Why an Export Network?

David Bone

Managing Director of
Somar International Limited
A Pool of Practical Experience

 Why Reinvent the Wheel?

 Planning Considerations

 Operational Practicalities

 Avoid Needless Costly Mistakes

 Relevant Advice
An example of what just one company can
bring to the table
The Somar Business Model

Started in 1995 as an exporter

An International Distributor Network

Now covering over 80 territories –

(but currently scaling back)

Multi Award Winning – Best Practice

Why
Distributors?
Small Management Team
requirement

Low, or no “set up costs”

Distributors are close to local

marketplace

Distributors understand local

culture

Distributors understand local

language

Distributors can deal with local

legal requirements
Major Advantages
of the Distributor
Model:
Low risk
(if planned and set up correctly)

Positive cash flow

Scalability – generic growth

The Distributor
Model - Some
Considerations:

Your company‟s
reputation in their hands
You sacrifice gross
margin
More difficult to “manage
the sale” through a third
party
How do you develop
an effective distributor network?

Solid Planning
On Going Management
Before You Start
Some basic planning
considerations:

Which countries are

you targeting?
Why do they want your
products?
Are your competitors
already established
there?
 Planning Considerations:
What is your offering?

 What will you include in your package? – You may wish

to tier the offering to give different levels of support

 How much will your distributors be prepared to pay for or

commit to the package?

 Why get people to pay? – Commitment

 How will they get a good return? – Key Point – There

must be enough in it to motivate everyone
 Planning Considerations
Distributor Profile:

 What skills must your distributors possess?

 What resources do they require?

 In Somar‟s experience you get several types of people –

be aware of who you are dealing with:
 Those who “collect” distributorships
 Those who think it will be „easy‟ with everything laid on
 Those who have the ability to grow a business from nothing
 Those who are changing vocation
 Those who are adding your products to their existing portfolio
 Planning Considerations -
Distributor Business Model:

 Who is responsible for what? Make it very clear.

 What should their business model look like? What

expertise do they need to engage, and what resources
will they require if they are to succeed selling your
product?

Will you allow your distributors to sell other products? If

so, you will need to have a means of motivating them to
concentrate on your products rather than others.
 Planning Considerations -
How Will You Develop Your Distributor
Network?

 How will you find your potential distributors?

 How will you get their attention?

 What will your recruitment and screening process involve?

Planning
Considerations -
Finding your
Distributors :
Internet trawling
Internet traffic
Target press advertising
UKTI advisors
Face to face meetings / trade
delegations
(UKTI can help with this)
Webinars / Social Networking – a
growing media
In addition UKTI Offer a range of
excellent services
Planning
Considerations -
Financials:
Key Point: – Keep payments
to third parties to a minimum

Method of logistics

Landed cost including:

• import duties
• local taxes
• insurances etc.
 Planning Considerations
Financials:

Key Point: – there must be enough in it

to motivate everyone

 Consider the effect of exchange rates

 Pricing policies – Somar have a Sterling

price list for all territories except the USA
– no nasty surprises
 Planning Considerations
Financials:

 Distributor or Agent? – consider the difference,

particularly with regards to the effect on your cash
flow – remember it will be expensive for you to hold
stock for the world – you cannot open a sweetshop
without any sweets!

 Method of Payments – Would not recommend giving

credit to overseas customers unless guaranteed by a
mechanism such as a Letter of Credit – if you use this
mechanism, beware, set out YOUR terms, should be
Confirmed and drawn down against a UK Bank –
again your bank can advise you on this.
 Planning Considerations
Financials:

 Don’t be too generous - get distributors to pay

for things – no freebie trips – only if they buy
stock etc. (or they will have you running around
everywhere at your cost)

 Key Point – If A Distributor fails – be sure that

your company does not lose money – you should
look to generate profit from every transaction
Planning
Considerations -
Legal:
Contract/Agreement should be
very clear - expectations of
both sides clearly defined. No
surprises, you will need to
build the relationship on trust.

Key Point: – your contract

should be in English Law

Key Point: – if possible

should be standard – this will
save you considerable
amounts in third party legal
costs
 Planning Considerations -
Legal:

 Consider how you can part company with ineffectual

distributors (minimum sales)

 Make distributor responsible for all legal's locally

 Insurances etc. – you must have professional indemnity

at least – take advice from your broker – Special
attention for USA
 Planning Considerations -
Legal:

Franchising – decide, are you running a distributorship,

agency, or franchise? – be aware of localised laws on this –
particularly in the USA
 Planning Considerations -
Legal:

 Product Safety – ensure that you are fully compliant with CE

(and if necessary UL) standards - read the fine print on the
standard requirements (for example re warning notices)

 Clear terms of purchase – outlining where your corporate

responsibility ends in the sales cycle

 Consider protection of your brand, and your intellectual

property – Madrid Protocol et al. Whilst defence of this can
be difficult, biggest problem is someone trying to stop you
from trading once you are established (this happened to
Somar in China)
Practical Network
Management
Good Management is
essential – the difference
between 5% retention and
45% retention

Clear manageable sales

model / system that can be
tracked

On Line CRM system

(Salesforce.com)
 Practical Network Management:

 Territorial exclusivity – verticals etc. – more exclusivity,

more commitment required

 Timewasters (Paretto Principle) – find a system that will

allow you to spend more time with your more productive
distributors
 Practical Network Management:

 Stockholding principle (use long lead times – you are

not a supermarket)

 Training – initial, field, and on-going training –

dissemination of training

 Sales motivation – reward schemes, league tables etc.

Practical Network Management:

 Technical support – methods

 Quality control – methods

 Feedback from Distributors – face up to them

at least annually – ask them what they want,
send out regular feedback forms
Some
Recommended
Tools:
Sales Toolkit – what ever that
may be

Brochures – in digital form for

language and branding
personalisation

Marketing branding style

guide

Website builder – you control

the URL so that you can
remove it if required
 Some Recommended Tools:

 Distributor support website – with various functions

 Communication artery – direct to right department.
 Knowledge bank – support function including manuals etc.
 On Line training – preferably e-learning.
 Access to CRM system
 Marketing materials library.

 Distributor Regional Conferences

Some Final
Considerations:
Recognising and
understanding cultural
differences:
• Religion
• Holidays
• Male / Female recognition
• Management level recognition
• The meaning of an agreement
Some Final
Considerations:
Language

Time zones – particularly for

support

Climate

Political Stability – would

recommend a Pestle Analysis
of each territory (UKTI can
help)

Official Honesty
Don’t Undersell Your Business……

In summary…..if you are enjoying success with

a strong product that can travel well, exporting
your success via an International Distributor
network is a safe and effective way of scaling
the value of your business up to realise it‟s full
potential……It is not difficult, it is not
expensive, it is not high risk….I would
recommend it as part of your growth strategy.
For a summary
sheet please email:

d.bone@somar.co.uk