Reseller margin

[NotAllThere]

I'm a co-founder of one of those yankee style hi-tech startup thingies. We've a product that we want to sell. It's quite niche, so volumes are not high. Price is ~$5000. No, I'm not planning to retire on the proceeds!

Anyway, my partner has been talking to a guy who's in business software marketing, and he's offered to act as a reseller. He is proposing to post marketing materials on his site and take 25% of our price if the sale originates from his referral.

It seems high to me - in the region of sharkism when it comes to agency margins, for example. Does anyone have experience of what's a "normal" margin in reselling? The guy is an experienced marketer, I'm given to understand, so there's a reasonable chance of him making sales.

[Grinder]

Go back with 10% and see what he says? Even if 25% is the norm (doubtful if that's his starting offer) you have to try to get him down.

[pmeswani]

I'm a co-founder of one of those yankee style hi-tech startup thingies. We've a product that we want to sell. It's quite niche, so volumes are not high. Price is ~$5000. No, I'm not planning to retire on the proceeds!

Anyway, my partner has been talking to a guy who's in business software marketing, and he's offered to act as a reseller. He is proposing to post marketing materials on his site and take 25% of our price if the sale originates from his referral.

It seems high to me - in the region of sharkism when it comes to agency margins, for example. Does anyone have experience of what's a "normal" margin in reselling? The guy is an experienced marketer, I'm given to understand, so there's a reasonable chance of him making sales.

I've worked in a reseller environment. Only accept anything about 15% if:

a) He is able to provide (technical / sales) support on the product as a result of his referral (i.e. if all he is doing is producing marketing materials, how does that justify 1/4 of your product sales?)
b) He can show commitment in delivering a minimum result (i.e. set a target for him to acquire the margin)

Find out how much it would cost him to produce the marketing materials. If it turns out that it would cost 1/4 of one product for the whole project, then haggle for a lower margin or go somewhere else.

[nomadd]

I'm a co-founder of one of those yankee style hi-tech startup thingies. We've a product that we want to sell. It's quite niche, so volumes are not high. Price is ~$5000. No, I'm not planning to retire on the proceeds!

Anyway, my partner has been talking to a guy who's in business software marketing, and he's offered to act as a reseller. He is proposing to post marketing materials on his site and take 25% of our price if the sale originates from his referral.

It seems high to me - in the region of sharkism when it comes to agency margins, for example. Does anyone have experience of what's a "normal" margin in reselling? The guy is an experienced marketer, I'm given to understand, so there's a reasonable chance of him making sales.

Done lots of work with resellers over the years. The percent you quote is a fairly typical opening offer. Mind you, that was back in the days when the marketing consisted of a lot more than "post[ing] marketing materials on his [web]site". Unless this site is very high volume, and he can guarantee a large number of sales, I'd say avoid him at these margins. You'd be much better just setting up your own site and doing your own marketing (that way you also get much better direct feedback over your product and build better relationships with your end clients.) Unless this guy has a unique client base that you just can't get to in any other way, I'd say look around elsewhere.

In the past I've managed to squeeze resellers down to 10% or so, but that's with the backing of a large client (i.e. Bank, PharmaCo, etc.), but that's as a buyer. Do you know how much he's going to be asking for your stuff? - it probably won't be the price you are quoting to him. Maybe that's a better way of approaching this: just tell him how much the product costs (obviously offering volume discounts as an incentive) and let him stick his own margin on top. That puts the ball back in his court.

Nomadd

[ratewhore]

25% for posting material on a website? That is v high.

He should be in recruitment with that attitude...