Happy CEO

Factors to consider when choosing a distributor for export markets

It is sometimes effective to choose to go through a network of foreign distributors to start exporting.
Here are some tips for finding a distributor based on my experience.

• Ask for the opinion of your colleagues, network or companies offering products or services similar or complementary to yours (addressing your core target).
• Look on the net or in directories (eg fairs) for companies that already have a network of distributors offering the same type of service or are already addressing your potential customers.
• Find out from a few reference customers which distributor is considered to be the most competent or dynamic.
• Take advantage of trade shows: distributors are very active at trade shows because they are looking for new cards or exhibiting locally if you are targeting a particular country.
• Get in touch with specialized local organisations in the countries concerned. You may be able to have free contact details of distributors by sector of activity.

During a distributor selection mission in a new target country, you must optimize with care the information that you will collect from your new contacts.

It often happened to me at the beginning to meet an agent, to have a good feeling, then to see a second one, to have a good feeling, a third… and this during the all week !

Lunchtimes and evenings are devoted to business, which never leaves us time to write down our feelings and verbal information, in particular those given during a factory visit, a Showroom or a warehouse.

We say to ourselves all the time, well, it’s interesting, I’ll remember it…

Then, we go home exhausted and we start again either in another country, or at the office under a ton of administrative, commercial, accounting, managerial tasks…

And after a fortnight, we are unable to tell the difference between all the agents by looking at the business cards (especially when they are in Japanese, Russian, Greek or Arabic…)

You have to implement a professional organization. Instinct and talent are not enough for long scale corporate growth. I have therefore developed along the years the following method which I hope will inspire you…

1- Before the mission

Gather all available information on each potential agent.

• Company information, Corporate vision, values that you may share, business missions and goals.
• Name and positions of important contacts who will be present at the meeting.
• Organization chart if available.
• Single contact for the commercial relationship.
• Address (And confirm, it will save you from unpleasant surprises, especially for the taxi driver for example, in some countries, there are no street names…)
• Phone (And confirm the phone beforehand… )
• Website.
• Overview of skills, specializations.
• Brands already represented. Avoid those selling competitors indeed.
• What are your qualitative and quantitative objectives for this country ?
• What will be your objective for this meeting precisely ?
• Depending on the information gathered, adapt your presentation, especially if you plan to divide your portfolio between several specialized agents.
• Email a template of the desired meeting agenda to your contacts with a list of questions.

2 – During the mission

Questions to ask (or rather try to get )

THE COMPANY IN GENERAL

• Philosophy ? History? Brand image ? CEO personality ?
• Turnover, turnover by brands represented, services offered.
• Evolution of the business during the last 3-5 years?
• Evolution of the market and technologies?
• What is their strategy for next year?
• Number of employees and evolution.
• Try to calibrate and note the level of enthusiasm expressed for your products and your presentation. What does the CEO think if he is not present at your presentation?
• What will be their action plan if you work with them?
• Ability to geographically cover the market.
• Who is their main competitor? (hard to get)
• Why do they think they will be the best to represent your products?
• How are the employees who will be in charge of your products and will they be trained?

COMMERCIAL

• How do they manage their customers? Are there account or brand managers?
• Is there an incentive or bonus program for salespeople?
• What are their goals ? Yours ?
• Adaptation of products and packaging?
• Organization of the sales department
• Number of employees who will be dedicated to your brand, including the number of salespeople.
• Career of key employees who will be in charge of your brand.
• Seller Rating Method
• What will be the commercial indicators and results that will be provided to you? With what regularity?
• Commercial strategy.
• Frequency of customer visits. How many accounts to manage per seller?
• Management of major accounts, key accounts.
• If organized by market and brand, structure of the organization.

CLIENTS

• References.
• On your side, if you already have prospects or customers on site, what will be the organization?
• Are you going to do global marketing to generate leads locally?
• List of their customers and prospects interested in your products.
• Ranking by turnover.
• % of new customers? % of customers lost?

MARKETING

• Marketing strategy, planning.
• Launch method
• Launch timing
• Budget
• OKR, KPI, Performance indicators
• References, samples…

FINANCE

• What % margin or commission? Final customer price.
• Financial stability.
• Payment, customer risk.
• Payment deadline.
• Payment method.
• Costs to consider (Corruption for example…)
• Product Support and Warranty.

LOGISTICS & IT

• Organization of the customer support service and spare parts, stock.
• IT, specific software requiered, network, cloud, cybersecurity.
• Progress of an order process.
• Stock, warehouses, addresses…
• Equipment, machines, trucks, cars…
• Customer deliveries (% delivery on time…)
• Organization of inventory. In-stock product turnover cycle, Inventory.
• Quality Control

LEGAL

• Exclusivity or not?
• NDA, Contracts framework.
• Contracts with end customers.
• Duration and geographical area.
• Management of technical aspects of import, customs, insurance…

At the end, create a selection grid with your most important criteria and weigh the pros and cons of each distributor. Beyond the affective aspect of the relationship which is important, clearly evaluate the objective points.

If you are still in doubt, give grades and assign weights.
For example you will evaluate; the size of the distributor, its weight on my target market, its number of points of sale, its type of distribution network (supermarkets, shops, etc.), your planned implementation costs, the marketing power, the desire to sell your products.

Also feel free to show that you are going to review them, you are not here to sightsee or waste your time. This will also give a very professional image of you.

Thus, you will also be able to show them the evaluation grid to obtain more in-depth answers, information on the organization of business in general in this country and your field in particular, which is sometimes completely different than your country and your region.

For example, in many countries, supermarkets do not exist, so you have to think of your distribution network in a completely innovative way. For example, in Bangladesh, a major yogurt brand distributes its day-to-day dairy products through a network of unemployed women who hold nutrition meetings and sell the yogurts on a group meeting principle.

You can also get information about other distributors.

The two reasons not to work with a distributor.

Time to start on site ? If the Business starts and your market shares become effective in the defined area (a sufficient repetitive amount of business), it may be time to think about establishing a local structure beyond the simple distributor or agent.

The two reasons not to work with a distributor but to establish yourself:

1- A distributor most of the time seeks short-term cash (6 months maximum) whereas your strategy is spread over a minimum of 3 years or even 5 years.

2- Depending on the length of your sales cycles and your brand awareness, your company needs to evangelize its solutions, which your agent can’t do (as well as you would anyway.) To explain what are the characteristics, operation and benefits of your solutions and services, it takes time and it is sometimes not very profitable for a majority of prospects.

Investing in a local structure of your own also means giving yourself the capacity for a lasting presence. However, this option is expensive and therefore difficult to implement. A foreign entity represents a significant cost. The use of regional, national and European aid must always be examined.

Before investing, you can consider a pre-implantation test:

• Creation of a website,
• Simple domiciliation,
• Remote workers locally from home office.

Be careful, in any case, they will then become either partners or competitors.

Of course, you will have every interest in favoring the relay with your agent or even considering creating with him a representative office, a branch or subsidiary if the relationship is excellent. Doing the acquisition of the company of your local agent/distributor can also be a great way to source trained talents and drive external growth.

Make the decision wisely. If you decide to get started, the future mode of implementation will be decisive.

Have the file studied by specialists. Their experience of international cases (creation, takeover, joint venture) allows them to quickly define the right partnership, whether commercial, industrial or technological by :

• Defining the right legal framework,
• Defining the right fiscal framework,
• Search for the mode of implantation,
• Commit, engage the investors.

Good luck

In summary, A strategic approach to select a distributor for export

• Preparation:
  • Information Gathering: Collect essential data about potential distributors, including company details, contacts, specializations, and objectives.
  • Customized Approach: Tailor your presentation and distribution strategy based on gathered information.
  • Agenda Planning: Email a meeting agenda with key questions to facilitate productive discussions.
• During the Mission:
  • Company Assessment:
    • Understand their philosophy, history, and brand image.
    • Analyze financials, market trends, and future plans.
  • Commercial Insights:
    • Evaluate customer management, incentives, and sales goals.
    • Assess sales department alignment and personnel qualifications.
  • Client Perspective:
    • Seek references and local marketing strategies.
    • Identify key clients and turnover rankings.
  • Marketing Strategy:
    • Review marketing plans, launches, budgets, and indicators.
  • Financial Considerations:
    • Discuss commissions, pricing, and financial stability.
    • Understand payment terms, methods, and product support.
  • Logistics and IT:
    • Investigate customer support, IT requirements, and logistics.
  • Legal Aspects:
    • Examine exclusivity, contracts, and legal compliance.
  • Decision-Making:
    • Create a selection grid to weigh pros and cons objectively.
    • Communicate your intent to evaluate professionally.
• Additional Insights
  • Consider transitioning to local presence for long-term strategies or products needing extensive explanation.
  • Seek expert advice for international expansion, aligning legal, fiscal, and operational aspects with your goals.
  • Approach distributor selection and global expansion wisely for success.

“I can do things you cannot, you can do things I cannot; together we can do great things.”

Mother Teresa