Value-Added Reseller Business Model: Setting Up Your Business

A value-added reseller (VAR) business model presents the opportunity to expand your business offerings, build strong customer relationships, and increase sales. As a VAR, you will act as an intermediary between manufacturers and end customers, adding value through additional services and customization. Setting up a successful VAR business involves careful planning, industry knowledge, and a commitment to providing exceptional value to customers.

In this comprehensive guide, we will explore the key elements of the VAR business model and provide insights on how to navigate the technology landscape, build vendor relationships, address legal and compliance considerations, implement effective marketing and sales strategies, and much more. Whether you’re an aspiring VAR or looking to optimize your existing VAR business, this article will equip you with the knowledge and strategies needed for success.

Key Takeaways:

  • The VAR business model involves acting as an intermediary between manufacturers and end customers, adding value through additional services and customization.
  • Setting up a successful VAR business requires careful planning, industry knowledge, and a commitment to providing exceptional value to customers.
  • Navigating the technology landscape, building vendor relationships, addressing legal and compliance considerations, and implementing effective marketing and sales strategies are crucial for VAR business success.
  • Differentiation, continuous learning, and effective cost management are key strategies for VARs to stand out from competitors.
  • Building strong customer relationships, providing excellent customer service, and staying informed about industry trends are essential for successful VAR partnerships.

What is a Value-Added Reseller (VAR)?

A value-added reseller (VAR) is a business that acts as a middleman between a manufacturer and end customers. VARs purchase products from manufacturers and resell them, while adding value through additional services, support, and customization. This business model allows VARs to offer a comprehensive package that meets the specific needs of their customers.

For example, imagine a software company that develops a Customer Relationship Management (CRM) software package. They could partner with a consultancy firm to sell their software along with the consultancy’s services and training. This collaboration creates a win-win situation for both the software manufacturer and the consultancy. The software company gains access to the consultancy’s expertise and customer base, while the consultancy can offer a complete solution to their clients.



By reselling products and adding value through additional services, VARs play an important role in bridging the gap between manufacturers and customers. Their ability to offer customized solutions, technical support, and expertise makes them a valuable partner in the supply chain.

VARs vs. Managed Service Providers (MSPs)

When it comes to meeting customer needs in the technology industry, both Value-Added Resellers (VARs) and Managed Service Providers (MSPs) play important roles. While they may seem similar at first glance, there are distinct differences between these two models.

MSPs specialize in providing ongoing management and support services for their customers’ IT infrastructure. They focus on delivering comprehensive IT solutions to ensure smooth operations and optimize performance. MSPs typically offer services such as network management, cybersecurity, cloud computing, and data backup and recovery. Their goal is to proactively manage IT systems, prevent issues, and respond swiftly when problems arise.

On the other hand, VARs have a broader scope and can resell a variety of IT products and services, not limited to the IT industry. While VARs can also provide ongoing support, their main focus is on one-time purchases. They offer a curated selection of products and services, adding value through customization, integration, and consultation to meet specific customer needs. VARs excel at tailoring solutions, whether it’s implementing a new software system or designing a complete technology infrastructure.

Here’s a comparison of the two models:

Value-Added Reseller (VAR) Managed Service Provider (MSP)
Offers IT products and services Provides ongoing management and support
Adds value through customization and consultation Focuses on delivering comprehensive IT solutions
Often involves one-time purchases Emphasizes ongoing services
Resells products from various vendors Takes on the responsibility for managing IT infrastructure

Both VARs and MSPs have their unique benefits and serve different customer needs. VARs excel in providing tailored solutions, while MSPs specialize in ongoing support and management. Depending on the specific requirements and goals of businesses, they can choose the model that best aligns with their needs.

VARs vs. Original Equipment Manufacturers (OEMs)

When it comes to the distribution of technology products, two key players in the market are Value-Added Resellers (VARs) and Original Equipment Manufacturers (OEMs). While OEMs design and produce technology products, selling them either directly or through a distribution network, VARs take a different approach.

VARs act as intermediaries between OEMs and end customers, purchasing products from OEMs and enhancing their value through customization and additional services. This allows VARs to provide a more personalized and tailored approach to meet the specific requirements of their customers.

By adding value through customization, integration, support, and training, VARs differentiate themselves from OEMs and cater to the unique needs of their customer base. This customizable approach ensures that customers receive the products and services that best fit their individual needs and preferences.

Core Elements in the Value-Added Reseller Business Model

In the value-added reseller (VAR) business model, two core elements drive success: reselling products/services and adding value to them. VARs serve as intermediaries between manufacturers and customers, purchasing products from manufacturers and then reselling them to end-users.

While the reselling aspect focuses on distribution and sales, adding value is what sets VARs apart. By customizing products, integrating them into existing systems, providing support and training, VARs enhance the overall offering and meet the unique needs of their customers.

Customization

One of the key ways VARs add value is through product customization. They tailor products to align with specific customer requirements, ensuring that the solutions provided are a perfect fit for their business. By offering personalized options, VARs enhance the usability and effectiveness of the products, resulting in higher customer satisfaction and loyalty.

Integration

VARs also excel in integrating products into existing systems. They have extensive knowledge and expertise in ensuring seamless compatibility and integration with other software, hardware, or infrastructure. This reduces implementation challenges for customers, streamlines processes, and maximizes the efficiency and effectiveness of the solutions provided.

Support and Training

Providing excellent customer service is a vital element of the VAR business model. VARs go beyond the initial sale, offering ongoing support and training to their customers. They assist with installation, troubleshooting, and resolving any issues that may arise. VARs also provide training sessions to help customers fully utilize and maximize the benefits of the products they have purchased.

Building strong customer relationships is key for VARs. By offering exceptional customer service, responding promptly to inquiries and concerns, and keeping an open line of communication, VARs foster trust and loyalty with their customers. This leads to long-term partnerships and repeat business.

Staying informed about industry trends is crucial for VARs. The technology landscape is constantly evolving, and VARs need to keep up with the latest advancements to offer cutting-edge solutions to their customers. By staying ahead of the curve, VARs can provide valuable insights and recommendations, positioning themselves as trusted advisors in their respective industries.

Pros & Cons of the VAR Business Model

The Value-Added Reseller (VAR) business model presents several advantages and challenges that potential VARs should consider before entering the market.

Pros

  • Differentiation: VARs have the opportunity to differentiate their products and services by offering customization, integration, and value-added services.
  • Increased Revenue: VARs can generate additional revenue through product resale and by charging for value-added services.
  • Boosted Brand Image: By providing quality products and services, VARs can enhance their brand image and reputation.
  • Excellent Customer Service: VARs play a crucial role in providing exceptional customer service by offering support, training, and personalized solutions.
  • Strong Customer Relationships: The VAR model allows for building long-term relationships with customers, leading to repeat business and referrals.

Cons

  • Product Bundling Guidance: VARs may require guidance and expertise on how best to bundle products and services to meet customer needs and preferences effectively.
  • Potential Conflicts with Direct Sales Strategies: VARs should carefully manage potential conflicts that may arise when their resale activities compete with direct sales strategies of manufacturers.

Despite the challenges, VARs can create a successful business model by capitalizing on the advantages and addressing the potential drawbacks.

Pros Cons
Differentiation VARs have the opportunity to differentiate their products and services through customization and value-added services. N/A
Increased Revenue VARs can generate additional revenue through product resale and value-added services. N/A
Boosted Brand Image Providing quality products and services can enhance the brand image and reputation of VARs. N/A
Excellent Customer Service VARs play a crucial role in providing exceptional customer service by offering support, training, and personalized solutions. N/A
Strong Customer Relationships The VAR model allows for building long-term relationships with customers, leading to repeat business and referrals. N/A
Product Bundling Guidance N/A VARs may require guidance and expertise on how best to bundle products and services.
Potential Conflicts with Direct Sales Strategies N/A VARs should carefully manage potential conflicts that may arise when their resale activities compete with direct sales strategies of manufacturers.

The Importance of Distribution in the VAR Business Model

A successful Value-Added Reseller (VAR) business model requires effective distribution strategies. In today’s competitive market, distribution plays a crucial role in reaching the target market, gaining a competitive edge, and maximizing profitability.

VARs need to explore different sales channels to expand their reach and capture a wider customer base. This includes partnering with value-added resellers, leveraging affiliate programs, and utilizing application marketplaces.

By partnering with third parties, VARs can tap into existing networks and access a larger customer pool. This strategic collaboration provides a platform for increased market visibility and brand exposure.

  • Reach a wider audience
  • Expand market visibility
  • Stand out among competitors
  • Maximize sales and profitability

By strategically distributing their products/services, VARs can ensure their offerings are accessible to the target market, increasing the likelihood of securing sales and maintaining a competitive advantage.

By exploring diverse distribution channels and forming strategic partnerships, VARs can establish a strong market presence and position themselves as key players in the industry.

Navigating the Technology Landscape

Remaining up-to-date with the rapidly changing technology landscape is crucial for VARs. To ensure the success of your VAR business, it’s essential to research your target market and gain a deep understanding of your customers’ needs and preferences. Armed with this knowledge, you can effectively choose the right technology solutions that align with those needs and meet their expectations.

Conducting thorough market analysis and competitor research allows you to stay ahead of the game and make informed decisions. Keep a close eye on industry trends and advancements to identify emerging technologies that may offer new opportunities for your VAR business.

By navigating the technology landscape, VARs can effectively position themselves as trusted advisors and solution providers to their target market. Embrace cutting-edge technologies and innovative solutions that cater to your customers’ unique business challenges.

Benefits of Navigating the Technology Landscape Considerations for Navigating the Technology Landscape
  • Stay competitive by offering the latest technology solutions
  • Enhance customer satisfaction through tailored technology recommendations
  • Build credibility and trust as a technology expert
  • Regularly assess and update your knowledge of the market
  • Invest in continuous learning and professional development
  • Leverage partnerships with vendors and industry experts

By proactively navigating the technology landscape, VARs can position themselves as trusted advisors, helping their target market embrace the latest technology solutions that drive business success.

Building Vendor Relationships

Strong relationships with technology vendors are essential for VAR businesses. These relationships provide access to products, support, and resources. When choosing vendors, factors like product quality, reputation, and collaboration with VARs should be considered. Negotiating agreements and contracts that outline partnership terms, pricing, and support is essential for a successful VAR business.

By establishing strong vendor relationships, VARs can benefit from:

  • Access to a diverse range of high-quality products
  • Priority support and resources from vendors
  • Opportunities for collaboration and co-development
  • Competitive pricing and favorable contract terms

When selecting vendors, VARs should research the market and evaluate potential partners based on their:

  • Product portfolio: Ensure that vendors offer a comprehensive range of products that align with the VAR’s target market and customer needs.
  • Product quality: Verify the quality and reliability of the vendors’ products through customer reviews, certifications, and industry reputation.
  • Vendor reputation: Consider vendors’ track record, customer satisfaction ratings, and standing in the industry.
  • Collaboration with VARs: Look for vendors who actively engage with VARs, providing support, training, and resources to help them succeed.

Example of Vendor Evaluation Criteria

Here’s an example table that outlines the evaluation criteria for selecting vendors:

Criteria Weightage Vendor A Vendor B Vendor C
Product Portfolio 40% 8 9 7
Product Quality 30% 9 7 8
Vendor Reputation 20% 7 8 9
Collaboration with VARs 10% 8 9 7

In this example, Vendor B has the highest overall score, indicating that they are the most suitable vendor based on the evaluation criteria. VARs can adapt this table based on their specific needs and priorities.

Legal and Compliance Considerations for VARs

In a Value-Added Reseller (VAR) business model, legal and compliance considerations play a crucial role in establishing a solid foundation. VARs must carefully navigate legal structures, industry regulations, and data protection requirements to ensure ethical business practices and build trust with customers.

Choosing the Right Legal Structure

One important aspect for VARs is choosing the appropriate legal structure for their business. Options may include sole proprietorship, partnership, limited liability company (LLC), or corporation. Each structure has its own legal and tax implications, so it is essential to consult with a legal professional to determine the most suitable option for your specific VAR business.

Complying with Industry Regulations and Certifications

VARs operate in various industries and may be subject to specific regulations and certifications. It is vital to understand and comply with these requirements to ensure legal compliance and maintain credibility with customers. For example, VARs operating in the healthcare industry may need to adhere to the Health Insurance Portability and Accountability Act (HIPAA), while those handling personal data in the European Union must comply with the General Data Protection Regulation (GDPR).

Protecting Intellectual Property

Intellectual property (IP) is a valuable asset for VARs, and protecting it is crucial for business success. This includes safeguarding trademarks, copyrights, and patents related to customized solutions, innovative technologies, or proprietary software. Implementing appropriate legal measures, such as IP registrations and non-disclosure agreements, can help protect VARs from unauthorized use or infringement of their intellectual property.

Ensuring Data Security

Data protection is of utmost importance in today’s digital landscape. VARs handle sensitive customer information and must take steps to ensure data security. Implement industry-standard cybersecurity measures, including secure data storage, encryption, access controls, and regular data backups. Complying with relevant data protection regulations, such as encryption requirements under GDPR, helps safeguard both customer data and the reputation of the VAR business.

Legal Compliance and Data Protection

Legal and Compliance Considerations for VARs Description
Choosing the Right Legal Structure Selecting the appropriate legal structure for your VAR business
Complying with Industry Regulations and Certifications Understanding and adhering to regulations and certifications specific to your industry
Protecting Intellectual Property Safeguarding trademarks, copyrights, and patents associated with customized solutions and proprietary software
Ensuring Data Security Implementing robust cybersecurity measures to protect customer data

Marketing and Sales Strategies for VARs

Effective marketing and sales strategies are crucial for the success of Value-Added Resellers (VARs) in attracting and retaining customers. By employing various strategies, VARs can position themselves as trusted partners and leverage their unique value proposition to stand out in the market.

Crafting a Compelling Value Proposition

Creating a strong value proposition is the foundation of an effective marketing strategy for VARs. It involves articulating the unique benefits and value-added services that set a VAR apart from competitors. By clearly communicating how their solutions can solve customer pain points and deliver significant business outcomes, VARs can attract the attention of potential clients.

Defining the Target Audience through Buyer Personas

Identifying and understanding the target audience is essential for creating targeted marketing campaigns. Developing buyer personas helps VARs gain insights into their customers’ demographics, preferences, and buying behavior. This information allows VARs to tailor their messaging and tailor their sales efforts to resonate with their ideal customers.

Utilizing a Mix of Digital and Traditional Marketing

A well-rounded marketing strategy for VARs combines digital and traditional marketing tactics to maximize reach and engagement. Digital marketing channels such as search engine optimization (SEO), social media marketing, and email marketing help VARs reach a broader audience online. Traditional marketing tactics like trade shows, industry events, and print advertisements can complement digital efforts and establish a local presence.

In-Person Networking for Relationship Building

In addition to digital and traditional marketing, in-person networking plays a vital role in building strong relationships with potential customers, vendors, and industry partners. Attending industry conferences, seminars, and networking events provides opportunities for VARs to showcase their expertise, connect with key decision-makers, and establish valuable partnerships.

Differentiating through Specialization

To differentiate themselves from competitors, VARs should consider specializing in a specific industry, technology, or service offering. By becoming experts in a particular niche, VARs can position themselves as trusted advisors and resourceful partners for customers seeking specialized solutions.

Customer-Centric Approach

A customer-centric approach is paramount for VARs’ sales and marketing strategies. By focusing on understanding customer needs, providing exceptional service, and building long-term relationships, VARs can foster loyalty and become the go-to solution providers for their clients.

Continuous Learning and Adaptation

The technology landscape is constantly evolving, and VARs need to stay ahead of the curve. Continuous learning and adaptation are crucial for success in the VAR business. VARs should invest in ongoing training and certifications to stay updated with the latest technologies and industry trends. Being proactive in learning and adapting ensures that VARs can offer cutting-edge solutions to their customers.

Effective Cost Management

Managing costs is essential for the profitability of VARs. It involves implementing efficient processes, negotiating favorable pricing terms with vendors, and optimizing marketing expenses to maximize ROI. VARs should regularly evaluate their cost structure and identify areas where cost savings can be achieved without compromising on quality.

Marketing and Sales Strategies

Strategy Description
Crafting a Compelling Value Proposition Articulate unique benefits and value-added services
Defining the Target Audience through Buyer Personas Identify ideal customers and understand their needs
Utilizing a Mix of Digital and Traditional Marketing Employ online and offline marketing channels
In-Person Networking for Relationship Building Connect with potential customers, vendors, and partners
Differentiating through Specialization Focus on a specific industry, technology, or service
Customer-Centric Approach Put customers’ needs and satisfaction at the forefront
Continuous Learning and Adaptation Stay updated with the latest technologies and trends
Effective Cost Management Optimize expenses without compromising quality

Conclusion

Setting up a successful VAR business requires careful planning, industry knowledge, and a dedication to delivering exceptional value to customers. By understanding the Value-Added Reseller (VAR) business model, navigating the ever-changing technology landscape, and building strong vendor relationships, VARs can position themselves for success in the market.

Addressing legal and compliance considerations, creating a comprehensive business plan, securing appropriate financing, and implementing effective marketing and sales strategies are vital steps in establishing a thriving VAR business. Additionally, providing value-added services, overcoming challenges, and scaling the business for growth are key factors in achieving long-term success.

As VAR businesses continue to evolve in the competitive marketplace, measuring success becomes essential. Analyzing metrics such as revenue growth, customer satisfaction, and market share allows VARs to gauge the effectiveness of their strategies and make necessary adjustments to maintain a competitive edge.

FAQ

What is a Value-Added Reseller (VAR)?

A value-added reseller (VAR) is a business that acts as an intermediary between a manufacturer and end customers. VARs purchase products from manufacturers and resell them to customers, adding value through additional services, customization, and support.

What is the difference between VARs and Managed Service Providers (MSPs)?

While VARs focus on reselling IT products and services and adding value through customization, MSPs offer ongoing management and support services for a customer’s infrastructure, mainly focusing on IT solutions.

How do VARs differ from Original Equipment Manufacturers (OEMs)?

Original Equipment Manufacturers (OEMs) design and produce technology products and sell them directly or through a distribution network. VARs, on the other hand, purchase products from OEMs, add value through customization and services, and then resell them to meet specific customer requirements.

What are the core elements in the Value-Added Reseller business model?

In the VAR business model, reselling products/services and adding value through customization, integration, support, and training are core elements. VARs also play a crucial role in providing customer service and maintaining strong customer relationships.

What are the advantages and disadvantages of the VAR business model?

The VAR business model offers advantages such as differentiation, increased revenue, improved brand image, excellent customer service, and strong customer relationships. However, challenges include the need for guidance on product bundling and potential conflicts with direct sales strategies.

How important is distribution in the VAR business model?

Distribution is essential for reaching the target market and standing out among competitors. VARs need to explore different sales channels, such as value-added resellers, affiliate programs, and application marketplaces, to maximize their reach and profitability.

What should VARs consider when navigating the technology landscape?

VARs should research the target market, understand customer needs and preferences, conduct market analysis, and stay informed about industry trends. Choosing the right technology solutions to meet those needs is crucial for success in the VAR business.

How important are vendor relationships for a VAR business?

Strong relationships with technology vendors are essential for VAR businesses as they provide access to products, support, and resources. Factors like product quality, reputation, and collaboration with VARs should be considered when choosing vendors.

What legal and compliance considerations should VARs address?

VARs must choose the right legal structure, comply with industry regulations and certifications, protect intellectual property, and ensure data security, including adhering to data protection regulations like GDPR or HIPAA, if applicable.

What marketing and sales strategies should VARs implement?

VARs should craft a compelling value proposition, define their target audience through buyer personas, and utilize a mix of digital marketing, traditional marketing, and in-person networking. Differentiating from competitors through specialization, customer-centric approach, continuous learning, and effective cost management is also crucial.

What are the key steps in starting a VAR business?

Key steps include understanding the VAR business model, navigating the technology landscape, building vendor relationships, addressing legal and compliance considerations, creating a business plan, financing the business, implementing marketing and sales strategies, and providing value-added services.