Questions

Is 30% of initial and ongoing subscription revenues a reasonable percentage for Resellers of a SAAS Product?

We're just about to release a new SAAS product for professional psychologists. We will handle U.S. Sales directly, but we've been approached by a credible network of international re-sellers that already sell other products to psychologists and medical professionals in 40 Countries. They would actively promote our web service, attend professional local conferences, and provide Clinical and Technical support to their customers in the native languages required. However, they want 30% of initial and ongoing subscriptions for as long as they are supporting the customer. This was higher than we anticipated, but they would "jump start" our sales internationally, and do not require an exclusive. Do you think 30% is too high, or is that percentage warranted under these circumstances?

4answers

From everything I've seen, 20-35% is definitely the sweet spot. It certainly depends on the price point and some people start lower but build in incentive criteria to bump the percentage up after a certain milestones have been met.


Answered 6 years ago

I've seen SaaS companies pay 20-30% recurring lifetime commission for simply referring a paying customer.

If they are going to be attending trade shows, providing localized Clinical & Technical support it sounds almost too good. I'd be concerned that they have enough margin to actively promote and support your product.

I'd also want to set sales targets in any reseller agreement to give yourselves the ability to terminate weak performers.

Happy to jump on a call to discuss.


Answered 6 years ago

There are many factors to be considered here.

1. Compare the cost: How much does 30% cost against the anticipated LTV (lifetime value) of your customer, versus the CPA (cost per acquisition of a customer) using "traditional" marketing like ads, or sales teams etc. If the 30% is less than or equal to the typical CPA to onboard a customer then you're winning either way. Nothing to lose.

2. Added value: 2 things that matter A LOT with marketing, social proof, and reputation. People buy from people. You've probably heard it before, but it is true. And if "experts" in the field have wide reach (following) and great reputation, then it's INVALUABLE. You will have a hard time getting to that stage from scratch. It'll just take a long time and lots of effort pushing awesome content. If it turns out the CPA is higher (See (1)) then it might still be worth it for the nod in your direction from the reseller (IF they're an expert and using their influence to sell your product).

And subjectively, 30% isn't a lot in my opinion. If you earn, they earn. If your margin is high (which it should be for Saas in general due to low costs of goods (aside from salaries)) then it's worth it in my opinion. Referral marketing is powerful, when done right...

I hope this helps!

Stefan


Answered 6 years ago

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