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