Are white label businesses viable?
I get asked all the time ‘are white label businesses a viable way to make money?’ – well, it all depends what kind of white label business you go for and how the commercials are negotiated between you and your supplier.
For example, a while ago I ran a white labelled website design company. Essentially, I would go out and find the customers and the design team would implement the orders. The reason that this worked for me is that my developers were based in Nepal, which did not cost much when compared to the prices of web design in the UK. This gave me the flexibility to give customers discounts and to bundle lots of ‘free’ add-ons into their order.
Contrast that to a company that I’ve been working with. They run a white labelled service where they have no control over the costs & profits are split 50/50. This is a huge issue as they must obtain permission from the provider to run special offers and they have no real way to offer a customer a discount or any bundles services. This makes it very hard to win customers from the competition as they will expect a flexible service, tailored to them.
So, as I said at the very beginning, it really does depend on the type of service you’re white labelling and the level of flexibility you can get built in.
In my experience you should look for:
- Flexible pricing structures which can be changed rapidly
- The ability to provide discounts to your unhappy customers
- In the event that you’re white labelling software, you need to be part of the product pipeline discussions – you should be able to add features that your customers want.
- You should own the customer – which is not always possible with cloud-based services
If you can nail down the above points, you should have a solid white label model as it will allow you to be commercially competitive with other providers and it’ll also allow you to have some control over the development path of the product.
It’s always important not to rush into a white label agreement too quickly. While working with many clients, I have researched the market and found that it is saturated & they will be unlikely to see any returns for several years. For most start up companies, this is not a sustainable or achievable business model.
This article was brought to you by Netshock. Netshock is your technology blog, providing technology news, guides and insight.