Should we be turning down software resellers?

We get emailed nearly daily from various software reselling companies around the world. They generally enquire as to the cost of 1 - 5 units of our software, and we generally turn down these requests citing that it does not meet our minimum order size.

This sometimes works out well. In one instance a large software company attempted to buy our software via a reseller, was turned down and then came directly to us. This set up a valuable line of communication with this customer, and we profited more as we did not have to offer a discount to the reseller as they appear to expect.

In the majority of cases however, they disappear.

We generally struggle to understand the software reselling industry, we're not sure why anyone would want to go through these companies. However we had a recent email from a software reseller who briefly mentioned that the educational institute wanting to buy our software generally purchases all their software through the reseller as it's very difficult for them to buy software directly themselves due to their financial logistics et al.

We're wondering if we should be turning these software resellers down or not. We have virtually no experience of the software reselling industry, and are struggling to work out if they could add value. If anyone is able to shed some light on how these sorts of companies work, and offer advice as to if we should be accepting their business or not (how much discount would we have to offer on single unit purchases?) it would be appreciated!

There are three major reasons why companies buy through a software reseller:

1. This is the only way they are allowed to purchase software (for all kinds of goofy reasons).
2. They are looking for a discount from the list price. (Large companies that purchase a lot of items from a reseller can often get part of the reseller discount passed on to them.)
3. The reseller is actually the end user, looking for a discount.

As a software manufacturer you need to understand that most of these software resllers provide no value to you. They don't market your software for you, they simply process orders they receive from customers who already want your product. They may pass along all or part of your reseller discount to the customer, undercutting your pricing model.

The solution to the problem is very simple. If a reseller contacts you for low volume pricing, simply state you don't offer any discount in small quantities. You will happily fill his order at list price. This is not a problem for most software resellers- they will happily pay you list price for your items. They are just providing a service to a large volume customer of their own. Also note that before accepting a PO from any of these resellers, you might want to check their credit history. Some are notoriously late in paying.. We charge money to accept a PO, an additional $10 per order. If a reseller is late in paying us, we switch them to prepayment only. And please note we have never found a true reseller who won't accept those terms.

One final note- software resellers are acting on the behalf of customers who have already decided to buy your software. If that customer doesn't buy through that reseller, they will buy your product some other way- either directly from you or through another source.