Facts and myths about reselling webservices

You can find a lot of companies offering reseller programs and discounts, and it’s pretty tempting to jump into reselling as the investment required seems to be ridiculous and the profits margin huge. However you should take everything with a grain of salt, as sometimes things aren’t as good as the providers paint them.

Myth

It takes close to nothing to build a reseller business.

Fact

You’ll have a lot of hard work, there are thousands or millions of guys thinking exactly as you do. In order to prevail over all those resellers you need to add some value to your services.

Myth

You don’t have to invest any money, all you have to do is sell.

Fact

Even though you’re not investing in infrastructure, technology and a lot of staff, you’ll need to make your site or service noticed by potential customers. Doing so needs advertising and advertising costs money, less money if you do it yourself, but money nevertheless.

Myth

As a reseller you’ll be making thousands of dollars  each month.

Fact

You’ll start making a few bucks a month, after creating a loyal customer base, your earnings will increase, but before you make thousands by just reselling, you’ll figure out that it’s cheaper to become a provider than to keep reselling other providers’ services.

Myth

John P. of Whatevercity, Whateverstate is making a living by working 3 hours a day reselling services.

Fact

John P. doesn’t even exist, and if he does, he works way more than 3 hours a day in order to make a living.

Myth

You’ll be paying a few cents (or other cheap prices) for the services being resold but you’ll be charging a lot to your customers.

Fact

As there are millions of resellers like yourself, you’ll find some resellers that don’t mind having a small profit from each customer in order to have a bigger market share, so be prepared to resell those services adding just a small %.

Myth

It’s a safe bet.

Fact

Since to the real provider, you’re the customer, if one of your customers doesn’t pay his bills on time (or doesn’t pay them at all), or if you are targeted by a scammer (online fraudster) that causes you chargebacks (reversed credit card payments), you’ll still have to pay the bills to your provider. So yes, there’s a risk. You can minimize such risk by following some simple steps (read the article I posted some weeks ago about preventing online fraud) but there’ll always be a risk.

Myth

The provider you’ll be reselling for sees you as a “business partner”.

Fact

They see you as a customer, if you fail, they won’t as they have a lot of resellers like yourself. So even if being a reseller gives you some voice when it comes to bargaining, they are already prepared to lose your account or to see you go to another provider, so they won’t always go the extra mile just to keep you happy.

Myth

The cheaper you buy, the more profit you’ll make.

Fact

Do some math, make sure that your provider is making enough money to stay in business. Some providers try to go hit rock bottom prices and file for bankruptcy a few months later. If your provider goes out of business, you’ll have some hard times explaining to your customers why their websites suddenly disappeared. Make sure that you’re signing up with a solid provider that will be able to provide quality services to your customers, after all, it’s your image that’s going to be damaged if something goes wrong, as your customers will come back and get on your back, not your providers’.

Myth

An All-in-one provider is the best way to start reselling.

Fact

Sometimes it’s true, as your billing will be a lot easier since you just have to send payments to one provider, but that’s not a rule. Some providers are excellent when it comes to one  service (i.e. domain name registration) but just suck at others (i.e. webhosting) so you’ll have to do some research and make sure that you’re signing up with a mix of providers where each one of them provides one of the services you’ll be reselling with the highest quality.

Myth

Automated systems allow you to run your business without any human intervention.

Fact

Even though systems increase productivity and save a lot of time, there are issues that require some special criteria applied. A system can’t determine that by itself. Let’s say that you have over 1000 webhosting customers and one of them starts hosting illegal files… a system would shut down your account but a human may see that if you’re hosting 999 legal and decent customers, having one customer host illegal files doesn’t reflect your business but just a bad luck isolated incident. So always make sure that there will be someone available to call or email if you need true human assistance.

I hope these lines help you think twice before rushing in and signing up with a provider expecting to make thousands of dollars a month.

Soon I’ll be posting an article on why providers love reseller/affiliate programs and also if launching one can benefit your business. I’ll also post another article on what to look for (kind of a rule of thumb) when selecting a provider to resell.