interest on overdue amounts, and if the late payments continue, eventually terminate the agreement.
Relationship With End Users
Where a reseller resells your SaaS, it is essential to maintain the relationship with the end user. Accordingly, it is common to provide an end user licence agreement (EULA) to the reseller, which they must ask the end user to accept. This EULA will grant the end user a limited licence to use your SaaS and set out the restrictions when using your SaaS.
Your reseller agreement should explain who is responsible for onboarding and supporting end users. For instance, consider whether the end user makes a support request directly to you as the SaaS owner or whether the reseller escalates support requests on their customers' behalf.
Engaging third parties through referral or reseller agreements can allow you to sell more licences and increase your customer base. However, you must draft robust agreements to protect your commercial interests.