How Distributors Could Make or Break Your Business
April 12, 2018
Choosing the right distributor for your small business’ products is one of the most important decisions you need to make. After all, your distributor is the person buyers meet and order your products from. The way they market your products can make or break your business.
Do You Need a Distributor at All?
Most startups don’t begin looking for a distributor on their first day in business. Instead, they often market and sell their products themselves.
Your customer base will likely surpass a level where you can’t handle distribution by yourself anymore
This is a sensible choice, since new businesses need to build up a solid customer base first. Personal contact and trust-building is very important in that first stage.
But when your business takes off, your customer base will likely surpass a level where you can’t handle distribution by yourself anymore. In addition to it being cost-intensive, it will also require a lot of time. This is when you need to start thinking about partnering up with a distributor.
How to Find a Distributor?
There are several ways to find a distributor.
You can ask similar businesses how they distribute their products, or attend trade shows and try to find distributors there.
You may start looking for distributors based on the location you want your products to be distributed in
You can also subscribe to a distributor database. There are several online databases, both industry specific and comprehensive, that compile the contact information of various distributors.
There are 5 easy ways to find an international supplier, and grow your business. Read about them here.
For example, Export Solution and Global Trade offer comprehensive global databases, while Best Food Importers concentrates on the food and beverages sector. Search for a database in your specific industry.
Alternatively, you may start looking for distributors based on the location you want your products to be distributed in. This approach is best when you’re thinking of exporting your goods.
Many countries manage online databases of their distributors. For example, this database covers the entire EU region. Or you may turn to US government resources, like the embassy or consulate in your chosen country, or Export.gov.
What to Ask?
Once you have a shortlist of potential distributors, you have to pick the one that’s perfect for your needs. Here’s a list of criteria to help you decide.
If a distributor is too big, your products may “get lost” in their range. If it’s too small, they may not have enough resources to properly represent your business.
System and Capacity
Check out their supply chain. Where are their warehouses located? How many transport vehicles do they possess? What kind of support systems do they use? How many employees do they have? How long is their delivery cycle?
Let them walk you through the whole process and explain how they work in detail before you make a decision.
You need a reliable partner that delivers exactly the way they promised. But to do that, they need financial stability. Although it’s unlikely they’ll show your their last financial report, you can still determine their stability by asking about their client base and the volumes they usually handle.
You need a reliable partner that delivers exactly the way they promised
You can also research them online. Look for red flags like disgruntled customers, or broken contracts.
Ask about their method for launching new commodities. How do they get their clients to buy new products?
Check out their existing client base. Do they have competing products in their line? Do they carry complementary goods that could be marketed with yours?
If possible, try to ask for client references, and speak to a few of their existing clients. Are they happy with the distributor’s services?
Are they enthusiastic about the prospect of working with you? Granted, you’re not looking for a “jumping over the moon” kind of excitement. But if they show a lacklustre approach to your potential partnership, how can you expect them to represent your products to their buyers?
What to Include in the Agreement?
Once you’ve made your selection, it’s time to sign a contract. Make sure to seek legal advice before you commit yourself to the partnership.
A typical distribution agreement includes:
- The territory of sales;
- Product range;
- Responsibilities of both parties;
- Exclusivity (whether the distributor is the only company with the right to sell the products in the given territory);
- Sales restrictions for competing products;
- Intellectual property rights (i.e if they can use your logo);
- Insurance and risk;
- Termination and dispute management.
How to Pay Your Distributor?
This is especially important if you’re employing a global distributor. International wire transfers are costly, unsafe, and unreliable. A delayed payment can quickly sour the business relationship with your distributor.
Don’t lose a valued business partner. Instead, pay them through Veem.
Veem allows you to send and receive international B2B payments with just a click. You can save time, because Veem is faster than your bank. The process is safe and transparent, since you can track all your transactions in real time.
And you can save money, because Veem charges no wire fees and offers competitive foreign exchange rates.
Sign up for a free Veem account and enjoy easy international payments.