Table of Content
- 1. Automate Areas that can be Automated
- 2. Get a Handle on Pricing and Profitability
- 4. Be Omnipresent – Catalog export to market places etc.
- 5. Add Value to your Customers
- 6. Get Bigger Business Volumes
- 7. Use Cross-Selling and Upselling to Increase Deal Value
- 8. Track Profitability at the Customer Level
- Conclusion
- FAQs
With each passing day, VAR business is getting more and more competitive. As a result, margins have shrunk considerably which has reduced the overall earnings of VARS. Without getting an adequate gross profit margin, a business cannot pay its expenses and enhance earnings for future growth. Hence VARS is looking for different ways to improve their profit margin so as to run their business efficiently.
Key Takeaways:
- Low-margin VAR businesses mustoptimizepricing and operational efficiency to preserve profitability.
- Identifying high-margin SKUs and prioritizing them improves overall revenue mix.
- Automating manual tasks reduces labor costs and accelerates service delivery.
- Negotiating better terms with distributors improves cost positions.
- Cross-selling and up-selling bundled offerings enhance average deal value.
The following blog discusses some proven strategies to increase your margin in a competitive market where growth is hard to come by,
1. Automate Areas that can be Automated
Automation is a great tool to enhance margins. The biggest thing a VAR can do for his business is automate the areas that can be automated. There are various software applications that can automate various business processes like quoting, sales, procurement, catalog management, and CRM. It makes sense to use such tools.
Also, it is advisable that you try to manage most of your functions in one software or use software that integrates well with your existing applications. Otherwise, you will spend a lot of time entering the same data in multiple places wasting time and also making it error-prone.
2. Get a Handle on Pricing and Profitability
You cannot correct your business processes unless you are aware of them. So identify the areas on which you are getting low and high margins. Find out how you are pricing your products and what kind of profitability you are getting. Understand the environment, see what your competitors are doing. Learn from the bigger players in the industry. This will help you to identify the changes that need to be done in your business processes so as to maximize profit.
Pro Tips:
- Use margin analysis tools to flag low-profit quotes before they are sent to customers.
- Introduce strategic discounting that protects core margins while closing strategic deals.
3. Have an Online Presence / set up an eCommerce Store
Having an eCommerce store is no longer a luxury but more of a necessity, particularly for low margin VAR business. Online shopping is really convenient and will definitely save time and effort of your customers. With an eCommerce store, your customer can shop at any time of the day from the comfort of their home. Moreover, your online store is not limited by any geographical area or time zone constraints, thereby helping to gain new customers. Push commodity sales or Low Value/Low margins items online as much as possible. All this can contribute to improving your VAR business health.
4. Be Omnipresent – Catalog export to market places etc.
In order to improve your margins and overall revenue, try to sell through multiple channels. For instance, there are software platforms available that allow you to export your product catalog to popular marketplaces like Amazon, eBay, Google shopping, etc. So use of these software platforms will make your products available at most of these marketplaces. This will help you to get additional sales, thereby ensuring greater margin and revenue.
5. Add Value to your Customers
Try to add value in everything that you do. That value can come from your services, great product knowledge, customer support and even quick turnaround time. So add value as much as you can, which can always help to get more from your customers. You can get repeat business from the customers as well as more margin from the same deal itself.
6. Get Bigger Business Volumes
As your business grows, your cost of procuring the product can go down. For instance, if a laptop costs $100 from a distributor when you order 5 units, you may be able to negotiate a lower unit price when your order volume increases. If the distributor reduces the price to $98 per laptop for an order of 50 units, your total product cost drops from $500 to $4,900, saving $100 on the larger order. Even a small reduction in unit cost can add up when you’re purchasing high volumes regularly.
This works best when volume is consolidated rather than spread thin. A VAR placing smaller, frequent orders across many distributors for the same product category often misses volume-tier pricing entirely, since no single order crosses the threshold. Concentrating purchases with fewer distributors per category, where it makes sense, can help unlock better pricing tiers faster than growing total revenue alone.
As your business volume increases, managing the additional quotes, orders, suppliers, and customer information can also become more complex. The right software can help keep these processes organized as you scale. For a look at the tools that can support different areas of a VAR business, see 9 Software Tools To Manage Your VAR Business Efficiently.
7. Use Cross-Selling and Upselling to Increase Deal Value
Increasing the value of an existing deal can be more cost-effective than constantly looking for new customers. When a customer is purchasing hardware, consider whether they also need accessories, software, implementation, support, or other related services.
Cross-selling relevant products and upselling to a solution that better fits the customer’s requirements can increase the average deal value. It can also create opportunities to attach services and complementary products that contribute more to the overall profitability of the deal.
8. Track Profitability at the Customer Level
A customer generating significant revenue is not necessarily your most profitable customer. Look at the costs involved in servicing each account, including discounts, sales effort, support requirements, and fulfillment costs.
Tracking profitability at the customer level can help VARs identify which accounts deserve more attention and where pricing, service levels, or account strategies may need to change. It can also help sales teams focus on growing relationships that contribute positively to the business rather than chasing revenue at any cost.
Conclusion
Most of the strategies above, catching thin margins before a quote goes out, spotting high-margin SKUs, consolidating volume with the right distributors, only work if you can actually see this data in one place. Trying to track it across spreadsheets, email threads, and separate distributor portals is exactly what causes margin leakage in the first place.
This is where VARStreet fits in. VARStreet gives VARs a single platform for quoting, catalog management, and distributor pricing, so margin visibility happens before a quote is sent, not after the order ships. With real-time pricing from 50+ distributors and automated catalog syncing, you can spot low-margin quotes early, consolidate purchasing with the right vendors, and add services and bundles without juggling five different systems. Book a demo with VARStreet to see how it can help protect your margins going forward.
FAQs
What is a healthy profit margin for a VAR?
There is no single profit margin that works for every VAR. Margins can vary based on the products sold, services offered, customer segment, vendor agreements, and operating costs. Rather than comparing your business with an industry-wide number, track your margins over time and identify whether they are moving in the right direction.
How can VARs negotiate better pricing with distributors?
VARs can approach distributor negotiations with clear purchase volumes, sales history, and projected demand. Consolidating purchases where practical, discussing volume-based pricing, and reviewing terms regularly can help create opportunities for better costs. Strong distributor relationships can also make it easier to discuss pricing when business requirements change.
How much discount should a VAR give a customer?
There is no universal discount percentage that works for every VAR. Before offering a discount, calculate how it will affect the deal’s gross margin and consider the customer’s long-term value. Setting a minimum acceptable margin for different types of deals can help sales teams negotiate without giving away unnecessary profit.
How can VARs avoid losing money on large deals?
Large deal sizes do not automatically mean higher profits. VARs should review product costs, discounts, services, fulfillment expenses, and expected margins before finalizing a large opportunity. Breaking down profitability at the quote level can help identify deals where high revenue could still result in limited profit.
Should VARs prioritize revenue growth or profit margins?
Both matter, but revenue growth without healthy margins can put pressure on a VAR’s cash flow and operating costs. VARs should evaluate growth based on the quality of the revenue they generate, including gross margin, customer profitability, and the cost of delivering each deal. This gives the business a clearer view of whether growth is actually contributing to the bottom line.
