Value added reseller (VAR) agreements play a crucial role in distributing and selling products and services, particularly in the ICT industry.

These agreements enable businesses to expand their reach and offer additional value to their customers through the expertise and services provided by VARs.

In this post, we delve into the intricacies of VAR agreements, exploring what they are, why they are essential, key components, benefits, challenges, and best practices.

What’s a value added reseller agreement?

A value added reseller agreement, often abbreviated as VAR agreement, is a contract between a provider or manufacturer of products or services and a third-party reseller, known as a value added reseller (VAR).

This agreement outlines the terms and conditions under which the VAR will sell, distribute, and potentially customise the vendor’s products or services to end customers. VARs typically provide additional value by offering technical expertise, support, integration, or other services.

Why are VAR agreements important?

  • Market expansion: VARs help providers reach new markets or customer segments they may not have had access to otherwise.
  • Expertise: VARs often possess specialised knowledge and expertise in a particular industry or technology, which can enhance the vendor’s product offering.
  • Customer relationships: VARs have established relationships with local or niche customers, making it easier for vendors to tap into these networks.
  • Cost-effective sales channel: VARs can reduce the vendor’s sales and marketing costs as they handle these aspects themselves.

Key components of a VAR agreement

  • Scope of work: Defines the specific products or services the VAR is authorised to sell and any customisation or support services.
  • Pricing and payment terms: Outlines pricing structures, payment schedules, and any discounts or commissions the VAR will receive.
  • Territory: Specifies the geographical region or customer segments where the provider authorises the VAR to operate.
  • Performance metrics: Sets performance targets, including sales quotas, quality standards, and service level agreements.
  • Intellectual property: Addresses ownership and usage of intellectual property, such as trademarks, copyrights, and patents.
  • Termination and exit clauses: Outlines the conditions under which the parties can end the agreement and any associated penalties.

Benefits of value-added reseller agreements

Market expansion

Providers can reach new markets and customers without substantial investments in sales and marketing.

Enhanced services

VARs can provide customers with added value through technical expertise, customisation, and support services.

Revenue growth

VARs can increase revenue by selling complementary products or services alongside the provider’s offerings.

Risk sharing

Both parties can share risks and rewards, creating a mutually beneficial partnership.

Challenges in VAR agreements

  • Conflict of interest: VARs may represent multiple providers, potentially leading to conflicts of interest.
  • Quality control: Maintaining consistent quality and customer experience can be challenging when products are customised or adapted by VARs.
  • Market competition: The market may become saturated with VARs, leading to increased competition and margin pressure.
  • Contractual disputes: The agreement’s ambiguity can lead to disputes between providers and VARs.

Best practices for value-added reseller agreements

  • Clear communication: Maintain open and transparent communication channels between vendors and VARs.
  • Training and support: Provide comprehensive training and support to VARs to ensure they can effectively represent your products or services.
  • Regular performance reviews: Monitor and assess VAR performance regularly, offering feedback and assistance when needed.
  • Legal expertise: Consult with legal experts to draft and review VAR agreements, ensuring compliance with relevant laws and regulations.
  • Flexibility: Design agreements with some flexibility to adapt to changing market conditions or business needs.

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