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Agents and distributors can help you establish your products, adding their local knowledge and contacts to your offering in their overseas market. There are distinct differences between agents and distributors and we have covered that elsewhere however, the key issue is a distributor will purchase your goods while an agent tends to introduce you to a buyer, there are various agency types but this is the fundamental difference. Once you have decided the best arrangement for your business, the next step is negotiating their contracts and determining how to get the most from the relationship for both parties.
Here are several aspects you should consider including:
An exclusive deal (no other agents or distributors in a specified territory) can be attractive to the agent or distributor as they won’t have local competition, but it does leave you entirely dependent on their sales.
If you do agree to an exclusive deal, ensure it is target led so that you can measure performance and make continuation of the exclusive deal dependent on achieving those targets within a given timescale. (Don’t forget that a distributor buys from you outright so you have less control over where they sell so it needs to be defined in any agreement). If the targets are not achieved, you still have the option of keeping them on but in a non-exclusive capacity, so that you can appoint additional agents, or of terminating the contract.
Consider what support you can offer them to market your products and how closely you wish them to adhere to your brand guidelines. You may wish to give them a margin of flexibility to allow for regional nuances but ultimately they are representing your business, so guidelines need to be defined.
Make sure it is clear who performs, and, at what level any service provision is set. Establish clear service level agreements (SLAs) that you wish them to operate by. You may even wish to build in penalties for non-performance or levels of care ie first line support with an escalation process back to the manufacturer.
Establish at the outset that the IP in the products or ideas belong to you and that any shared IP for the purpose of selling or supporting the product in the chosen market only exists while the contract or agreement is in place. This should be made clear in your agreements.
How much training is required to be competent at understanding your products and how to sell them? The more support you provide, the better equipped they will be to secure sales. It may also be unreasonable to expect them to hit challenging targets if you don’t offer them the opportunity to develop the right skills and knowledge.
How long is the agreement? What currency will they be paid in? When will they be paid? What could constitute a breach of the agreement and what would the outcome of that be? When can contracts and targets be reviewed and, potentially, be renegotiated? All these are important factors to agree upon.
Always look at your relationship with your representatives as a partnership. You will achieve the most success if it is working for the benefit of both parties. By setting clear expectations upfront and providing the right kind of support, it sets the contract up to work well from the start. The most important part of any relationship is communication.
