Companies that have had some export success selling though distributors often reach a point where their sales growth flattens or stalls, or they are pulled in so many directions in different countries that supporting this becomes unsustainable. This series outlines the key steps needed to truly make your export business strategic, with sustainable growth.

Take comfort that many companies have made this shift, and have never looked back.

In our previous articles, we discussed the importance of changing your mindset, the way you find and invest in distributors, improving your skills sets and processes, and enhancing your tools.

In this installment, we examine the final key to move to Exporting 201:  enhancing the distributor experience.

Much has been written about optimizing the customer experience, but little about the partner experience.  Your distributors are your customers, but they are quite different from your direct customers.  They are not the end-users of your products or services, but instead a partner that needs to work closely with you to reach more end-users.

Make no mistake, the partner experience is important. When we chat with distributors, they often complain that their suppliers are hard to work with. Their policies are complicated or are not communicated clearly. Escalation of issues is confusing and inconsistent. Information about product specifications, relevant marketing collateral, pricing, and product availability and shipment status is not timely or hard to obtain.

Frustration builds, and your company’s products or services start getting pushed down the priority list. And once the distributor’s focus on you is lost, it is candidly very difficult to get back.

Here’s a few tips on how to maximize your distributor’s experience with your company:

Map out the partner experience. Export 201 companies map out all the touchpoints in their company, and take steps to make each of those contacts as smooth as possible. Start with the very first interaction your distributor has with you, and follow it through recruitment, due diligence, business planning, contract negotiation, and operations. Recognize that the distribution manager can work to build partner relationships, but that will not be enough if the distributors have bad experience dealing with legal and compliance, customer service, tech support, or shipping and logistics.

Enlist your internal resources. There are many ways to do this. Help educate each of the relevant functions so that they see the company through the distributor’s eyes and become better partner advocates. Work with them to clarify and update relevant policies and procedures. Engage them to help train the distributor’s team. Find ways to help them build bridges with their counterparts in the distributor’s organization.

Invest in partner onboarding. As noted in a previous article in this series, good onboarding is a “how-to” guide for the supplier and distributor will work together – the investments both will make, how issues are resolved, company culture, regular meetings to review a detailed business plan, and the written procedures – and more importantly, all the unwritten rules of how your company operates. Take the time to create a good onboarding process and follow it consistently.

Create a partner portal. A partner portal is a central repository of key information your distributors may need. This could include product data, marketing collateral, branding information, product demos, on-demand training, pricing, and information on product availability and shipment status. A good partner portal ensures version control, and allows distributors to access the information they need, as they need it. This not only makes your company easy to deal with, but saves wear and tear on your company’s personnel by minimizing urgent one-off requests.

Commit to continuously improve. Seek out candid feedback from your distributors on how to make things easier for them. Learn what the best suppliers in your industry do and emulate those things that make sense. Foster partner councils or other platforms to facilitate the exchange of best practices among distributors. Never stop seeking ways to add more value to your partners.
To truly grow your export sales, make the move to Exporting 201 by optimizing your company’s partner experience. Your distributors will reward you for it!

Doris Nagel is the CEO of Globalocity, and has 25+ years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry.  She’s a frequent speaker and author. Join Globalocity’s upcoming webinar, where we’ll show how the distributor onboarding process enables your distributors sell better and faster, and stay more engaged.

Companies that have had some export success selling though distributors often reach a point where their sales growth flattens or stalls. This series outlines the key steps needed to truly make your export business strategic, with sustainable group.

But warning: this is not an easy process, and requires some investments that may take a little time to pay back, as well as a bit of faith. Take comfort that many companies have made this shift, and have never looked back.

In our previous articles, we discussed the importance of changing your mindset, the way you find and invest in distributors, and improving your skills sets and processes.

In this installment, we examine another key step that companies need to make to move their export business to the next level — to Exporting 201 – and that is: upgrade your tools.

When companies first start exporting, they’re not sure if it makes sense to invest much in things like tools, software platforms, or apps. Business plans consist mostly of projected sales forecasts. Sales vs. forecasts are tracked with excel spreadsheets. Outlook or Google calendar may suffice for scheduling business reviews.

But by the time you’ve signed up several distributors, the whole support process can become difficult to manage. Key pieces of information about your distributors and that your distributor need reside in different places and systems. It’s often a challenge to track down promised sales tracing reports. Keeping new personnel trained in a timely manner and even keeping on schedule with business reviews can become difficult. Providing several distributors with requested information such as product data and marketing collateral on an ad hoc basis becomes time-consuming and distracting.

To effectively manage a network of indirect sales partners, distribution managers need centralized information and automated processes.

Here are some key tools that Exporting 201 companies invest in to more effectively manage their distributor network and to make them easy for their partners to deal with:

A Customer Relationship Management (CRM ) platform with customization or a module to specifically support distributors. There are even specialized Partner Relationship Management software packages that combine some or all of the functionality below.

Learning management tools. This might include a formal Learning Management System platform, or assistance creating on-demand learning modules. A learning platform allows exporters to help train distributors and new personnel quickly and consistently, as well as track training progress, verify learning effectiveness, and ensure any certifications for installations, repairs, and upgrades are maintained.

A dedicated partner portal/central content management system. This is generally a web/cloud-based application that provides a central content management system for partners to access things like product pricing, marketing collateral, company policies and procedures, current business plan, training materials, demo videos, product information, and communications. A partner portal eliminates version control issues, and minimizes one-off requests from distributors.

Contract management software. This allows suppliers to track key contract terms, dates, and goals.

Supply chain software to improve forecasting, track shipments in transit, better manage inventory and order fulfillment, and consolidate shipments to reduce costs and improve service.

Apps, including current price and product availability, shipment status, product information, and other key information from mobile devices.

Local-language website pages to help support foreign sales; ideally, these are locally-hosted and optimized for SEO in each language.

True, it’s sometimes difficult for an export manager to convince management to make significant investments in technology platforms. However, most or many of these tools also will make the company’s direct sales force more effective, and often benefit other company functions. Even small investments in apps can help automate processes, standardize data, and make it easier for distributors to do business with you.

To truly grow your export sales, make the move to Exporting 201 by investing in better tools, platforms, and apps to simplify and enhance your distributor management.

Doris Nagel is the CEO of Globalocity, and has 25+ years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry.  She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Join Globalocity’s upcoming webinar, where we’ll show how the distributor onboarding process enables your distributors sell better and faster, and stay more engaged.

Companies that have had some export success selling though distributors often reach a point where their sales growth flattens or stalls. They wish their exports were a strategic part of their business, with predictable double digit growth quarter after quarter, but they aren’t sure how to get there.

This series outlines the key steps needed to truly move your distributor export business to the next level. But warning: this is not an easy process, and requires some investments that may take a little time to pay back, as well as a bit of faith. Take comfort that many companies have made this shift, and have never looked back.

In our previous articles, we discussed the importance of changing your mindset, the way you find and invest in distributors, and enhancing your skills sets.

In this installment, we examine another step that Exporting 201 companies take to move their export business to the next level: enhance your processes.

Most Exporting 101 companies experiment with different approaches to see what works. They find their distributors from trade show contacts, internet inquiries, or government agency introductions. They end up in markets because new distributors take them there. They choose their business models based on what their distributor or other local partner tells them makes sense. They experiment with pricing, rush orders, credit terms, and whether or not to grant exclusivity.

All of this may make sense when a company starts exporting or is just testing the export waters, and Exporting 101 companies learn a lot along this journey.

What most companies find, though, is that this leaves them with a legacy of ad hoc decisions. They can’t explain how or why certain distributors were appointed. Distributor training is cobbled together, and delivered inconsistently. They meet with distributors as time and schedule permits, and business reviews happen sporadically.

Not everyone in the organization pulls together, because there are conflicting priorities and gaps in role clarity. People rely on institutional knowledge to get things done, and it’s often a challenge for new people to get up to speed. Distributors often find Exporting 101 companies hard to deal with, because there’s little predictability on how to get things done or how to get issues resolved.

To make the jump to Exporting 201, companies need to make the decision that they will not be all things to all distributors. They standardize their processes, carefully focusing on the things that maximize their sales and empower their best distributors. They map their processes, identifying roles and timelines. You can download a free sample here of one way to map those out.

Exporting 201 companies have clear, consistent processes for entering new markets, recruiting and vetting new partners, for training distributors, for providing marketing materials and translations, for special orders, pricing, and returns, business plan reviews, and many other key aspects of their export business. They document these processes, and train new team members on them. They also train their distributors to help them to work more effectively.

And, just as importantly, they measure key aspects of these processes. They review what works and what doesn’t. They evaluate how much various steps cost, whether there is a good return on these steps, and regularly re-assess how to eliminate or reduce costs and improve overall returns.
They know, for example, how much it costs to support their direct salesforce vs. their indirect sales channels. They are clear about which functions their distributors perform, and what a reasonable margin is for those activities. They can point to the precise metrics that characterize their best distributors, and to those driving their own business excellence, such as on-time delivery, order fulfillment, and support and service satisfaction.

To make the move to Exporting 201 and catapult your export sales, take time to formalize your processes. Standardize them, memorialize them, and train regularly on them.

Doris Nagel is the CEO of Globalocity, and has 25+ years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry.  She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Join Globalocity’s upcoming webinar, where we’ll show how the distributor onboarding process enables your distributors sell better and faster, and stay more engaged.

Companies that have had some export success selling though distributors often reach a point where their sales growth flattens or stalls. They wish their exports had predictable double-digit growth quarter after quarter, but they aren’t sure how to get there.

This series outlines the key steps needed to truly move your distributor export business to the next level – one where exports become a key strategic business unit. But warning: this is not an easy process, and requires some investments that may take a little time to pay back, as well as a bit of faith. Take comfort that many companies have made this shift, and have never looked back.
In our previous articles, we discussed the importance of changing your mindset, the way you find distributors, and the way you invest in your partners.

In this installment, we’ll look another key step in moving your export business to the next level: enhance your skill sets.

The first place to start is with your channel management skills. And that begins with a dedicated distribution manager, one of the best predictors of export success.

Experienced channel managers have a wide variety of skills. Selling through channels is significantly more challenging than direct sales. They’re almost polar opposites. What makes a great salesperson is their ability and desire to control their environment. They can do their own planning, they can select their own accounts, and they can manage the entire sales cycle.

Channel management, in contrast, means selling through an independent third party – somebody who runs their own business. Management and influence skills become more critical. Sales skills are still needed, but leadership, strategy, project management, and communication, are also important.

The best distributor managers listen actively, constantly put themselves in the shoes of their partners to clearly see the world through their eyes, and smoothly deal with change. They also manage up effectively – educating their entire organization to better support their indirect partners.

It’s a big and complicated job, and having someone who also has other responsibilities is not enough. If your channel manager is inexperienced, get them plenty of training and ensure they are well-networked with peers. To get even better and faster results, hire an experienced distribution manager.

There are other skills that will likely need upgrading if your company truly wants to create a strategic, high-performance export business. Some of these include:

Better logistics/supply chain capabilities. Many beginning exporters rely heavily on their third-party logistics providers. Over time, they often find that in-house capabilities result in better, more responsive customer support, easier IT systems integration, and sometimes cost savings by planning containerized shipments and consolidating logistics. There is enhanced focus on better forecasting and demand planning as well.

More sophisticated finance skills. Exporting 101 companies tend to insist on payment in their home currency and cash in advance. They tend not to hedge foreign exchange, and are unable to assess the creditworthiness of foreign companies or do financial due diligence on them. Tax planning is often minimal. In contrast, exporting 201 companies build capabilities in all of these areas, either internally, or through highly capable external advisors.

More robust compliance capabilities. Exporting 201 companies have calculated all the expenses of outsourcing things like duty calculations, export, free trade, and anti-corruption compliance, as well as compliance with other things like data privacy and environmental product laws. They recognize that outsourcing compliance piecemeal is a band-aid approach that often misses key issues and puts their company and their executives at peril. By bringing compliance capabilities in-house, they not only save money, but minimize risks by having more comprehensive and integrated programs.

Greater focus on overall partnering skills. Your distributor or channel manager needs to have a strong focus on being a good partner. This needs to extend to the entire partner-facing team, however. If the partners have a bad experience interfacing with customer service, logistics, or product specialists, the channel manager’s skills will be of limited help.

Exporting 201 companies need different and stronger skill sets, starting with their channel management skills, and extending out to the entire distribution channel support team.

Doris Nagel is the CEO of Globalocity, and has 25-plus years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry. She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Learn more about how to systematically find better distributors by downloading Globalocity’s latest e-Book.

Companies that have had some export success selling though distributors often reach a point where their sales growth stalls. They want consistent double digit export growth, but don’t know how to get there.

This series outlines the key steps needed to truly move your distributor export business to the next level – one where exports are strategic. In our previous articles, we addressed changing your mindset and the way you find partners.

In this installment, we’ll look another key step in moving your export business to the next level: change the way you invest in your distributors.

Beginning exporters generally focus on making transactional sales with their new distributors. By transactional, we mean that the suppliers provide basic product training to their partners. They give them some marketing materials, and then wait for the distributor to send them orders.

When the orders don’t come as planned, they might call to discuss why the two dedicated full-time employees or planned new product launches haven’t happened as promised.

These suppliers may grudgingly agree on reduced sales forecasts, but they’ll mostly blame the distributor’s lack of ambition or focus. They often complain about their distributors’ poor forecasting, rush orders, and endless special requests that create havoc.

Sound familiar? If so, you most likely have some – or even many – transactional distributors. With this kind of relationship, the distributor will never really grow the market for your products or services – at least, not the way it could be grown.

What do Exporting 201 companies do differently? First, they choose their distributors differently. They choose distributors who are willing to invest, and they send strong signals that they, too, are willing to invest.

How do they do that? First, by investing in a recruitment process, not just responding to distributors ad-hoc. Export 201 recruiting is consistent, professional, and designed entirely from the distributor’s point of view.

Exporting 201 companies also spend a lot of time thinking about how to enable their new partners not only to sell products, but also to how to help them build the supplier’s business. They do this by carefully designing a distributor on-boarding process.

Good on-boarding is far more than product training. It includes a how-to guide for the supplier and distributor will work together – the investments both will make, how issues are resolved, company culture, regular meetings to review a detailed business plan, and the written procedures – and more importantly, all the unwritten rules of how your company operates.

It’s often quite difficult to identify all of these unwritten expectations without outside assistance. People operating within the company are usually too close to be able to recognize and effectively articulate “how things are done around here” to an outside partner.

An Exporting 201 on-boarding process also includes training on all the skills the distributor may need to help build a local market for the supplier’s products or services. This training may need to be spooled out over a period of months. Sometimes, the specific training needed only becomes clear with time.

For example, a distributor may need coaching on how to more effectively forecast product orders. Or perhaps they would benefit from inventory management training. Maybe they need coaching on how to design better incentive programs, how to more effectively sell products, or assistance with evaluating and implementing IT platforms. Exporting 201 companies regularly review business plans, stay in touch with new marketing and training materials, and provide other valuable support, such as shadow training, distributor councils, or market research.

In short, there is an extensive transfer of intellectual capital from the supplier to the distributor.  Many Exporting 101 companies argue that they don’t have the time or resources to accomplish this, or that this is simply not their job – it’s the distributor’s.

The reality? Successful Exporting 201 companies know when you make these investments with the right distributors, they become true partners, both deeply invested in the long-term growth of the business.

And this is when the magic of sustained — and often remarkable — sales growth occurs.

Doris Nagel is the CEO of Globalocity and has 25+ years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry. She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Join Globalocity’s upcoming webinar, where we’ll show you a step-by-step process to systematically recruit better distributors; click here.

Companies that have had some export success selling though distributors often reach a point where their sales growth flattens or stalls. They wish their exports were a strategic part of their business, with predictable double digit growth quarter after quarter, but they aren’t sure how to get there from where they are.

This series will outline the key steps needed to truly move your distributor export business to the next level—one where exports become a key strategic business unit. But warning: this is not an easy process, and requires some investments that may take a little time to pay back, as well as a bit of faith. Take comfort that many companies have made this shift, and have never looked back.

In our previous article, we discussed the importance of changing your mindset. In this installment, we’ll look another key step in moving your export business to the next level: change the way you choose your distributors.

Most exporters begin by signing up distributors that approach them. They are typically so excited to find new foreign outlets for their products that they aren’t terribly picky about the partners they sign up. They figure any incremental sales are a good thing.

The likelihood of finding the best partners using this approach, however, are quite small. Sure, you may occasionally get lucky and find a gem or two, but most will likely be transactional distributors. They order your products occasionally, but never really invest in growing the market. The hard truth: you will never develop the international sales you need and deserve with those kinds of distributors.

The way Exporting 201 companies find partners is completely different. They identify their ideal distributors and recruit them. They systematically identify desired partner criteria, seek out promising partners, and evaluate each against their criteria, usually using a scorecard or other consistent scoring method. They look for distributors that will invest in growing the business, and in turn, they also invest in their distributors—becoming true partners, an aspect we’ll discuss in a later article in this series.

This process starts with data analysis, as well as corporate soul-searching. Data analysis helps tease out those parameters that your most successful distributors have in common, and an honest look at why others have been less productive.

Suppliers need to identify and accept responsibility that some of their own past behaviors have resulted in poor distributor results, another aspect we’ll discuss later in this series. Managing distributors is a two-way process, and simply placing all the blame on the distributors for poor performance is unlikely to result in real improvement. Exporting 201 suppliers identify necessary behavior changes they need to make, and implement steps to help make those adjustments.

Advanced exporters also recognize they need to make sometimes difficult decisions about terminating non-performing legacy distributors. When suppliers have been in Exporting 101 mode for several years, current personnel may not even know why or how certain distributors were signed. Personal relationships may have been developed over this time, even though sales results are poor or uneven.

There may be good reasons to keep on one or two of these poor-performing legacy distributors, but advanced exporters know the rest will need to be terminated. A few of these may be rehabilitated or brought up to your new standards, but these efforts need to be carefully targeted. And these initiatives need to be implemented with a clear go/no-go decision timeline. Too many beginning exporters waste a lot of time and energy having repeated and extended back-and-forth discussions with underperforming distributors.

Exporting 201 companies recognize that they need a completely different approach to finding distributors and interacting with them. We’ll explore how advanced exporters manage their distributor network differently in our next article.

Doris Nagel is the CEO of Globalocity, and has 25+ years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry. She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Join Globalocity’s upcoming webinar, where we’ll show you a step-by-step process to systematically recruit better distributors.

Editor’s note: This is the first of a series on moving from Exporting 101—an opportunistic endeavor—to Exporting 201, a strategic part of a business.

Companies that have had some export success selling though distributors often reach a point where their sales growth flattens or stalls. They wish their exports were a strategic part of their business, with predictable double digit growth quarter after quarter, but they aren’t sure how to get there from where they are.

This series will outline the key steps needed to truly move your distributor export business to the next level—one where exports become a key strategic business unit. But warning: this is not an easy process, and requires some investments that may take a little time to pay back, as well as a bit of faith. Take comfort that many companies have made this shift, and have never looked back.

Step 1 in this process: Change your mindset.

This is the most important step, and without it, the remaining steps will fall short.

The good news: this step requires no monetary investment. The bad news: it is by far the most difficult step.

And a fair warning: many companies will never make this shift without outside assistance, whether by hiring an experienced dealer/channel manager, bringing in a consultant, or through peer group or industry mentoring. Why? Because most companies are too close to the issues, too engrossed in the day-to-day processes. Like any shift in corporate culture, it’s hard to do organically without an evangelist or two.

A key step in the mindset change is to truly accept that every sale is not a good sale. To make your export business strategic and to grow it sustainably, you must relentlessly focus your limited resources on your highest and best markets.

This sounds self-evident on its face, but many exporters struggle with the concept in practice. It means accepting that you will say goodbye to some non-strategic distributors and countries, and further, that your export sales will probably drop in the very short term.

Here’s a typical exporting 101 story. A company we recently visited had one guy managing distributors and other partners in 42 countries, and that was not his only job. He looked frazzled, and admitted as much. He very much wanted to expand his foreign sales. But when we recommended that he first identify his best prospect markets and focus efforts there, and let go of several countries and distributors, he reacted with horror. He clearly did not want that! What he wanted was help to identify still more countries and distributors to grow his sales.

Make no mistake: chasing more and more distributors in more countries will not get you to the next level. And that is true no matter how many people you dedicate to the business.

Why is that? Because almost certainly several markets/or distributors are non-strategic and are simply costing you more than they are worth.

These non-strategic distributors cost you in many ways: they typically take up a disproportionate amount of your time—your scarcest resource—compared to the sales they bring in. Many companies think the distributor that only orders periodically and makes few demands is one that doesn’t cost them much.

In our experience, however, most companies seriously underestimate just how much those partners cost them in terms of conference calls, samples, literature, order fulfilment, tracking down sales reports, and travel, not to mention the distraction and loss of focus. True, one of these distributors doesn’t cost all that much, but when you have several non-strategic distributors, the cumulative cost to your team and organization typically mounts to unsustainable levels.

All that is time and energy that can and should instead be focused on more strategic markets and distributors.

If there’s one thing our work with more than 400 clients over our collective nearly 100 years of experience has taught us, it’s that to truly grow your international sales, you must identify your highest-prospect partners and markets, and single-mindedly focus on growing sales there.

And that means you will just need to let some of your non-strategic partners—and the sales that come with them—go. But don’t worry. The growing sales in your strategic markets will soon make up for and outpace all the lost sales from the non-strategic markets. And your organization will run smoother, with far fewer crises.

Doris Nagel is managing partner of Globalocity, and has over 25 years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry. She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Get a free excerpt from the book here.

No one (except, of course, the lawyers) want to think about how to end a relationship when it is only just beginning and full of promise. However, most agreements eventually end, and that’s why it’s worth spending time thinking about termination—especially while the relationship is amicable.

That way you can avoid the problems that a medical device manufacturer encountered when it finally terminated its distributor in Brazil. The company found out that the distributor had registered the products there, and that the new distributor would have to re-register—a process that would take nearly a year. They tried to get the old distributor to help expedite this by asking them to share the files and work with the new distributor to smooth the transition. Not surprisingly, the relationship had already soured, and the old distributor refused, and even stopped communicating.

Furthermore, the old distributor dumped all their inventory on the market at super-discounted prices, and said negative things about the manufacturer to local customers and government officials. And they refused to pay most of their receivables. The result: the manufacturer was effectively shut out of the Brazilian market for several years, and suffered very costly write-offs and sales declines. Their brand in Brazil was severely damaged.

If this company had thought more carefully about termination when they were setting up the relationship in the first place, they might have avoided some of these issues.

You should always plan for termination in the context of how you would transition to a different distributor or your own stand-alone sales office. (It’s always easier to torch and run from the market, but the reality is that you should think hard about entering a market if you think that’s how it will end.)

Goodwill payments. Make sure you clearly understand any goodwill payments that may be due on termination. Think about how long-term customer contracts and government tenders should be managed to avoid disruption to the customer.

Inventory. Think through how the distributor’s existing inventory should be handled. It’s easy to think, “They bought it, so let them find a way to get rid of it.” The problem is that they will drop the price, making it very difficult for your new distributor or your new sales team. Leaving the old distributor to pick up all the pieces usually doesn’t make for a smooth transition plan. Consider buying back some or all the inventory (other than maybe excess no-move inventory) to essentially buy their goodwill so that your brand isn’t ruined.

Product registrations and other key files. If you’re in a highly-regulated industry, think through how all the registration documents and files should be handed over. This can significantly shorten your new partner’s time to market, and may be worth a generous payment to your old distributor.

Customers. Ultimately, protecting your brand is about making sure the end customers are happy or at least accommodated. Agreeing that your distributor will provide a list of customers and key contract terms will allow a much smoother termination.

In today’s uber-connected global economy, the scorched-earth exit is seldom the best option, and can have unintended consequences and ripple effects (such as having your old distributor’s inventory appear in other markets, or bad online reviews).

Most companies have invested too much in building and protecting their brand to allow a distributor termination to get truly ugly. Planning for termination in the contract, along with building in a financial cushion to perhaps buy the old distributor’s cooperation often just makes good business sense.

Doris Nagel is managing partner of Globalocity, and has over 25 years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry. She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Get a free excerpt from the book here.

Editor’s note: This is the eighth in a series of articles on Debunking The Top Ten Myths About International Distribution Agreements. Check out the previous articles in the series:

Myth #1: We don’t have time for a contract – we need to get busy selling!

Myth # 2: How we found our distributor is totally separate from our contract.

Myth # 3: Contract templates are great, because that way we can skip the legal review costs.

Myth #4: We Can Just Have Our Local Contracts Lawyer Review Our Agreements

Myth #5: We hope our foreign distributors don’t hand out bribes, but if they do, it’s really not our problem.

Myth #6: Two extremes: We never give exclusivity unless forced to, or, we give exclusivity freely.

Myth #7: If We Set Aggressive Deadlines to Finalize Our International Contracts, We’ll All Stay Focused and Get it Done More Quickly!

Myth #8: We don’t need to spell out operational details in the contract—that’s business stuff, not legal!

Once upon a time, a manufacturer had an Israeli distributor. They had a contract, and it had all the usual legal terms.

The relationship was rocky, however. The manufacturer and the Israeli company fought constantly about who should pay for new headcount, new product launches, product training, and attendance at key congresses and trade shows. They disagreed about sales forecasts and rush orders. And they argued endlessly about sales reporting frequency and details, and when to have business reviews.

This story has been repeated over and over, with variations, in my more than 25 years of negotiating distribution agreements. It’s sometimes hard not to get impatient when companies spend lots of time negotiating force majeure clauses (what happens when an act of God prevents contract performance), or assignment or notice provisions.

No doubt these clauses are sometimes the subject of disputes. But operational issues generally make or break the relationship. And the time to think through and discuss them is during contract negotiations. If the parties have detailed discussion and put their agreement in writing, there tends to be fewer issues later.

Here are some of the most common sources of disputes, and some questions to consider.

Investments: How many people will the distributor dedicate to selling and supporting your products? What kind of skill sets do they need? Do you want the right to interview, veto, or replace these people? When there is turnover of personnel, how quickly should these positions be filled, and what recourse should you, the manufacturer have, if the positions aren’t replaced? Which of you will pay for product training, congresses to promote your products, or the creation of localized marketing materials?

Forecasting & Demand Planning: There is nothing worse than having your distributor provide you an aggressive sales forecast, and you purchase or make products based on this forecast, only to find the orders never come. The reverse is equally bad: the distributor suddenly wants lots of unforecasted products shipped immediately, and you don’t have them available.

Often, the distributor does not have the skills to accurately forecast, or to do it the way your company expects. Sometimes cultural differences are the root cause—the distributor may not want to disappoint you, so they provide a rosy forecast. Recognition and skills training often can be beneficial.

Logistics and Supply Chain: When are rush or air freight shipments appropriate? How long are manufacturing lead times? How are product shortages rationalized? Will the distributor incur penalties in their customer contracts if delivery is delayed? What shipping metrics will you use?

If you’re not already, become familiar with INCOTERMS—these are very precise shipping terms that spell out which party is responsible for each element of the costs and risks of international shipping and help avoid disputes.

Pricing: when and how should pricing adjustments occur? This is particularly important in countries where there are large and sudden currency fluctuations, or when product cost is heavily dependent on the price of petroleum or other key raw materials.

Payment: On what terms will you sell your products? When will you extend credit, and if you do, what happens if payment is delayed? Can you or should you cut them off, and if so, under what circumstances?

Reporting and Business Reviews: Will there be an agreed business plan? Will there be quarterly business reviews? Will there be minimum purchases, and how and under what circumstances will they be adjusted? What metrics, besides minimums, are you expecting your distributor to meet? Do you expect sales tracings reports? If so, how often, and in what format?

After-Sales Support: How will returns and repairs be handled? What tasks are the distributor able to handle? Should they receive special training to do certain after-sales support activities? Will the manufacturer or a third party handle? How quickly can repairs be done? When is replacement appropriate?

Take the time to discuss these and any other relevant operational detail with your new distributor. Memorialize these in your contract. Think of your distribution contract less as a document you pull out of the dusty files when things have gone wrong, and more like a blueprint for governing your distributor relationship.

Doris Nagel is managing partner of Globalocity, and has over 25 years of hands-on global experience, focusing on strategic partnering, indirect sales channel management, and market entry. She’s a frequent speaker and author, and is currently working on a book on international distributor networks. Get a free excerpt from the book here.

Editor’s note: This is the eighth in a series of articles on Debunking The Top Ten Myths About International Distribution Agreements. Check out the previous articles in the series:

Myth #1: We don’t have time for a contract – we need to get busy selling!

Myth # 2: How we found our distributor is totally separate from our contract.

Myth # 3: Contract templates are great, because that way we can skip the legal review costs.

Myth #4: We Can Just Have Our Local Contracts Lawyer Review Our Agreements

Myth #5: We hope our foreign distributors don’t hand out bribes, but if they do, it’s really not our problem.

Myth #6: Two extremes: We never give exclusivity unless forced to, or, we give exclusivity freely.

Myth #7: If We Set Aggressive Deadlines to Finalize Our International Contracts, We’ll All Stay Focused and Get it Done More Quickly!