TALES FROM THE ROAD 25 – GETTING PAID: MAKING CREDIT INSURANCE WORK FOR YOU

          

 ‘Getting paid’ is frequently cited as one of the main challenges for exporting companies. My own experience is that I have had more domestic than international bad payers, better payers from Nigeria and Russia than from Nottingham and Reading. But I guess everyone will have different stories to tell.

In a nutshell, Credit Insurance exists to protect businesses from non-payment of invoices, and can be a useful tool in helping to develop trust relationships with new overseas selling partners. My first experience of the value of credit insurance came when I started work as Export Sales Manager for a textile company. Our biggest ‘export’ customer was a distributor in Ireland who had really enjoyed a life of Reilly for some time, stretching payment terms and exceeding their insured credit limit, and generally giving my predecessor the runaround. Well as a new kid on the block you want to start with a clean slate don’t you? I looked at each export account and quickly realised that our biggest export customer was also our biggest export problem!

So when they wanted their next order to be released I blocked it, refusing to allow any goods to move out of our warehouse in their direction until they had paid out sufficient invoices to bring their account back within the terms of the credit insurance cover that Atradius provided. It can be quite funny, if also a little sad, listening to excuses and promises when somebody knows they’ve been rumbled, and it was all hot air and a waste of telephone time, because in the end the goods were not going anywhere until the money was paid.

Those decisions pretty well finished the relationship with the distributor because they had been biting off more than they could chew with large Irish contracts for far too long, so I had some hairy moments explaining that away while simultaneously spreading the risk across a larger number of more reliable selling partners. However, because I had forced the issue and ensured that payments were back within agreed limits, when the company finally did go bang the following year, Atradius paid out 85% of our exposure – significantly better than the alternative!

Each company has to make its own judgement as to whether or not credit insurance is right for them. Some prefer to self-insure or to provide open account facilities because they know well the reputations of their selling partners. Some might opt for the security of payment by Letter of Credit (LC) for larger orders. Others prefer to be paid in advance because they do not have sufficient trust in their selling partners. Experience teaches us that there is no single right answer, therefore I have tended to apply for credit insurance cover when I have felt it is needed, and also to give new distributors a little flexibility in order to demonstrate payment performance.

I worked very successfully with a Turkish distributor for a number of years. At first, payment terms were payment either in advance or by LC. As the relationship built and strengthened, and because we could not obtain credit insurance at that time, we agreed a £10,000 open account limit so that the distributor could take smaller, regular orders, with all remaining orders being paid for by LC. After three years of successful trading and on time payments, the open account limit was increased and we were able to achieve a small amount of credit insurance cover. The insurers looked at the usual criteria of country risk, company risk, etc., but also at the way the account had been managed between ourselves and the distributor. By building a relationship with the credit insurer we were able to give them the confidence that offering limited cover was worth their risk. 

That illustrates one incidence where initial refusal by the credit insurer did not necessarily reflect on the distributor’s willingness or ability to pay their bills on time. It is very important to note that credit insurance can be refused for a whole variety of reasons, and that decisions can change according to political and economic circumstances, and individual company performance. I was once refused credit insurance on a French distributor who the company had been working with for many years before I joined.

The reason for the refusal was not a reflection of their payment record, but more a question of the total exposure to Atradius of that one distributor. They distributed a wide range of products into the French construction sector, and a number of other companies had beaten me to the draw, each securing credit insurance on their business with them. So the insurance company looked at the collective risk of all those policies, and took the decision that they were already risking enough!

Why did I suddenly apply for credit insurance cover on a distributor who had been working with my company for some time? Well it is quite simple. A distributor whose track record was with regular smaller orders suddenly won a much larger order, and it was necessary to ensure that the company had the ability to pay. My choice became a simple commercial one, whether to accept the order or risk losing prestigious business with Societe Generale in the Trocadero Building in Paris. So we agreed stage payments that helped to minimise the risk of non-payment, with the amount of the first payment being covered by a Bill of Exchange, and covering our manufacturing costs.

So what are the lessons learned:

•  Don’t take a refusal of credit insurance as necessarily a negative thing
• Be prepared to use a variety of methods of securing international payments
• Manage your accounts within agreed insurance limits

TALES FROM THE ROAD 24 – TRICKS OF THE TRADE

I’d been with our distributor in Moscow for several days. There were four reasons for my visit: first so that they could learn more about our products, second so I could learn more about how they operated as a company, third so that my colleague and I could make a presentation to Russian architects at the British Embassy, and fourth to identify ways in which my presence would help them to sell more of my product. The company had offices in a number of Russian cities, from St. Petersburg to Tomsk, and then south to Krasnodar on the Black Sea and into Ukraine, and occasionally several of their regional staff would fly into Moscow for management meetings and company presentations. These were useful gatherings that really helped in putting across the key selling points of the products that they were distributing for us.

I was driven from the airport straight to a meeting with one of their major clients. On arrival we sat in a waiting room with a number of competitive companies, all of us hoping to win the right to supply flooring products to their new offices. I was armed with my briefcase containing a couple of brochures and some technical leaflets, and my distributor carried just one of our blue carpet tiles. Our three competitors had arrived with trolley loads of samples with which to bamboozle and impress this prestigious customer, so I felt decidedly under-prepared!

However, selling isn’t just about the number and variety of things that you are able to show, it’s about grabbing the customer’s attention and holding it while you convey the reasons why a) they should buy your products, and b) why they should buy from your company. Too many salespeople try and sell everything and anything in their portfolios, but that can often signal lack of confidence to the buyer, who would prefer that the products presented are both fit for purpose, readily available, and offered at a good price. So with my one tile, my file of technical leaflets, and my experience of our range of products, I was able to make a good pitch. It must have been okay because I was invited to meet them again the following day and show them a few more of our samples, and we went on to win some business from them.

The experience showed me that although there was no doubt we were working with the best distributor of commercial interior products in Russia, there were still deficiencies in the way they presented our products. And that led me to wondering what other things were maybe not being said. On my penultimate day with the distributor I asked to see their warehouse on the pretext that I wanted to see the conditions in which our products were stored. When they seemed a little evasive about that my request turned into more of a demand, and by the following morning had metamorphosed into a determination to take a taxi out there if they didn’t take me themselves!

So we arrived at their warehouse en route to the airport, and it was more like a cold storage unit. Absolutely freezing, and not the best conditions in which to hold our pallets of carpet tiles. There were two things that were immediately obvious on entering the building. The first was that our products were lost among multiple pallets of products from a competitor whom we were supposed to have replaced. The second was that some of the pallets that we had supplied had broken, and this had caused damage to some of our products. That was entirely our fault because the pallets were not sturdy enough, and we were able to correct the situation. The distributor went on to sell a lot of carpet tiles for us after that visit, and on later visits it became clear that our products were their product of preference, even though they continued to sell for our competitors.

TRAINING OUR RUSSIAN DISTRIBUTOR IN MANCHESTER 2003

Part of the reason for that success was that we invited ten of their managers over to Manchester for three days of product and sales training, which their MD was delighted to support. Those few days gave us the opportunity to present the technical and aesthetic properties of our products in detail, without interruption, and to demonstrate methods that we employed both in winning specifications for our products in commercial buildings, and in maximising the profitability of each project. We had employed a superb interpreter, thanks to a reference from UK Trade & Investment, and she overheard one of the group saying “we have never been taught to sell like this before”. That team went on to become the company’s most important export distributor in the following year.

So the main messages from this are that you should be prepared both to know as much as possible your distributor’s operations, and to empower them to sell your product to maximum effect. In this case, a little investment went a very long way!

TALES FROM THE ROAD 23: ONE TO ONE MARATHON IN JAKOBSTA

I was approached in January by a not-for-profit organisation in Finland to deliver international trade training services in April to a group of companies from the creative industries sector, most of them young or start-up companies, but also one or two more established businesses. My initial discussions with Christer Sjoholm centred on a two day project, with a presentation on general aspects of international trading on the first morning, followed by a series of one-to-one sessions with interested companies for the remainder of my visit.

Anticipating that we would have anything between six and ten one-to-one meetings, we allowed one hour for each followed by a 15 minute note-taking and comfort break. Each company was required to provide a single page summary of what they wanted to achieve out of the session, and the deadline for those summaries was one week before my visit. As the deadline approached it became clear that we would fill most of the remaining day and a half following the presentation, and by the time the deadline passed, thirteen companies had signed up!

Never afraid of a challenge, I embarked upon what I thought would be a punishing schedule, but the truth is that I was energised by the enthusiasm of each of the companies, their fantastic creations and ideas, their plans, and in some cases their complete lack of a plan! Time just flew by, and I am sure I could have squeezed in a few more one-to-ones had there been more companies to see.  I have worked before with companies from the creative sector, and quickly learned that their passion is in what they create, not in getting their products to market, understanding international business, or even in basic business organisation. 

There was a diverse group of companies: illustrators, graphic designers, textile designers and manufacturers, photographers, writers, a wholesaler, a soft toy manufacturer, an established Finnish fashion brand, and a specialist manufacturer of electric bass guitars. All of them knew their products intimately, and all had great stories to tell about how their product or service was conceived. Like so many smaller businesses, they felt that they were not receiving the professional help they needed to drive their companies forward into international markets.

The real issue is that they were actually more interested in creating products and ideas rather than in developing business. In most cases, they wanted someone else to take the pain and hassle of getting their product to market. In one case, it was suggested directly to me that I would become the Sales Agent for a range of products, to which I suggested directly ‘No’, but it was a good try and it highlighted exactly the deficiency of many similar companies, in Finland, in the UK, worldwide. It’s one thing to create, it’s quite another to sell.

Jakobstad is located in an area of western Finland where for historic and general conquest reasons 90% of the population is Swedish, and the vast majority of them have a very good command of English. There is a strong awareness of international markets and a tradition in the area of selling products overseas. Most of these younger companies are just putting their foot on the first rung of the ladder, and they need the kind of handholding that almost all companies need in their formative years.

I very was surprised that social media has not been embraced in Finland as it has been back here in the UK, especially given the profile of the companies who I was talking to. In isolation individual social media sites are of little worth, but collectively they can act as different shop windows for your products and services. You can use each social media to present your products in a different way, to a different audience, and at a different time. It is all about getting your marketing mix right and about you controlling your online presence rather than it controlling you!

But most of all, why would you not want to use social media to maximum effect when it is largely free? And why would you not want to use social media when you can get your message across several times a day, while spending only a few minutes doing it. Social media is an online trend, and we have seen many of these trend come and go in the short time that the world has had the Internet, so it is important to companies large and small to work with the trends of the day and to anticipate those that are just around the corner. And that was part of my message to the companies in Jakobstad.

I also helped to put them directly in contact with specialists offering a mix of professional international services, from intellectual property rights, currency exchange, customs & excise, to financial and logistics services, and in most cases I was able to suggest key target companies in the UK for their products, and provide guidance in how best to approach the market. So now we await the arrival of some of those companies in London during Design Week in September, to see how they have progressed and what they have learned. And in the meanwhile I will enjoy communication with every one of them, and to do my bit in helping them to realise their ambitions.

JOHN REED, EXPORTAID

TALES FROM THE ROAD 18 – GOING THE EXTRA MILE

It is commonly said that you only get a few opportunities to sell, but actually as business people we are constantly selling: selling our products, selling our services, selling the reputations of our companies, and our individual strengths as human beings. On a one to one basis, your customers will either like you or not, you will make a connection or you won’t. But isn’t that life?

There are times when the time you have in which to impress is limited. Well planned exhibitions and trade fairs can, and should be, intense places for your sales staff. So whatever you can do to alleviate the pressure on them by turning the focus on to the product or service you are selling, or by operating good customer receiving services on your stand, will help to maximise sales performance.  Yes, you’ve got it. I am going to give you a few examples!

The first exhibition I did in the carpet industry was at Batimat in Paris in 1997. Six gruelling days of meeting and greeting and selling from 8am till 6pm, preceded by coffee and croissants, and followed by wine and fabulous French food. The company had agreed to exhibit at short notice after gentlemanly pressure from our French distributor, and it was my decision to go or be damned. So I thought going was the better option, and we arrived at the booth to find that the 6m x 3m raised floor surface for our 500mm square carpet tiles was made up entirely of wooden pallets! So I left it to the gentlemanly distributor to sort it out because his business was flooring contracting and installation. Mine was just selling the stuff, and I had only been with the company for two months.

As a result, it won’t surprise you to know that day one of the exhibition was an unmitigated disaster, with tiles coming loose and causing trip hazards, and the whole stand looking generally amateurish. So by lunchtime I decided to phone the boss who was due to arrive a couple of days later. We took the only decision that we could, and insisted that the floor be re-installed. And rather than wait, we had the distributor bring in a fitter to do the work as we continued to exhibit. An accidental stroke of genius. The refit drew a crowd, and we were inundated for the rest of the day. We repeated the refit at points during the exhibition and it helped customers to understand why the way we cut our carpet tiles was so innovative.

That lesson was carried through to subsequent exhibitions, but probably had its most important effect at the Yapi Exhibition in Istanbul in 2000. We had recognised some months previously that the installers used by our excellent Turkish distributors were competent fitters of roll carpets but had limited skills when fitting carpet tiles. I had once been called to a complaint at a new Turkcell building on the outskirts of Istanbul where a 2,000m2 floor area had been fitted with beige carpet tiles. On the back of every single tile is a direction arrow to show which way the tile should be fitted. There was also a full set of instructions on how to fit the tiles, translated into Turkish, in every single box of 20 tiles. So when I walked into the area the problem stuck out like a sore thumb: a single tile had been fitted in the wrong direction. Not my problem!

A few months later we had the chance to train the Turkish fitters by getting them to install a complex floor pattern on our distributor’s stand at the Yapi exhibition. We flew over the best UK carpet tile fitter to train them on how to create complex shapes with carpet tiles, and actually cut the distributor’s logo into the floor. So not only did we have the best looking floor in the exhibition, we had also trained installers to fit to the highest standard. Sadly, I had to have my evening meal each night with said carpet fitter, who lived, breathed, and yes probably ate carpets! For each of those four long evenings, I longed for a conversation about football.

In both of these cases, I was there to sell the product. In both cases the product ended up selling itself. It taught me that at exhibitions, sales people are order closers, and that the whole of your exhibition stand, how it is operated throughout the period of the exhibition, and all of your preparation in attracting customers to visit, act as lead generators. And finally the power of demonstrating a skill, at exhibitions where your customers may largely not speak your language, is simply the best sales aid of all.

TALES FROM THE ROAD 17 - HI-TECH BOATS FOR THE GULF OF ADEN

There I was happily driving back to Manchester from the Holyhead ferry after a few days helping a client in Ireland, when the phone rang. It was 2003 and I had just set up my own International Trade Consultancy. Leaving the world of employment was a tough thing to do but the timing had been right because by then I had 16 years of international selling experience and qualifications to go with it. The guy on the phone was from RBS. I had met him at a number of Export Club events where we had talked about business and football, and he had been kind enough to refer me to one of his clients, a manufacturer of Hi-Tech speedboats that were used by coastguards and security services.

So I followed the lead. The customer was concerned that they might need an Export License for four such vessels that were due to patrol oil platforms in the Gulf of Aden for a Canadian oil company. So I took them through the process, examined the purchase order, and agreed that we should send a Rating Enquiry Form to the Export Controls Organisation (ECO). Rating Enquiry Forms are simple documents used by ECO to establish the status of an export consignment, and to decide whether a license is needed. So we filled in the form with the key details of the proposed shipment and two weeks later received the decision that ‘no export license was required’ because the boats were for Civil use.

Manufacturing continued, and the company began to make arrangements for the sea trials, with the Canadian company ready to pay the balance for the goods upon successful trials. With six weeks to go until completion, we received a revision to the Purchase Order which just about changed everything. The customer details had changed, and we were no longer supplying to a Canadian Oil company, but to the Ministry of Defence for the Republic of Yemen. The specification had changed to include ‘hard points’ on the bow and stern of each vessel, which were clearly for mounting guns. Therefore the Civil status of the consignment had changed to either Dual Use (Civil and Military) or to plain Military use.

There was no option but for the company to make another Rating Enquiry, and after two weeks we received the predictable response that the consignment would need to be covered by an Export License. By this time the company had already agreed sea trial dates and officials from the Ministry of Defence for the Republic of Yemen were making arrangements to observe the trials and rubber stamp the deal. It can take up to four weeks to receive an Export License and the sea trials were scheduled for five weeks time, and the fact remained that the boats were going nowhere without one!

You have to bear in mind that even for Civil Use in the Gulf, it is likely that patrol vessels will need to be armed to some degree. It is an incredibly volatile region, and Yemen continues to have its own specific problems. The Export License was granted after four weeks for Dual Use and the Yemenis visited and observed successful sea trials. Had a license not been granted then £800,000 was at risk, and while the boats could have been sold eventually to another organisation, that is an expensive amount of stock for a small company to carry. Failure to obtain a license could have bankrupted the company.

However we achieved everything within a very tight timescale, and the boats were prepared for shipment to Manchester Airport where the Yemenis has commissioned a huge Antonov aircraft to collect all four once payment had been cleared through. That was my very first job as a freelance International Trade Consultant and covered every emotion from severe stress to elation! It illustrates how Exporters need to be aware of procedures that they may only need to perform once in a blue moon, and why regular International Trade Training updates are required for relevant staff. Non-compliance can cause bankruptcy, and failure to obtain the right licenses for equipment that might have a military or security use can result in imprisonment for company directors. Tread carefully.

TALES FROM THE ROAD 16: YOU DON’T ALWAYS HAVE TO LIKE WHO YOU WORK WITH, BUT IT DOES HELP!

Charlie Bates. That was his name. It has taken me about six months to remember the name to the (rather red) face that I am not likely to forget! Relationships are everything in business, and I am glad to have a reasonably good instinct when it comes to forming and developing key business relationships. I have achieved that in multiple countries and across cultures, making many good friends along the way. And where friendships have not developed there has generally been the kind of connection and mutual respect that leads other people to actively want to do business with you. 

One of my longstanding clients once had a need to locate a very specific type of woodworking machine and asked for my help.  I had been out of the business for some years but said I would see if I could find one through any of the machinery dealers I used to work with. As part of that process I phoned a dealer in St. Louis USA. I had not spoken to him for about eight years, yet he still had my name in his phone and answered with a warm “Hey John! Good to hear from you!” It taught me a lot about communicating and making your connections work. It’s something that doesn’t happen overnight.

Conversely, it was poor communication and an inability on my part to connect which ultimately caused my relationship with Charlie Bates to break down! Charlie was a Sales Agent for one of our US distributors. He took a commission on machines that he sold on their behalf. The woodworking machines that we manufactured in Windermere were complex machines, albeit based on simple principles. Charlie had understood enough to sell a machine line to a woodworking company in Johnstown Pennsylvania. It was a high speed spindle turning machine linked to an automatic sander.

The machine had developed a teething problem and after several telephone conversations with both the distributor and Charlie, I felt the best thing was to take an engineer with me to resolve any issues. That went down very well and Charlie said to me that he felt it would ‘take the heat off the situation’, which has something of an ironic ring to it! Everything was very cordial, polite and positive and we had agreed to meet Charlie en route from Pittsburgh Airport to Johnstown. It was late in the day when we arrived, and being British we managed to get lost on straight roads. This all happened pre-mobile phones, and as there was no way of contacting Charlie we drove directly to the hotel, imagining that he would put two and two together and find us there.

My only direct communication with Charlie regarding the hotel had been to pass on details through the distributor of where we were staying, and we knew that he had received that information. So we assumed he would eventually meet us there. After an hour or so of settling into the bar, we started to get a little peckish, and as the restaurant was scheduled to close at 9pm we ordered. Still no Charlie, so we pressed on. About half way through our meal, this incandescent, red-faced ball of fire appeared at the end of our table bombarding me with accusations of giving him the wrong directions, with a peppering of expletives thrown in! So I let Charlie rant on for a while before eventually pointing out that actually he had been to Johnstown before, he had been to see the customer to complete the sale, and he would have had to drive past the hotel en route. Furthermore, I was British and had never previously been to Johnstown yet I managed to arrive at the hotel several hours before him. Poor Charlie wouldn’t let it go, and carried on with this endless and illogical public attack for so long that by the time he had finished the restaurant had stopped serving. When he realised, I offered him a French fry. I expect that wasn’t entirely helpful.

Although we then didn’t share a table for breakfast the next morning, we seemed to work well enough as a team to resolve the customer’s technical problem and had the machine line running perfectly by the time we left late in the afternoon. Yet if Charlie and I passed a dozen words between us that day, it is probably an exaggeration. At least we were both professional enough to know that the relationship that each of us had with our customer was paramount, and hatchets can be buried whenever a job needs to be done.

These two extremes demonstrate that while people do business with people, sometimes people just don’t get on. There have been instances where I have visited customers and made a good impact where previous salespeople have failed, and there have been others where I have failed where others have succeeded. Relationships are everything in business.

TALES FROM THE ROAD 15: SUPPORT YOUR DISTRIBUTORS

Appointing an international distributor can be a tricky business. Most business sectors in most countries have only a few main players therefore finding a new distributor can be a real challenge, especially for companies who are new to a market. And once you have found a good distributor, it is important to hold on to them.

Next week a former distributor of mine, and now good friend, is visiting Manchester from his home city of Prague. There are many reasons why I will remember Mira’s work for me in the Czech Republic, but there was one thing that convinced me his was the right company to be working with. I had inherited a hotch-potch of good, bad, and underperforming distributors from a predecessor, and Mira’s business fell into the ‘not sure’ category. He had not been our distributor for very long, and he also distributed for a competitive brand so I was not sure how that would work. The Czech Republic was not a priority market, but Mira was a trier, and he won a few reasonable sized orders that kept me from looking for an alternative.

One day he phoned me to give advanced warning that he might have difficulty in settling his invoices for a few months. He had not been paid by one of his major customers and his cash flow had been hit hard. Dodgy, you might think! Well that did cross my mind, and his announcement would leave us exposed to the tune of about £10,000. What impressed me is that he immediately suggested a payback period, with interest if necessary. I can’t recall the detail, but we reached an agreement on the outstanding invoices, and actually Mira was able to settle all of them well within the agreed timescale. That relationship lasted for six years, and he became an important distributor. That was an example of a reactive way to support a distributor. I had to take a view or risk losing what business I had in the Czech Republic. There are so many ways in which you can actively support your selling partners, and here are two more examples:

I visited a complaint at Turkcell just outside Istanbul where an open plan 2,000 square metre floor had been fitted with our carpet tiles. All the tiles had been fitted in the same direction apart from one, which stood out like a sore thumb smack in the middle of a large open area! Worse, the installers had used the wrong adhesive to save cost, permanent adhesive rather than release adhesive, so I couldn’t lift the tile and turn it in the right direction. Thus an unpleasant argument ensued where I had the installer bang to rights for not bothering to read the instructions in every box of twenty tiles that we had translated into Turkish. Turkcell accepted my version of events, which left the installer with a rather red face, and I left that installation wondering how we could avoid a repetition.

A few months later we were invited by our distributor to exhibit with them at the Yapi Exhibition in Istanbul, the country’s largest annual exhibition for construction materials. Their stand was a big one, so as our contribution to costs I offered to bring over one of the UK’s best carpet fitters to install carpet tiles in the design of our distributor’s logo. The other part of the deal was that our distributor had to ensure that all of their installers would attend on the two days before the show started to take a master class in creating fabulous floor designs from carpet tiles. That whole exercise probably cost our company about £3,000, but we were known thereafter for the quality of both our products and our installers.

The second example comes from my later days of selling carpet tiles. I was collected from my flight at Moscow airport by our distributors and taken straight to the offices to help present our products to BP, who had then just signed their agreement with TNK. We arrived in good time and were joined in the lobby by competitive sales people who were pulling behind them trolley loads of samples. So I asked our distributor, who was clutching a single blue carpet tile, if we had sent our samples ahead. We hadn’t! So the props for my sales pitch were one blue carpet tile, and a dozen specification sheets. There was simply no way we were going to win that business.

You never want to repeat experiences like that so I put on my creative head again, and after some thought and discussion arranged to invite ten of our distributor’s national sales people to Manchester for a two day training session on How to Sell Carpet Tiles to the Commercial Office Sector. The purpose of the training was to stop these excellent sales people from selling carpet tiles as a commodity – “Our blue tile is cheaper than that blue tile”. By the end of the two days (and vodka nights), they had learned to sell the right product for the right purpose and to achieve an overall profit margin higher than if they were to just sell the one type of tile. The interpreter advised me that she had heard one of the delegates say ‘We have never been taught how to sell like this before!” In the following year, that distributor sold nearly £500,000 of our carpet tiles into projects in Russia and Ukraine, a massive improvement in performance.

The Lessons Learned:

1.      Invest time and a sensible amount of money in your key distributors
2.      Be prepared to demonstrate the qualities of your product versus the competition
3.      Be flexible in the way you work with your distributors, and take calculated risks to help them to achieve their sales targets
4.      Don’t go out too often in Manchester with Ivan from Krasnodar or your liver will be pickled.

TALES FROM THE ROAD 14: STUCK IN GRONAU

Some weeks seem longer than others. In this case, it is a story of traffic queues, extreme roadworks, inclement weather, and to be perfectly honest, gross misjudgement of distances between European cities.  It always looks so do-able on a map!

My judgement was probably clouded by the fact that one day I drove back overnight from Frankfurt to Manchester, through the Channel Tunnel in a record 11 hours, helped by the fact that I arrived in perfect time for the next crossing! It created a feeling of invincibility, and a somewhat casual approach to driving distances on the pan-European journeys that immediately followed. I stopped at a service station in Aachen on the way from Frankfurt to Calais, and decided to eat before changing out of my blazer and slacks into jeans and t-shirt. I sauntered up to the self-service counter and pointed politely at the food I wanted to buy.

The serving lady, realising I was struggling with the lingo, started to gesticulate and direct me away from her counter, which felt a bit odd. But then in her best English said “Coach Driver. You go there!” and pointed to a square silver badge on the lapel of my blazer. It was actually the Gaskell Textiles badge, but she took it to be some kind of British coach driver emblem and I was ushered into the drivers’ lounge where I was fed royally, and served extremely quickly, for very little money!  

I had driven the well-worn route from Calais or Rotterdam to either Hamburg and Hannover on several occasions, through north-east France, northern Belgium, across the Netherlands, and on to the German autobahns. I generally filled up with fuel just as I left the Tunnel or disembarked the ferry and that would ensure an uninterrupted trip into Germany. On the occasion in question, I was to drive on to see a carpet manufacturer located in a town in what would previously have been the very western part of the former East Germany. It was much farther than I had imagined.

From memory I was going to visit our distributor Thomas Siewert in Kiel, after a couple of meetings in Hamburg, and then back along the long road back to the Channel Tunnel. We are spoiled in the UK with filling stations every few miles apart from in some of the more remote parts of the country. In eastern Holland at that time, there was a long stretch without a filling station in sight, and to my knowledge, very few settlements along the way. So as I approached the German-Dutch border with my gauge already well into the red, I knew I had to fill up or fizzle out!

And so I turned south off the autobahn to the sleepy and rather dull and linear town of Gronau, where not for the first time I pulled up at the pumps as I am sure I heard my car take its last gasp. More than a little relieved, I filled the tank to the brim and went into pay. My credit card at the time was a NatWest card, which the lady swiped and then said “No good”. Knowing that there was no problem with credit on the card I said “Yes. Good” and beckoned her to try again, then for a third time. I asked her to try an American Express card but she would not accept that.  Then the lady just said “Bank” and pointed down the road.  I got the impression I wasn’t the first British fool to have cut it a little too fine. So I reversed my car into a parking bay and walked in the drizzle in the direction of the bank, which I when I finally reached it after fifteen minutes was closed for lunch and I was drenched. The bank was not just closed for a lunch hour, but for two hours! And there was no hole in the wall!

A little exasperated by now, and with thoughts of a later than desired tunnel crossing, I decided I was going to go back to the filling station and call Thomas Siewert to help me persuade the lady that there was absolutely nothing wrong with my credit card. I handed her the phone with the words “Herr Siewert”, and Thomas asked her to try the card again and it worked first time.  It never happened again because I made sure I filled up whenever my gauge showed a quarter full. 

  pickled.

TALES FROM THE ROAD 13 – EXPECTATIONS & PERCEPTIONS

It is only in the last five or six years that the tie has become a less vital part of a British businessman’s attire, at home or abroad. It has become more acceptable to show up for a meeting in an open necked shirt, still smart but not quite the traditional image. I am personally not a great fan of the tie. That probably dates back to when it was used as a mild instrument of torture and gentle strangulation on the way home from school on the number 7a bus, but in spite of that schoolboy trauma I still think it is very important to wear one from time to time. It isn’t just about impact, professionalism, conformity, respect for those I am about to meet, or any individual thing. For me, it is mainly because a full suit and tie can occasionally have a very positive effect on people’s general perception of who we are.  

I once went on a long tour of the US North East coast, calling in on distributors and agents from Manhattan to Maine. For anyone who hasn’t done that drive in the Fall, make it one of the top ten things to do before you die. The colours of the maples are actually no different to the wonderful Autumn colours that we experience here in the UK. It is the sheer scale of the spectacle that never leaves you. I was driving up to Vermont for a meeting with the VP of Stanley Tools and his production team. We manufactured a very clever but incredibly complex machine for manufacturing different sizes of decorators’paint brushes, and it was my job to sell them one and to prove to them that it would increase output and quality.

It was a high speed woodturning machine that had a rotating turret with multiple centres that gripped the wood to be turned, and the whole thing moved back and forth against cams and high speed rotating blades to create a paint brush shape every few seconds. Everything but the bristles. A true feat of British engineering. I was especially excited about my presentation to the team because it was the first time I had sold such a complex machine by illustrating its key features on video. How times have moved on!

So I was greeted at the door by the VP’s right hand man, who was dressed in a polo shirt and smart(ish) jeans. He introduced me to the VP, who was similarly dressed, and I was escorted into a room with about 25 men in open neck shirts, polo shirts, or t-shirts, and every one of them in denim jeans. “Well…”, I thought, “…I suppose it is a manufacturing plant”. And there was I in my pin striped dark blue three piece suit and tie, looking far too much like a salesman and not nearly enough like an engineer! The presentation went very well and I sold the machine, an £80,000 order even at that time, which would have been about 1993.

About six months later, I accompanied Roger Bowness our tooling engineer to install and commission the machine. I was greeted in the same way on arrival, and we were led into the same presentation room. It wasn’t nearly as friendly an experience, which at first I attributed to the fact that there were a lot of complex engineering principles for them to absorb and understand.  Roger and I got them going, and the machine performed as well as we knew it would. But the slightly unwelcoming atmosphere persisted and I joked that they might not like Roger’s aftershave. When that went down like a lead balloon, I thought it was best to let Roger get on with his part of the job and take a back seat. My curiosity got the better of me in the end, and as we left the building after a very successful  installation, I asked the VP if there had been anything wrong with the way we approached the machine demonstration because I felt his team seemed to be in a subdued mood on this visit. And he just said “You’re British. You wear a suit!” Wow!

After the previous visit where every man and his dog was clad in denim and other forms of casual wear, I thought I would be on pretty safe ground in a smart jacket and trousers and open necked shirt. But no. To my customers it felt like I was a British person trying to dress more like them, trying to fit in, maybe to ingratiate myself. None of that was the case, but it taught me the value of living up to my customers’ perceptions of John the Businessman. Had we all gone for a beer somewhere afterwards, they would have been fine with John the Person changing into casual gear, but not while I was doing my job. Suit and tie only.

Conversely, I worked successfully with a UK engineering client for a number of years until their business was sold on. On my first few visits I was working on behalf of the local Chamber of Commerce, so I was dressed in a suit and tie, and on each occasion was received politely by the company secretary. The company MD barely said a word to me even though their office was open plan, and at times I felt he was downright rude. Then one day I was passing by en route to a stock taking exercise with another client and dropped off some claim forms for the company to fill in. The same guy was very welcoming, and like a completely different person. I was wearing a t-shirt and jeans! We never had a problem after that day.

So you have to be careful. Think carefully about how your customers expect you to be. Dress for your role on the day, but if you are ever in doubt, stay smart. 

TALES FROM THE ROAD 12: IN MORTAL DANGER

I visited India for a ten day business trip back in 1996. It was my first experience of the Indian market, and combined visits to a number of key customers, helping our distributors with an exhibition, a small amount of sightseeing, and the obligatory indescribably horrible tummy bug!

The journey started with a flight into Bombay that arrived in the early hours in November temperatures in the late ‘20s, and involved a scrum for a cab that would take me around the corner to the Connaught Hotel. I spent the next three days being guided around the city by Shanti Mansabdar, who ensured that I enjoyed just about every travel experience short of climbing onto a bus through the window on a busy roundabout! It was fun, if not as productive as I had hoped.

And so to New Delhi, where I was met at the airport by Sonny Roy and taken straight to the Park Hotel near to the Defense Colony where he and his family lived. As our distributors in Delhi they had taken stand space at an exhibition which can best be described as an outdoor Ideal Home exhibition, where they showed off their range of metal furniture alongside images of our fantastic woodworking machinery, and provided a curtained-off area for ‘Mr. John’ to meet and greet customers and talk to them about why they should place orders with us.

It was our first time exhibiting in India and I was there for a full six days, during which time the family Roy had arranged a good number of meetings with potential customers.  We were adjacent to the British Pavilion where British companies who actually knew what they were doing had taken exhibition space. But actually it was far more pleasant being in the great outdoors and watching the throngs of visitors passing by, with all the colour and bustle that you would expect of an exhibition in a busy capital city.

The Roys had two sons, the appropriately named Kubla and Chotu who occupied a position at entirely the other end of the temper scale, and who remains to this day the coolest person I have ever met in all of my travels. Directly opposite our stand and adjacent to one of the main thoroughfares was a stand manned by a group of religious fundamentalists who had come down from the hills around Delhi for their annual recruitment drive.

Every day they played their music and videos and drew huge crowds to listen to their words of wisdom, but also every day the volume got louder and louder, to the point where Kubla went across to ask them politely to keep the music at a reasonable volume so that it didn’t disturb exhibitors on nearby stands. That didn’t work too well, and resulted in them doing the opposite to what he had asked. Kubla then spent the best part of the day with steam visibly coming out of his ears, and getting slowly more wound up. We left the site at about 10pm when he again approached them politely to request that they would turn down the volume for the days that followed.

Well they didn’t do that either, and their noise became louder and louder and more intrusive until Kubla started to really lose it, and stormed across to threaten that if they persisted in playing their music at excessive volume, he would have no option but to destroy their equipment! And guess what? It got worse again, and Kubla finally cracked and carried out his threat, flinging their one video recorder, the source of their deafening output, onto the ground.

Within seconds, a group of 40 or 50 rather determined looking and extremely loud, bearded men in white surrounded our stand threatening among other heinous things to burn down our stand! Realising the clear and present danger, Chotu, who had been coolly encouraging customers to buy his range of metal furniture amid the din, decided to step in and mediate before his brother became the victim of a lynching. And who knows what would have happened to Johnny English?

A calm descended within seconds as Chotu offered to go and look at the equipment with a view to repairing it, and the throng followed him across the thoroughfare as disciples would follow their Messiah. He spent about 15 minutes there and returned with the damaged video recorder while Kubla was banished by his father to the safety of the Defense Colony.  An hour later, Chotu returned their equipment to them repaired and fully functional, and the rumpus resumed for the final few days of the exhibition.

It was an odd experience because in the whole of the time that our stand was in mortal danger, I felt quite calm. It was like watching a film with Chotu in the lead role as peacemaker and general good guy. It was truly fascinating to watch the transformation of this unruly mob into a respectful, appreciative, and much calmer group of co-exhibitors. I still reckon to this day that he must have had a spare video recorder hidden somewhere in the curtained-off area in anticipation. And Sonny Roy apologised to ‘Mr. John’ for his other son’s fiery temperament! A fabulous family.

TALES FROM THE ROAD 11: THE NIGHTMARE IN ATLANTA

I am glad to say that most of my international exhibition experiences have been pretty good ones. Good organisation. Great stand designs. Exceptional interpreters. Fabulous staff. Great business. But there are some things that you simply can’t plan for, and this is the story of the one that got away!

We had committed to taking several new woodworking machines to the IWF show in Atlanta (International Woodworking Fair), two of them weighing over a ton and each of them requiring setting up for demonstration.  We had booked a reasonable sized stand, relatively close to two of the distributors’ stands, and had contracted an exhibition specialist to set up the stand so that when my colleague and I arrived we would need just to check the machines and get ready to sell.

Kevin and I were originally just going to get off the plane from Manchester and have a few drinks in preparation for the following day, but something told us we had to go to the exhibition hall just to see how the stand had been put together. We arrived in our hall at about 2pm local time and finally had our ‘few drinks’ at 3am the following morning. We were lucky enough to find a bar that sold cans of  Boddingtons adjacent to the exhibition site!

On arrival at the exhibition hall we found four crates located on an otherwise empty stand. Nothing at all had been set up for us. We had no toolkit. We had not booked forklift drivers. We had no idea where to store the crates when we finally prised them open. Our contractors were nowhere to be seen, and to top it all it was 90+ degrees in the hall because they only switched the air conditioning on for the show itself!  

There was no point is wasting our breath getting angry. Our choice was to find a way to set everything up ourselves, or abandon the exhibition and sue the contractors for the wasted time, travel and accommodation expenses.  So we begged enough tools from one of our distributors to take the crates apart and set up these complex machines, for which we had to rob one of the technical guys from another distributor who knew what he was doing.

We had to pay forklift drivers large numbers of dollars to interrupt their tight schedules to remove the crates and to help set the machinery into their demonstration positions.  And we worked our socks off in sweltering, airless conditions for the next 12 hours. The two of us took in a pint of water every half hour just to stay hydrated and finally left the stand in good order shortly after 2:30am the following morning. I think we may have had a couple of sandwiches in all of that time.

Finding a bar had become essential by that time, and finding one with Boddingtons, albeit in cans, was like having our prayers answered. So we slipped quite a few of those down and then realised that our cab ride back to the hotel would take 30 minutes, and that we would have to leave the hotel again through Altanta’s morning rush hour by about 7am to get back to the exhibition stand for an 08:30 start. We each had three hours sleep but somehow got through the following day without either of us expiring.

We had an incredibly busy and successful few days and were lucky that our distributors were prepared to take our machinery into their showrooms rather than have to arrange for their shipment back to the UK. We had averted near disaster by knowing enough incredibly helpful people, and we got the show on the road. It goes without saying that we sued the company who failed to do what they had been contracted to do.

The only thing that Kevin and I could have done differently was to arrive a couple of days earlier. We thought that everything had been planned out to the ‘nth’ degree and that we had done everything possible to ensure that everything would be set up for us when we arrived.

SO THE LESSONS LEARNED?

1. Make sure you know enough people to get you out of a scrape if you happen to inadvertently find yourself in one.
2. We should have worked more closely with our distributors to use local set up companies rather than rely on someone we contracted back in the UK.
3. Make sure there is a good bar open all hours close by any venue where you suspect this kind of thing is ever going to happen to you!

TALES FROM THE ROAD 10: SUPPLYING INTO DIFFICULT MARKETS

TALES FROM THE ROAD 10: SUPPLYING INTO DIFFICULT MARKETS

My European History degree thesis was on the continuance of business with Hitler’s Germany during World War Two. It taught me that business generally continues even in the most difficult political circumstances, although its ethics can often be called into question. 

I spent several years from 2004 advising a UK manufacturer of incinerators whose enquiries were coming from all over the world, including George Bush’s  axis of evil, except for North Korea: Gaddafi’s Libya, Ahmedinijad’s Iran, and Saddam Hussein’s Iraq. Countries in different levels of turmoil but still with a need to trade. The Libyan order was supplied with the help of a well connected British consultant who spent half his life there. The Iranian order was completed through a Greek consultant just before sanctions were increased on Iran. The Letter of Credit (LC) costs were exhorbitant, mainly because the payment had to be routed through a London based Iranian bank. But the Iraq project was more soundly based, and this is the story.

My client had just acquired a UK competitor, and as part of the acquisition they inherited a $350,000 USD for 20 standard incinerator units for the Ministry of Health in Iraq. It was potentially very profitable business and they were both excited by it and at the same time daunted. It took a couple of meetings for them to produce the LC that applied to the order. It was from the Trade Bank of Iraq, owned by JP Morgan, and was stacked entirely in favour of the buyer – the Ministry of Health in Baghdad. These were the key terms of the contract and LC:

·         80% payment to be made on delivery of all 20 units to Baghdad, overland from Amman port in Jordan and to include all insurance.

·         20% payment to be deferred ‘until all units were installed and in use’ at some indeterminate time in the future.

·         A 10% bid bond was required just to take part in the tendering process

·         A 20% performance bond was required to ensure that any equipment supplied would perform to standard, and would also be paid/refunded either partially or in whole at some indeterminate time in the future

·         No British manufacturing plates were to be visible on any machine in case they were captured and destroyed by insurgents.

All of the risk was for my client, who stood to lose all $350,000 if anything went wrong in transit, or if payments failed to materialise. The LC had been arranged by an intermediary in Baghdad who has since proved  to be one of the most honourable people I have ever known. Of course we had no way of knowing that back then, but I advised my client that we could not accept the LC on those terms. The manufacturer was clearly nervous about losing a large and profitable order, but I persuaded them that it had to be re-negotiated so that we could reduce their exposure to risk.

So I picked up the phone to the intermediary, and told him that as the LC as it stood was unworkable we needed to find an alternative arrangement, either a complete set of amendments to the LC or by agreeing a deal that would enable us to cancel the LC. We declined to pay either the bid bond or the performance bond. I know that his LC charges in Baghdad were likely to be very high, and immediately suggested that the LC would cost us both unnecessarily. He accepted that, and agreed the following schedule:

·         The 20 incinerators would be sent in three shipments: the first containing four units, and the second and third each containing eight. 

·         Each payment would be by telegraphic transfer into my client’s bank.

·         50% of the value of the first four units would be paid before shipment from my client’s factory, with the balance payable when the shipment reached Amman in Jordan, plus the 50% deposit for shipment two. The deal was repeated for each of the following shipments.

·         The intermediary arranged overland delivery and insurance from Amman to Baghdad and the installation of each machine.

·         The maximum financial exposure to my client at any one time was $70,000 USD .

All payments were made on time. All shipments arrived in Baghdad on time and the incinerators were distributed around various hospitals in the city. Orders are still being received from the same source, but that fact that my client could demonstrate they had units on the ground in Baghdad  encouraged further orders from both the British and US military.

The situation in Baghdad during that time was extremely dangerous, to the point where the intermediary had to send his British wife to live in Jordan until things calmed down. Their lives had been shattered by the war but they found a way to manage in those very difficult circumstances. He was especially pleased to be championing the supply of British goods into Iraq because the war years had led to the importation of what he regarded as sub-standard products from many different parts of the world. During his youth the Iraqis liked to buy British because it had a quality stamp to it, and a certain prestige. So the incinerator story is a success story for both British manufacturing and British exporting!

The lessons learned?

1.       If a deal looks wrong, you can normally change it. Business is about negotiation.

2.       Business is also about risk. Sometimes a business deal is about minimising the degree of risk rather than taking no risk at all. This was a calculated risk that paid off.

3.       People do business with people. The intermediary is a regular visitor to the UK and my client had the good fortune to get to know him and his family, just as he became familiar with the quality of their machines.

4.       British quality is globally recognised and we should be shouting it from the rooftops!      

TALES FROM THE ROAD 9 – HOW CAN YOU TELL? PART TWO

Whatever decisions you make in life, you can get them right or wrong, partly or wholly. It is no different in selecting who you do business with. However, you can do a number of things to make any risk a calculated one based on facts, figures, and reputation, and therefore minimise the degree of risk to your own business.

In PART ONE of this Tale, Om and Joseph demonstrated a hunger and persistence that encouraged belief in their dedication and will to succeed, and risks were taken in both cases by the companies who gave them a chance. Both risks were minimal and were calculated risks. Om was prepared to finance the purchase of machinery and he did, and our company at that time had no alternative options to sell into Dubai. It was a case of either do it or back off. There was no financial risk, but there was a risk to our reputation should Om have turned out disastrously. At first, Joseph operated as a Sales Agent for the German tooling manufacturer, so he had to win orders and ensure that payments were made before he received his commissions.

The US distributors continued to sell our machinery because we knew they could not get it anywhere else. They continued to sell for our European competitors, so it wasn’t ideal but suited us at the time. Both continued to whinge about the other but there was plenty of space in town for both of them. Our Nigerian friend has stayed in touch and may be of use in future years, so actually none of the cases from PART ONE of this article brought us to a complete dead end.

I only got to know the Nigerian in 2011, but before the advent of the Internet company verification could be quite a challenge. Now we have the luxury of online credit checks, Google Streetview, and a whole host of other information sources that go some way to help us establish whether or not a company is a good or a bad risk. The flip side is also true. Companies and individuals who are a bad risk use the Internet for a range of activities, both innocent and fraudulent.

So you start with two rules of thumb: if it sounds too good to be true then it probably is; if you have even the slightest doubt, check, check, and check again and do nothing if doubts persist. Below are 20 questions that I have used over the years to help verify new enquirers:

1.       What is the street address of your company?

2.       What is your website address?

3.       What is your company registration number?

4.       How many locations does your company operate from?

5.       What is the main business of your company?

6.       What company standards and certification have you achieved?

7.       How many years have you been selling into our market sector?

8.       What is your company turnover and how many people do you employ?

9.       How many sales people do you employ?

10.   What territory do they sell into?

11.   What market/industry sectors do you target?

12.   What complementary product ranges do you sell?

13.   What competitive products product ranges do you sell?

14.   Do you have your own warehousing facility?

15.   What Trade associations do you belong to?

16.   What Industry publications do you advertise in?

17.   What is the scope of your online advertising?

18.   What exhibitions do your company show at?

19.   What are your main sources of sales lead generation?

20.   What sales turnover can you generate for our company in the next 12 months?

What would your company’s 20 questions be? Of course you don’t need to ask all of them all of the time, but it is useful to ask four or five of these to provide you with a basic understanding of who you are dealing with. You know best what your company requires from an overseas partner, so build your own checklist based on that knowledge. Alarm bells should sound if companies are not prepared to answer reasonable questions, and some will not respond at all. Those who do tell you some or all of what you want to know are generally worth pursuing.

Be aware also that there are occasions when you can run through all possible checks but then still can’t tell! That’s when you have to rely on instinctive judgement, gut feeling. And that’s what it was always like 20+ years ago, and it remains an essential skill in appointing any new business partner, especially internationally.

TALES FROM THE ROAD 8 – HOW CAN YOU TELL? PART ONE…

One of the things I have been told most frequently by potential new distributors is ‘we want exclusivity!’ Although it started to sound like an overplayed record, I would probably ask the same if the boot was on the other foot. Distributors mainly ask for exclusivity because they want to commit to marketing and promotional expenses on your behalf, and why should they do that if you are going to side with someone else?

I had only been in post at Gaskell Textiles for a couple of months when I took a call from my sister company’s distributor in Athens, who shall be called Mr. G. He had clearly not been able to impress the previous guy, and probably thought the new boy would be a soft touch. I had barely opened my mouth before he told me he was our exclusive distributor for Greece! However, I had all the performance figures of all our distributors in a chart on my desk and I was able to retort that £18,000 of business this year and £4,000 last year hardly justifies an exclusive arrangement and that there was no distribution contract in place.

It got funnier. About six months later, I took another call from Mr. G. who was on his way to see our sister company ‘in one hour’. He suggested that I dropped everything to meet him. So I said no, but if he waited around until later in the afternoon I might be able to find ten minutes. And I kept my word, and walked into the showroom where the meeting was to take place, warmly greeted Mr. G., shook his hand and asked him about his journey, and then said “Mr. G. I would like to make my position clear. I will not give you exclusivity for our products until you show me £50,000 a year in sales turnover”. That didn’t make him too happy, and for all I knew there could be another distributor in Greece that would have provided a quicker route to my £50,000 a year – which I actually failed to achieve anyway! And the postscript to the story is that Mr. G. stood me up when I visited Athens later in the year. It’s all a bit of a game.

So who would you be prepared to offer an exclusive contract to? The following opportunities are true. The people are real. The cases are real (sorry folks, I nicked that from Judge Judy!). Think about each as you read on, and think about what you would do. The answers are at the end, but first use your own judgement, and see if your gut feelings are correct!

CASE 1

A former sales director colleague of mine was selling woodworking machinery at an exhibition in Dubai. He had gone to exhibit on a whim, to test the waters, to see how the land lies. He had taken a shell scheme and was not in the greatest location, and as a result he ended up twiddling his thumbs for most of the six days of the exhibition. However, on each of those days, one man called onto the stand promoting himself as someone who would build business for the company’s machinery across the Middle East. He had no experience of selling machinery. He had no experience of the construction sector into which our machinery was predominantly sold.

CASE 2

A German tooling company was exhibiting in Accra Ghana in the 1990’s. ‘Joseph’ pestered them daily for the right to sell their tooling into engineering companies in Ghana. He didn’t let up, and was there at the start of every day. Joseph was wearing no shoes at the time because he couldn’t afford them. He had no money and no experience of selling tooling, no experience of selling anything at all!

CASE 3

Two established companies in the USA, one in Springfield Massachussetts (no Simpsons gags please, they’ve all been done!), and one in Charlotte North Carolina. Both persistently demanded nationwide exclusivity for our products. Both had long and successful track records of selling machinery. Both had tremendous knowledge and experience.

CASE 4

I was introduced by a very well connected guy in South Africa to a Nigerian who in turn was well connected in the medical sector in his home country. He was full of energy and very demanding, both in terms of time and in terms of the support he would need to win a share of the market for my client’s incinerators. He travelled regularly to the UK and was familiar with all the necessary logistics and payment issues.

SO WHAT HAPPENED?

1.       Om became our best distributor in the Middle East, bringing a regular £300,000 of business annually.

2.       The German company gave Joseph a chance. At first he dragged his only tooling block around Accra on a homemade cart with a string handle. Within 5 years Joseph was driving a Mercedes and wore shoes.

3.       Neither US company were given exclusivity. The market is too big, and both companies were selling for competitive European companies. We weren’t the only show in town. And by the way, they both hated each other!

4.       I have no doubt that the Nigerian guy would have worked out, but Nigeria was not a priority market, and my client had already sold into the country through another source. He wanted expenses upfront because he was going to have to travel extensively to achieve his goals.

PART TWO will provide a few hints and tips on how to verify new distributors, and make judgements about what sort of contract to agree with them.

TALES FROM THE ROAD 7 – EXTREME NEGOTIATION STANCES

The psychology of selling and negotiating is fascinating. My first job on the road was as a UK Sales Engineer, which was a bit rich really, because I had never sold anything on the road, and I have never been trained as an engineer! But that’s what it said on my business card, and customers seemed to believe it.

Much depends on what you are selling and who you are selling to. My sales roles have involved a high degree of solution selling, whether by resolving a production bottleneck by recommending the right machine, or by creating an aesthetic floor design using most suitable products. It’s all about overcoming your customer’s objections to buying your product and presenting new ideas with confidence. And knowing your stuff.

A key element in successful selling is to know where your own boundaries lie. Where is the line in the sand between you and your customer that you are not prepared to cross? Walking away from a potential order is a tough thing to do. However, that must always remain a part of any sales person’s armoury because walking away from non-profitable orders enables a keener focus on meeting and exceeding profit margins, and involves less wasted time.

Back in the year dot, I was selling high production woodturning machinery into the USA. Our woodturning system on this side of the pond was radical, innovative, unique. The US system had not moved on for decades, and required much more complex loading and guarding facilities. Ours was faster, safer, and provided better definition. So you think those powerful arguments made selling the machinery a piece of cake? Well no!

In 1992 I visited a company in South Carolina to give them an overview of why our machinery would significantly outstrip the performance of their existing kit for making veranda balusters. They were really nice guys, though obsessed with golf which I am not. How does anyone find the time to play golf anyway? But once we got over that little local difficulty by agreeing that the 19^th hole is often the best place on any golf course, our discussions progressed really well. They seemed convinced and made all the right buying noises.

It took four further visits to their facility over the following 18 months to get my first order, and in the end I’m afraid I really stuck my neck out to get the deal, with an offer of 50% payment upfront, then if they didn’t like the performance of the machine within 3 months of its delivery I wouldn’t ask for the balance. Risky? Stupid? Cavalier? Mad? Well yes, it was all of those things and a rather a lot of expletives thrown in.

I would honestly not recommend anyone to do anything similar. I didn’t sleep terribly well for those 3 months! However, I did know my customer. They were never going to make a quick decision, but they were always very likely to make the right one. In the end it paid off, and they took another four machines in the following couple of years and were happy with them all. But it was just too risky!

That was the last and only time I took a risk as extreme as that, but business is about calculated risk and to not take risks is to stagnate. It is so important to have the autonomy to make decisions when you travel to see your international customers. You are likely to be the only company representative they ever see, and they associate your performance with the reputation and status of your company.

Many of you will have experienced the little man appearing at your exhibition stand, showing great interest in your products and then asking for exclusivity for the country or region where they are based. Some of them are just ‘agency collectors’ and will be of no use to you; some are the genuine article and will be able to do what they claim. And presumably, if you are looking for representation in their country, you will be interested in finding out more

The key with any new enquiry like that is verification, and in a later post I will give my further thoughts on that. But let’s deal with the issue of when and whether to grant exclusivity. You should only grant exclusivity either if you are able to verify through several sources that a company is a perfect fit for what you want to do and has a track record to prove it with complementary products, or after a period of time achieving the sales targets that you set them.

In planning your international business and forecasting the sales turnover and profit margins that you require from different parts of the world, you will have already set a benchmark of what you want to achieve. In markets where you have no business at all, you have nothing to lose in agreeing to ring-fence their activities for a short period to learn how they operate and to establish what they are capable of. But an exclusive distribution contract has to be earned, so don’t jump in with both feet however exciting a prospect might appear to be!

So what lessons?

1.       Don’t take no for an answer when you are completely sure of your ground

2.       Never be afraid to walk away from unprofitable business

3.       Make agents and distributors earn the exclusivity they demand

4.       Never admit you don’t like golf to someone who lives and breathes it

JOHN REED