Product Development October 19, 2020

Whitelabeling a SaaS product?

lukvo

Hi all,

I built a SaaS platform/marketplace that allows nonprofits to start a readymade fundraiser: a webshop with products from local suppliers on which they have a profit margin. Its business model is purely based on commission, and it's going well.

I get requests for a white label version of this marketplace and am quite attracted to the idea. The aforementioned local suppliers want to offer the software to their customers with their branding on it and no other competitors on there.

What are the do's and don'ts regarding whitelabeling an existing SaaS product? Any good readings or advice out there?

E.g. how do you go about support? I'm thinking of offering a whitelabel support solution as well, e.g. a live chat with our team but with the customers branding. Is that common? How do you implement it? Is there good chat software out there where I could manage this centrally?

Thanks a lot!

  1. 7

    We sell a SAAS that white labels for each client for my business. It is a very hard thing to do so you need to ensure a few things:

    1. Charge a lot more for white-labelling. I mean a lot more compared to your default SAAS pricing. Lets say you are charging $200/Month for regular SAAS. For white-labelled version, I would make it $15,000/Year.

    2. Notice I said /Year above. Make it minimum yearly contract for white-labelled version and not Month To month. If you can, try for a 3 year lock with yearly payment term.

    3. You would need to account for additional resources for the white labelling customizations if the client really wants to dig deep into white labelling and its not just changing a logo and basic colors.

    4. Finally, add additional support packages/cost to white-labelled clients.

    Overall the point is that white labelling increases the overhead on your end so make sure the client is also willing to commit more.

    Having said all this, it is very lucrative and can make you tons of money but it adds shit ton of complexity in your business both from infrastructure management and also from business perspective. All the best!!

    1. 2

      Upvoted, great reply.

      I have dabbled in whitelabeling before and I think I underestimated the level of commitment required by a factor of about 10x.

      It's not something I would ever do again unless there was some significant upside as @codegeek1001 says, like a high-ticket yearly price plus a multi-year upfront commitment.

      Thinking you can offer a whitelabel on a monthly subscription is doomed to fail.

      1. 1

        Thanks @yongfook.

        What were the things you underestimated the most?

        1. 1

          fundamentally I think it's just the fact that when a company inquires about potential whitelabeling, on the asset owner (you or I) side of things we think "great, I just need to swap in the logo, change a few text strings here and there" and that's it.

          In reality it's highly likely the whitelabel client will want some special functionality that you currently don't offer. So you say yes I can build that. But most likely since the client has no experience building software, these types of requests just pile up and up until you're drowning in little enhancements - combine this with a sunk-cost fallacy because you've already built some custom stuff for them and you want to close the deal... and you have a recipe for disaster IMO.

          Avoid!

          1. 1

            Thanks for sharing!

            So basically the art is in selling it with the right expectations and saying "no" to feature requests that do not overlap for 90% or more with the original product?

            Sounds doable 😃

    2. 2

      Excellent answer! Updooted.

    3. 1

      Thanks @codegeek1001! Very insightful.

      "A very hard thing to do" / "shit ton of complexity": could you elaborate? At first sight, it doesn't look like too much development effort to (a) change logo & colors and (b) let them host on a different domain (CNAME), but I am certainly missing things.

      What does typical support for a whitelabel look like? We do support in our customer's name, e.g. via email?

      Thank you again, this is very valuable advice!

      1. 1

        In my experience it's exactly what you've said, logos and colours and maybe integrating with a single sign-on provider, if they want one login to their platform and yours. That adds some complexity but isn't a massive problem.

        So long as you aren't writing custom functionality for your client it's not a big deal. You shouldn't be writing functionality for your client unless it would already be on your long term road map for the product, even if they're willing to pay for the development. Otherwise you're just getting sidetracked and you may as well be their contractor.

        1. 1

          Thanks @jf_! That's definitely something to keep in mind, to not get deviated from our own product vision / roadmap.

  2. 2

    Our company has a white label version of our product but our product is different than yours in a crucial way. It sounds like yours is a marketplace. If that's the case, white labeling would cut out the network effects of growing your market place by giving them their own. Unless they would be in your same marketplace network but it just would remove your brand...?

    Anyway, if I'm understanding correctly I would probably defer to Startup Rule 2929IJustMadeThisUp202: Never Negate Network Effects.

    1. 1

      Thanks for sharing your experience @SeanLikesData!

      Indeed we are a marketplace. We would only whitelabel the engine that drives the webshops.

      Example: booking.com has two main values: (a) the marketplace and (b) a super efficient booking tool.

      Let's say a hotel doesn't want to link his customers to that marketplace because literally all of its competitors are there, too.

      They might see enough value in the efficient booking tool to pay for that by itself, with their branding.

      --

      It is true that we're missing out on acquisition if they move to a whitelabel solution. But we believe they'll be more motivated to drive customers to the whitelabel than to the marketplace because of this competitor effect.

      We'll also be able to attract more suppliers in this way. And because we would apply the same commission as the one in the marketplace, we would also benefit from them driving more customers towards the whitelabel.

  3. 2

    Ditto to everything @codegeek1001 mentioned!

    Also...

    Be sure to ask yourself this question:
    What happens if one of your competitors decides to white label your solution to compete with you?

    That leads to a bunch of other complicated questions:
    • What if that competitor white labels your solution and offers it at lower prices to your existing market?
    • Whatever marketing & training materials you've created (or will create), do you allow the white label partners to put their name/logo atop those and use them for their customers? So, if a competitor is white labeling your solution, you've effectively written their materials for them?

    Tricky. All of it.

    This opportunity faced me earlier this year, and I had to turn them down because they were competing with me for the same end customer. There was just no way I could make it a win-win. At any price.

    1. 1

      Thanks for the warnings, @KenW!

      What do you mean exactly? That my competitor uses my software with their logo to service their clients? Like compete with me with my own product?

      If that's what you mean: commissions still apply to every sale that happens through a webshop the customer makes. Right now we're thinking of charging the exact same commission on the marketplace. So we don't mind them "competing" for the same end customer.

      If a competitor goes out selling our product under their own flag, we'll be very happy as they'll be doing sales for us! They can also never sell under our price without losing money.

      Either that or I'm missing something 🙂

      1. 1

        Sounds like we were doing different things with our products, and thus the white labeling was going to work differently.

        In your situation, I think you're saying that you're white labelling the app, but the marketplace "supply" remains constant? So whatever they [the white label partners] are selling, they're still selling your supply, and thus, you still get commissions.

        In my case, it was a lot more like community . so or slack, where I had built a multi-tenant platform to enable a certain kind of community to be created. My main product is tenant 0, if you will. But it can support as many as I wish.

        But then I started getting requests from interested white label partners who would be trying to sell to my existing customers for much less, or in some cases even free.

        I spent a few weeks really stressing out about it, trying to model fair and equitable per-user annual license agreement structures where I could still make that make sense, both financially for me, financially for them, and making sure to not offend current customers.

        By the end, I came to sense of resignation about it, that it simply wasn't a good fit for my business right now (maybe in the future).

        1. 1

          Very interesting to hear your case, thanks for sharing.

          Fortunately for us, lower activity on our marketplace wouldn't necessarily hurt our reputation or income.

  4. 2

    I agree with @codegeek1001 you want to charge enough to make it worth it. White labeling is a lot of work. Make sure you get some money up-front. I've seen a lot of people waste time white-labeling something only for the whole deal to fall through.

    On the flip side it can be an easy way to boost revenue.

    1. 1

      Thanks for commenting @shanefromfargo.

      A lot of work: can you elaborate? What kind of tasks are involved?

      Money up-front: yes, definitely good advice. We want to pre-finance the development completely.

      1. 2

        If your system is architected in a good way and you are technichal the development work should be minimal effort. However, if your tech isn't setup for it you could be looking at a re-write.

        The biggest time suck on these is the constant back and forth. There users will complain about something, and you'll constantly be ping-ponging back and forth over the product.

        1. 1

          Ok, that's reassuring.

          We were thinking of adding optional whitelabeled support. Maybe we should make that mandatory to prevent overhead on our side + to make sure we're being paid for that support work.

          Then their customers will complain directly to us (we'll be answering in their name), which we're doing with the current customers as well.

  5. 2

    @lukvo, you can limit some of the product complexity depending on how deep you want the white labeling to go... For instance, if all the customization is basically changing out the logo and name here and there, then it’s probably not that big of a lift. But if it extends to the domain it’s hosted on, customizing emails, changing out colors throughout, etc etc, then it really ratchets up the complexity involved in building and maintaining it.

    So, I suggest carefully considering how deep you let the white labeling go.

    Re: live chat with your team, I haven’t heard of this before BUT I can see it being valuable, and it should be priced accordingly. Either it’s a high yearly cost, billed hourly for time spent doing support request (eg, $90/hr answering customers support reqs in chat), or both.

    1. 1

      Thanks for the insights, @jones_spencera!

      Indeed we would keep it simple in a first version, with logo/name changes here and there. Domain would also be in scope but I didn't think that would be super complex (although I haven't thought that through completely yet).

      Customizing emails and other stuff could come later, once the initial concept is validated.

      Hourly charging seems interesting but very hard to sell for a newly launched product, as the customers won't have any idea how many hours will be involved (and neither will we, for that matter). High yearly cost is plausible, I can see a plan with 24h email support or a more expensive plan with live chat during office hours for example.

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