The Small Business - we grow too!

I was with a client yesterday in Oxford, started out very small - 4 people with the idea for a new technology in an old area - and now with funding, investment, energy - lots of energy - after 3 years they have 120 people, mostly scientists and they are going to grow very quickly. Why was I there - they need to export. Note the word NEED - the UK market isn't big enough for them!

Just a minute, haven't they read the press? Haven't they seen the news articles on how hard it is to get into export and how companies won't try because they fear failure or at least not getting paid on time? Don't they know how difficult it is with strategic planning, market research, needing skills you can only learn over years? Well, no they don't and to be honest they don't care.

That's not to say they are stupid, far from it - their management team work under AGILITY MANAGEMENT. Agility management? you might ask. Yes, if management plans need to change, change them, don't get stuck in a rut and not knowing about something doesn't mean they can't do it. They know they need help to export, and Strong & Herd LLP was called in to pull the strands together and make sure they don't miss key things as they sell to USA and China. Have they done market research, strategic planning - yes, but they wouldn't call it that. They know their products, know the markets, know their competition and have spoken to their prospective customers - they know their market edge.

What sparked this blog was reading something posted on LinkedIn a couple of months ago (I catch up eventually!), a link to a USA blogger and these words jumped out at me:

Strategic planning is inappropriate for small companies because:

• No time: They don’t have the management time or resources to invest in days of planning.

• Big cost: Because their top teams usually lead their sales efforts, taking them off the road has an immediate negative impact on revenues.

• Small payoff: The payoff of strategic planning is often measured in millions of dollars rather than hundreds of millions, so it makes no financial sense to overinvest in the effort.

• Short-lived: Smaller businesses must continually adjust their strategy so the strategies they develop during a strategic planning session are usually short-lived. They win because they are more nimble, quicker to seize unexpected opportunities, than their larger competitors. Long-term planning can slow them down and kill this advantage.

This doesn’t mean small-growth companies should fly blind. It means they should adopt an adaptive opportunistic approach to strategy. They should plan in the hallway, not the boardroom.

It goes on to say that what the smaller companies need is strategic thinking, not strategic planning - two key words "Why Not?" to out think the Competition, sometimes this happens just because you are new in the industry and don't know how it should work so do it your own way. Use IDEAS: Imagine, Dissect, Expand, Analyse, Sell. According to Kaihan Krippendorff who wrote the US blog the main reasons companies don't do something is because they think it costs too much, customers won’t like it or it’s not technically feasible without testing if it is true. He was talking about all business, but this sure seems appropriate to exporting.

Well, I met a company like this yesterday and believe me it works! Can't wait to see them win the Queen's Award for International Trade in 2013 - they will, you know, because no-one's told them they can't!

TALES FROM THE ROAD 3 - MANAGING INTERPRETERS

I have never employed a bad interpreter, and I have used a lot of them in different markets. My first experience of working with an interpreter was in Germany in the early ‘90s. I was selling capital woodworking machinery at the time and it seemed wrong and somehow disrespectful to have an exhibition stand at a German international show without being able to communicate with Germans! I arrived on the stand as soon as the exhibition hall opened to find Marjorie was already there, a German-American, and the first thing she asked was ‘What do these machines do?” So I told her, and when the stand became inundated with customers half way through the morning, she was actually able to hold clients with the knowledge she had gleaned. Recognising that can’t have been a comfortable experience for her, I determined that I would have several contacts with any future interpreters well in advance of their project.

On at least two occasions, interpreters have saved me a lot of time and money. I was researching the market in the Netherlands for carpet underlay, and commissioned what was then known as a Tailored Market Information Report (TMIR) from UK Trade & Investment. In the late ‘90s the deal with TMIRs was that if you visited the market within 6 months of the report being completed, you would be refunded 50% of the cost. So that’s what I did, and the Commercial Officer asked if I would mind her tagging along to my meetings both to learn about my products and to provide translation where necessary. The result of her work was that we discovered the Netherlands used a different type of underlay, and that our products were unsuitable for the Dutch market.

Then there was Luis in Barcelona. I took him along to several meetings, including one with Enric Miralles the architect who designed the Scottish Parliament building at Holyrood. I met Enric’s partner whose English was embarrassingly perfect, so Luis sat patiently being paid for doing nothing. Or so I thought. I apologised to him if he felt he had been a bit of a spare part during our meeting, and he replied that he had been listening to the chatter in the office and learned that actually I had no chance of getting my carpet products specified for Holyrood because the job had clearly been awarded to one of our much larger competitors.

But perhaps the stand-out interpreter was Katya in both St. Petersburg and Moscow. Katya worked for our distributors, and the St. Petersburg event was to mark their tenth anniversary in business, which happened to coincide with the city’s 300^th anniversary. And no, it wasn’t easy to avoid the vodka! I presented to the company’s nationwide management team of 45 who hailed from all corners of Russia, and had created a very snappy product training seminar. I had sent a copy to Katya in advance, and we had discussed how the presentation should go. I would say a sentence, and Katya would interpret. Easy huh? Well no not really. It didn’t work out quite like that. I spoke my first sentence, signalled to Katya as agreed who then went off on a soliloquy that lasted about five minutes! Thankfully my audience didn’t seem to mind how long the presentation took, and later that evening I learned two things First, when making a toast in Russia it isn’t enough just to stand up and say something short like ‘This is a toast to all my Russian friends for every happiness and success’. No. They want War and Peace, probably because then they have longer to recover between shots of vodka! The other thing I learned is that most of the 45 spoke perfect English!

But Katya’s star turn was at the British Embassy in Moscow where my colleague and I were presenting to an audience of about 120 Russian architects. I made the mistake of trying to kick off with a bit of humour, which was to tell the gathered professionals where in the UK our company was based, ‘Near Manchester’ I said “Where the football comes from”. And Katya went off on a meandering solo journey through the interpretation of my very brief (and not terribly funny) sporting gag. The hall fell silent when she finally shut up, and assuming not unreasonably that my football gag had bombed spectacularly, I carried on, unruffled of course. And as I continued with the presentation, a group at the front started to laugh and talk loudly about Manchester United and Spartak Moscow and “Very funny about the football. We like the football here in Moscow!” A bit slow on the uptake there chaps!

So what did I learn about working with interpreters?

1.       Only use professional interpreters!

2.       Brief your interpreter well. They are a part of your team, and your reputation

3.       Instruct them to listen as well as to interpret

4.       Know something of the culture of the audience you are addressing

5.       Write a few toasts before you visit your Russian distributors!

JOHN REED

TALES FROM THE ROAD 2 - TURKISH DELIGHT

The language barrier can be a serious obstacle to doing business internationally. We should also regard language as just one item in our cultural toolbox when meeting our overseas representatives and customers. I sold interior products into 32 countries for 8 years from the late ‘90s, mainly into Europe and the fringes of Europe, and my travels took me on regular business trips (Oops! Sorry, “Jollies”) to Istanbul where I was privileged to work with one of the finest and most dedicated distributors on the planet.

These guys were really keen. I mean REALLY keen! I would arrive in Istanbul around mid-afternoon, to accompany them to a couple of potential customers before finally touching ground in their office, where I would give product training sessions in slow, deliberate English. Because no, I don’t speak Turkish. Then back in the car to be steered wildly through narrow and hilly backstreets in order to avoid the seemingly permanent rush hour traffic, sometimes I suspect in the wrong direction, and then out for a meal more often than not with clients – on one occasion two meals! Well it would have been churlish to refuse.

If midnight couldn’t come soon enough, my 6:30am breakfast alarm always came far too soon. I was generally picked up by 8am and taken to the office where the morning would be spent in meetings. I was always heavily outnumbered, normally around five to one. The meetings were chaotic, with two partners talking simultaneously, and generally about different things, sometimes in Turkish, sometimes in English. Then there were the project managers who also speed-talked bilingually and gesticulated their way through the morning, while occasionally taking themselves off to answer the phone in mid-conversation. And I would have several working days like that before taking my flight back to Manchester.

All that sounds disorganised and a bit mad, but that was their way and they seemed to miss nothing. All projects were properly logged and each and every one of that fantastic, energetic team could forecast almost to the day when orders would be placed. In the calm after the chaos my own forecasting took minutes because they had done such a good job. And after several trips, and a number of long exhibitions, we developed substantial business and forged a strong friendship that generally meant I would have to stay out well after midnight and still wake to a 6:30am alarm!

By a complete quirk of chance, I found a very good way of holding their attention during meetings so that I could say my piece uninterrupted for at least 15 minutes. It became a tradition to buy each other small gifts, and as I looked in the Manchester Airport shop for suitable English items my eyes fell upon toffee tins shaped like a number of very British icons: a London Bus, a red postbox, a telephone box, and others. So I bought a different one for each of my Turkish distributor friends.

They collected me from the airport. We visited a couple of customers en route to the office. I gave them product training. We saw some more customers, and took some of them out for a meal until well after midnight. My alarm went at 7am. I was collected at 8. Through the traffic. Into the office, and into another couple of hours of loud and frenetic organised chaos”. I was finding it very tough to break through the wall of enthusiasm and hold their attention for more than a few minutes … until I remembered the toffees.

One of the guys was due to go to see a client, and I wanted to give out the gifts while everyone was in the office. So I paused the meeting in my most polite loud English, and asked to distribute my gifts. I wasn’t expecting each of them to sample the toffees straight away. And after a couple of minutes I realised that the meeting had fallen silent. The English toffees were so sticky that my Turkish friends were having great trouble talking. I was able to hold the floor for an uninterrupted 15 minutes, during which I delivered every key point that I had wanted to get across. They seemed to like the toffee, so I took some more on my next visit. In return, they gave me real Turkish Delight.

I learned several things from my time selling in Istanbul.

1.       You will never have more energy than your Turkish distributor

2.       The Turks are the most efficient salespeople on earth

3.       Friendship and business do mix, and business thrives on the back of friendship

4.       Be prepared for very long working days and minimal sleep

5.       Either learn Turkish or take an interpreter who can then hear what is being said

6.       Sticky toffees are great for meeting control

JOHN REED

International Trade Compliance - a thought

I have noticed that compliance has been raising its head recently, what with all the goings-on in Iran and Syria. I am continually emailed information from both the US and UK authorities advising me of new regulations which, if I fail to comply, will result in fines, prosecutions and even jail.

Experience tells us that there are many UK exporters who don’t take compliance seriously, or in some instances, don’t really understand what it is all about it. This is particularly the case where someone has decided to start exporting without any previous experience or training. I wouldn’t be at all surprised if some of them don’t even know there are embargoes and/or sanctions for certain countries they are selling to. And when it comes to the “less serious” issues like correct tariff classification and checking Customs entries for accuracy, how many exporters, or indeed importers, take the time, or even have the time, to perform this task? I would suggest that the number is fairly low; firstly because they possibly assume this is their forwarder’s responsibility (it isn’t!), and secondly because perhaps they don’t even know they should ask their forwarders to provide them with the information. And even if they do receive a copy of the entries, how many comprehend all the information contained on them?

Of course, none of this becomes an issue… until the company gets a Customs audit; and how often does that happen?

But perhaps things are changing. A more positive slant to international trade compliance is being championed - selling the benefits.

The flip side of all the perceived hassle of compliance is that if you do take the time to get things right then costs, delays and “the aggro factor” can all go down, and consequently customer satisfaction goes up. And don’t forget, if you are an importer, you are the customer! But as an exporter, think of the benefits for your customers. Their goods arrive on time, documentation is correct, accurate and appropriate, they clear Customs without any fuss, and the import costs are unambiguous and can be known in advance. What’s not to like?

If exporters, and in particular export sales staff were to adopt this positive mentality and see compliance as an opportunity and even a unique selling point rather than a burden, the benefits could far outweigh the perceived negatives. Your company reputation would be enhanced, your knowledge valued and your business could gain an advantage as customers see the benefits of working with a professional, well organised company who care about the customer; all leading to an increase in business.

There are benefits in having people with specialist knowledge working in this area. Many companies have done away with the good old fashioned Shipping Manager who had the time to do the “shipping” job properly; looking at the details in depth, and with a good understanding of compliance requirements. Maybe the current preference for wrapping up the shipping function into the “Logistics Manager” or “Supply Chain Manager” role means that these individuals just have too many strings to their bow, too many other pressures, to treat compliance as a core function and get best advantage from it.

Dave Heaver

TALES FROM THE ROAD 1 - THE EXHIBITION

I’ve always thought of an exhibition as part of a wider promotional campaign, where 60% of effort is in the preparation, 20% in doing the event itself, and 20% in the following up because the preparation was so very good in the first place. International exhibitions can be costly, therefore the planning element is vital to their success and in recouping those costs. This is a brief account of how that extra effort in planning worked rather too well for me at an exhibition in Hannover!

We hadn’t attended Hannover for a couple of years because we’d had nothing new to show, so the launch of a new product range was the impetus we needed. New products made unique by the introduction of state of the art machinery to our factory, new brochures and promotional material, and what better venue to show it for the first time than an international exhibition? Planning began 11 months before the event. We commissioned the design of a £30,000 stand, decked out with the new material, and with a meeting area for yours truly set on a higher level than the rest of the stand. An impressive display with real impact.

Our advertising focused on the Hannover launch and through it we invited distributors, architects, and contractors to book 30 minute time slots for discussions on our stand anywhere between the hours of 09:00 and 18:00. We mailshotted all our existing contacts worldwide, hoping that we’d achieve a good number of meetings over the six days of the exhibition. What I didn’t expect is that every invitation but one would be taken up!

So for 9 hours on each of five days, apart from the guy who didn’t show up (SSSSS!!!), I was rooted in meetings, barely able to get a minute to eat or drink, use the facilities, to have a thinking break, a change of scene, a restoration of sanity break. As one company left, the next was queuing up. I started to have delusions of being royal! By the end of the third day I was really beginning to flag, and decided that I’d have a quiet night in the hotel rather than another being sociable with more clients until the early hours.

That evening, our group of eight took the tram from the Messe back towards the hotel, and I can remember wishing that the tram stopped right outside rather than have that further five minute walk. Each evening as we got off the tram, our choice was to turn right towards the hotel or left towards the Boomerang Bar. Every night before then I had turned right, but for some inexplicable reason not this time. No, I was persuaded by a colleague that a single malt might give me a pick-me-up and restore some of the voice that I’d been gradually losing during the day. The rest is history really. We met a group of customers from Scandinavia, Switzerland, and Singapore and were with them until the early hours! No rest for the wicked, but the single malt(s) worked.

As the half hour slots during exhibition hours had been oversubscribed, I also arranged a couple of breakfast meetings from 08:00 for each of the following two days. Those people all showed up too, so no time for a headache! Follow up calls, quotations, sample packs were all sent out as the exhibition continued, and additional calls were made to companies who I had been unable to see. It was five days of non-stop action for all concerned, a great team effort, and terrific fun too. So what was the outcome of all this effort?

1.       Opportunity to properly showcase our new range of products

2.       Promotional articles in the trade press

3.       Presenting our company to new international clients

4.       First time discussions with invited international prospects

5.       A busy and well-designed exhibition stand attracted new visitors to lean more

6.       Maintaining face to face contact with our existing distributor network

7.       Demonstrating the strength and confidence of our sales team

8.       New international orders from Hong Kong, Russia, and Switzerland

9.       Increased sales from our existing distributors

10.   Increased credibility in a highly competitive market sector

The experience taught me a number of things. It reaffirmed my belief in the importance of preparation, not just for an exhibition but for any event, including trade missions or other overseas sales visits. Anything really. It taught me that you should only exhibit when the time is right for your company, when you have a new story to tell. And that when you have that story to tell, you should tell it well. It taught me that no matter how well you plan, your exhibition will only ever be 95% right. This was as close to perfection as we got.

And no, I didn’t tell you the product because it’s what you do with it that matters.

JOHN REED

Dave Heaver MIEx on the ....

Origin Woes & Dangerous Treaties

If you want a certificate of origin approved by your local Chamber of Commerce, whether or not it is in connection with any preferential tariff treatment, you will need to supply them with “proof of origin”. For years a signed declaration from your supplier has probably been accepted to satisfy this requirement. But beware… things are changing.

Recently the Chambers have been tightening up on their origin requirements from the exporter, requiring more substantiated documentary proof of where the goods “originate” before they will approve a certificate of origin. But this has led to a few problems for exporters. Supply chains these days can be long and complex. Many exporters buy products from third parties; who in turn may have bought from elsewhere in the UK who may have sourced them from an overseas supplier who had them manufactured specifically for them in a galaxy far, far away… Or maybe by a small manufacturer in a town in Poland, or Latvia, or India... well, you get the idea.

So, picture the scene. You, the UK exporter, have a consignment packed and ready to ship. You prepare all your shipping documentation and apply to the local Chamber for a non-preference certificate of origin. It is rejected because the “declaration of origin” which they have always accepted in the past is now unacceptable. So you go to your UK supplier and ask them for a declaration of origin from the manufacturer of the goods… But your supplier is still perhaps several more steps removed from the actual manufacturer, and even if he knows who makes the products, he doesn’t want his customer - you – to know this information, for fear that you will then go direct and cut him out of the loop. And if he doesn’t know the manufacturer, he will have to request this same information from his supplier, who will go through the same thought process.

So, the Chambers of Commerce came up with a cunning plan whereby the manufacturer’s details can be sent direct to the Chamber who will hold this information confidentially, and the exporter can then declare, “evidence of origin is held by the xxxxxxx Chamber of Commerce” on their C of O application… Job done; right? Well not necessarily…

Perhaps your supplier - or theirs - is themselves not an exporter, and never deals with the Chambers of Commerce and therefore doesn’t really know what they do. So now begins the Spanish Inquisition: “Why do you need to know this now?”; “Who is the Chamber of Commerce to make us divulge this information?”; “What guarantees do we have if we provide you with this confidential information?” etc…. and all the time, the clock is ticking.

The rules of origin are defined in Article 24 of the EU treaty. They are sent out to individual Chambers by the British Chamber of Commerce and are clear as to what is required… but do you have a copy of these rules? If not, you should get them from your local Chamber. However, as we know with so many things which are proposed by the EU (remember the standardised curve of the banana fiasco?); it is the impact of these rules in the real world which is causing some consternation. If you cannot get the required and acceptable proofs of origin from your suppliers, and you cannot send a certificate of origin which your customer requires, what happens then?

I suggest you pass the problem back to the Chamber of Commerce and ask them to try to get the documents they require to prove origin. They say they are there to help exporters, so this way they will see first-hand exactly how unworkable these requirements can be in the real world.

But that is just one frustration for exporters…

The government keeps banging on about how they want companies to export the country back to prosperity, but there seems to be an increasing undercurrent of unnecessarily complicated hurdles to be jumped by exporters. It has been reported that UK companies applying for export licences still find it an extremely slow process with no significant signs of improvement over the years. However, one exporter has reported chasing for their licence which had been in the system for several weeks, only to find the process taking even longer than usual; almost, she felt, as a punishment for daring to chase up the dawdling civil service. This irresponsible and immature attitude from any government department, let alone BIS, is a totally unnecessary frustration to an already difficult job.

Of course there are without doubt some forward thinking individuals within government departments, but sadly there are also far too many who are simply plodding their way to their overblown pension, either incapable or unwilling to work - and respond - at the speed demanded by modern commercial business.

And what happens to the new or inexperienced exporter who comes up against such bureaucracy and all the associated intransigence? Their first thought is likely to be, why should I bother? This is too complicated and time-consuming.

And then of course we have the Blair/Bush legacy, which has resulted in an ever more regulated and far less flexible international trading environment which does little or nothing to encourage companies to trade overseas. In the light of the recent extradition of retired British businessman Christopher Tappin, without trial, to the US, UK exporters will (or should) now be doubly wary of violating US export regulations. These regulations are so complex that many exporters could easily find themselves facing a similar situation, simply through a genuine mistake or a failure to appreciate the depth of research they need to do into their customers before shipping. The UK government should stand up now and withdraw from this one-sided treaty which has no logical basis in law. UK exporters are (generally speaking) not a bunch of terrorists and should not be presumed to be so by any so-called friendly foreign government. UK exporters need help and support from their own government, not dangerous, lawless pacts with paranoid overseas totalitarianism which puts UK citizens at unacceptable risk. The powers that be need to recognise this urgently and act accordingly. Or to paraphrase the vernacular, perhaps it’s time for the UK government to cultivate some testicular fortitude …

Also see article: EU Preference System: Overview

Training:

The Export Course

Understanding Origin and Preference

Preference and Origin Rules Explained

Essential Guide to Customs Procedures

Be positive about Exporting!

I’m starting this blog after a great Twitter discussion. It followed a tweet about how the CBI seeks £20bn state boost for UK exports to BRIC economies (http://t.co/pWXxkrzz). Was this announcement good news? Surely it has to be good news, to quote from the statement:

CBI study finds UK's share of global exports has declined to 4.1% from 5.3% in 2000.

The CBI has urged the government to provide a £20bn boost to the economy over the next decade through a radical overhaul of Britain's export strategy focusing on providing the right products for the world's high-growth markets.

John Cridland, CBI director general, said: "We need to capitalise on the booming success of the Bric countries, and look to future high-growth markets such as Indonesia, Mexico and Turkey. The middle classes in emerging economies will have needs that our producers are more than able to fulfil."

How could this not be good news … but there are always things to be aware of, be cautious of – but that shouldn’t stop the fact that getting on with EXPORTING is GOOD. We hear too many stories of companies who got into trouble because their goods got delayed in customs and it cost them loads of money, they didn’t do the paperwork right and they got fined, they didn’t understand international payment issues so they didn’t get their money, etc, etc, etc.

Though I know we need to temper enthusiasm with reasoned words of advice and caution can’t we be more positive with the public perception of EXPORTING? It's profitable! It’s fun! Companies are 34% more likely to survive a recession if they export! Here’s some more good news:
Taking your products (or indeed your services) to beyond the shores of the United Kingdom opens up almost limitless opportunities for expansion and growth. Why sell to 70 million people when you have a global market of 7 billion?

But you may argue: Isn’t it expensive to begin exporting and there are lots of the risks? Of course we can't ignore this. Companies can get caught out if they don’t do the homework but that's always been the case and it doesn't just affect UK exporters, other countries do it and the UK is still the 13th largest exporting country of merchandise in the world. Export/ import regulations are many and varied – but isn’t that part of the fun, the challenge, the reason I’m still involved in and excited by international trade. Companies make more money exporting than they can in home markets and it encourages growth and sustainability. We should be positive about exporting, encouraging them to try, and if there is a problem, try again.

Come on people …. Comment and Encourage!!

So, why and how did you join the IoE

IoE & International Trade is a professional and educational body in the UK. Strong & Herd LLP training courses are accredited by the IoE and we are able to issue Continuous Professional Development (CPD) points to attendees. WE also issue a “Certificate of Competence in International Trade” for delegates attending 5 or more courses. All this is great but I have a feeling that the age range of IoE members is increasing and we need to get new people doing the educational packages – which run through to a diploma and (soon) a foundation degree – as well as getting people who have been involved in international trade more joining the only professional body I know of in the UK linked to international trade. If you have more than 10 years experience in international trade you can become a full member.

I joined the IoE because, as a trainee import/export clerk in a busy shipping office of a major company, I had to. I was told that they would pay for me to take the diploma and that I had better do well because the guy I was working with (Paul) came top in the country in all his exams. Well, I went to the night classes and had an afternoon in a classroom each week and, as a very new starter (only 19) it really helped me understand the world of international trade and started me on a journey I have (and still am) thoroughly enjoying.

I would love to hear your stories on why you joined, even why you left the IoE or what you think about joining now. You don't have to sit an exam to join unless you want to become a graduate, you can join at different levels depending on your experience. 10 years experience or more and you are a full member. If you are interested in becoming a member I would be happy to consider sponsoring you – email: training@strongandherd.co.uk .

Oh yes, how did I do in the exams – I won 3 major prizes and came top in the country (so there Paul!) and for that I got a £100 bonus from the company!

Who says we don't manufacture?

For all you sceptics out there – YES, the UK does manufacture and YES we do export. The UK is not just a theme park country with nothing but services and it’s official. The UK is the 6th largest manufacturing country in the world and the 10th largest exporter of merchandise goods. OK, so we are the 2nd largest exporter of commercial services in the world but that’s good too – isn’t it?

Recent newspaper reports show that, though our core exports may have taken a hammering in the past but, as the figure show, many small-scale products are thriving. Exports of toilet soaps, for example, was up 15% in 2009, pharmaceutical export up by 19% (to £19.5 billion) and in 2010 dairy exports alone were up by 24.6% on the previous year (up to £977 million).

It is said that UK firms gain an 34% uplift in productivity when they start exporting and there are certain free services to help – check out “Are you Ready to Export?” In 2010 UK’s top 5 export destinations are:
1. USA £37,561 million
2. Germany £28,390 million
3. Netherlands £20,514 million
4. France £20,137 million
5. Ireland £16,261 million

And we have some great oddities: UK exports tea to China and India, clocks to Switzerland, chocolates to Belgium, ice cream to Iceland, whisky to Ireland, sausages to Germany, pasta to Italy, cheese and wine to France and toys to China. Who said we don’t export – for a small country we are still hitting above our weight!

Related training:
Export Essentials
Letter of Credit Workshop for Exporters
EC Trade and Intrastat

Tips on Controlling Agents & Distributors

Good management practice prescribes that one needs to check ‘what was done is what one originally wanted to be done.’ Easy to say but particularly difficult when doing business with partners in remote locations. It is further complicated by the nature of overseas operations – arguably business being done through agents should be easier to control than that being transacted through distributors.

Using Agents

If using an agent, you retain direct contact with end-customers as the agent is selling on your behalf and selling at your price. The task is to control salesmen who act like any other salesmen throughout the world. The core requirements are to ensure the agent is:

•calling on all suitable customers
•spending the right amount of time with each customer
•selling the appropriate range of products
•gaining the correct size of order
•seeking new business
•feeding back competitor and market information
In other words, each order you receive from the agent is a direct measurement of his performance and can be evaluated by traditional sales productivity criteria i.e. in a given sales period:

•Number of orders, by customer
•Number of products sold, by customer
•Average order size and value, by customer
•Orders received this year to date, versus last year to date, versus this year’s planned forecast
•Customer retention
•New customers
•Spread of customers across assigned territory
Using distributors

Dealing through distributors is more difficult. They sell stock purchased from you to their own customers in their own way at their price. Legally you cannot control their margin or their sales-out price. The problem is you may not know to whom and how well they sell.

If you subscribe to the view that ‘I give my distributor the best price and expect him to get on with it’ then this article is of no value to your business. If, however, you believe overseas business is best developed by nurturing partnerships please read on.

There are three main elements:

1.Key result areas
2.Reporting methods
3.Making market visits
Key result areas

The main issue is the reporting of in-market sales. At the outset the exporter only knows what is shipped to a distributor, but has no idea where these products are sold in the market. In-market sales provide the actual measurements of performance and the basis on which future marketing and sales decisions can be made. Additionally, information on distributor stock inventory is of particular value in assessing the distributor’s ability to order the right quantities at the right time to satisfy future demand.

Examples of basic reporting will include:

•In-market sales by product & variant/packing
•Key trade sector in-market sales
Then dependent upon the level of distributor sophistication and cooperation:

•Stock inventory by product & variant/packing
It may be of commercial benefit to understand more about how this business was achieved, similar to assessments made on an agents’ performance:

•Distribution of product, by outlet and/or trade channel
•Salesmen coverage and number of visits.
•Number of salesmen employed full or part-time on sale of exporter’s products
Reporting methods

It is critical that the distributor provides a series of regular reports. This level of formal reporting will be supported by informal and regular contact on current issues. The two basic requirements should be, at least, the provision of a regular report, say monthly and an ad-hoc market research questionnaire. It is recognised that this requirement can often be a contentious issue between both parties with the distributor either not able or not wishing to provide information. This article cannot address the management skills required to handle this but a number of rules must be agreed at the appointment stage of a new distributor.

Recognising that many distributors sincerely believe it is an intrusion into their own business, the exporter must be clear on what and why he requires regular reporting and find an early amicable solution to the issue. If not, he will operate remotely and in the dark. The basic requirements of a regular report would be to:

•Measure performance against standards, targets and objectives
•Obtain feedback
•Prompt corrective action as required
As a minimum, the distributor should possess the necessary internal systems to report on:

•Actual in-market sales this year
•Cumulative sales this year to date
•Actual sales for same month last year
•Cumulative sales for last year to date
•Sales performance versus budget
Ideally he could also provide:

• Sales by customer & trade sector
•Stock and sales
◦Opening stocks
◦Shipments received during reporting period
◦Market sales
◦Closing stocks
◦Forward orders
Again the matter of inventory management is potentially a complex issue in that the exporter cannot dictate what a distributor should purchase to his own account, yet must ensure he is ahead of the business in terms of production and shipping planning. The less reactive the exporter is in the supply of product, the more proactive he can be promoting in-market sales effort.


Market visits
Whilst there are no set rules with regard to frequency, the exporter must ensure regular market visits are undertaken. Nothing can replace ‘seeing is believing’ and benefits both agent and distributor arrangements. Recognising that making visits are costly both in time and expense, the exporter must be clear on setting specific market visit objectives which could include a number from the following list: The bottom line must be that the visit must generate future business.

• To present new products, advertising plans and promotions
•To review sales performance - achievement against current plans and programmes
•To provide feedback on company and general distributor performances i.e. comparisons with other markets
•To resolve administrative problems arising from communication restraints
•To concentrate the distributor’s focus onto the exporter’s products
•To motivate by resolving any distributor problems in generating business and ensure the visit is not perceived as wasting the distributor’s time
•To review status of distributor’s overall business
•To review skills and training needs of distributor team and provides solutions
•To generate business and goodwill.
•To plan annual (or other periods) sales and marketing programmes
•To set action plans to counter deviations from plan and to handle new objectives
In summary, the main dilemma for any exporter is how much does he need to know about the sale of his products in each market and how can he find out? This requires the setting of practicable performance measurements, agreeing formal methods for regular reporting and the actual checking in-market to see what is being done.

Written 4th April 2011 by Dick Brentnall - S&H LLP Associate/ Trainer

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