Choosing international distributors without a thorough selection process is less than ideal and to be avoided at all costs: selecting the wrong distributor is a tremendous setback for the exporter and the distributor alike.
In my experience as an exporter and as a trade consultant, I have realized that this situation can be avoided by implementing a solid screening and selection process that is used for every candidate, every time.
One of the most useful tools to select the right distributors is an International Distributor Screening and Selection Process that helps prospects self-qualify or self-disqualify as potential distributors. Below I will share an International Distributor Screening and Selection Process that I used for many years and have shared with many of my clients with remarkable success. I am sure you will find it tremendously useful.
I constantly use this phrase regarding keeping and developing successful distributors: “It is much easier to grow a successful and strong distribution network when you select the right distributors to start with.” If you select the wrong candidates, it will be very hard to develop them into productive distributors and to keep them for the long run.
The illustration below demonstrates how the International Distributor Screening and Selection Process helps acquire the right distributors:
When you receive an international distribution inquiry via email, phone call, or in person at a trade show or another event, it is very important to ask the candidate to complete a Distribution Inquiry Form before sharing any additional information or moving onto the next step.
This simple form accomplishes two objectives:
Here is an example of a Distribution Inquiry Form:
If a candidate returns the Distribution Inquiry Form, the next step is to send them the International Distribution Prospectus. This is a tremendously useful tool because in one document you communicate the type of distributor you are looking for—their ideal profile, investment level, industry experience, wholesale pricing examples, corporate support, etc. In short, you provide candidates with the information they need to make an informed decision.
(The next article in this series will focus on the International Distribution Prospectus, why it is a critical tool for exporters and how to develop one for your company. Make sure you subscribe to the International Trade Blog here so you don’t miss it.)
When you send the International Distribution Prospectus to the candidate, it is critical that you ask them to review it thoroughly first and write down the specific questions they want to discuss during the interview (see next step). In my experience, using an International Distribution Prospectus not only keeps you from explaining the same information repeatedly to different candidates, but also provides another opportunity for candidates to self-qualify or self-disqualify.
Once candidates have reviewed the International Distribution Prospectus and have questions to discuss, it is appropriate to conduct a phone or video interview. This interview should focus on specific questions the candidate has regarding the information on the International Distribution Prospectus and the questions you may have for the candidate. The interviews will be very productive if you focus on specific questions.
In my experience, candidates drop out because they realize this opportunity is not for them or decide to keep moving forward in the process, thus self-qualifying or self-disqualifying themselves.
One common mistake I see exporters make after they have interviewed and are interested in a candidate is immediately signing the distribution agreement or (worse) awarding distribution rights without an agreement.
At this point, if you and the candidate agree to keep moving forward in the screening and selection process, the candidate needs to complete a formal International Distributor Application. In this application, the candidate provides more in-depth information regarding:
Here are some examples of International Distributor Applications:
An International Distributor Application will provide critical, in-depth information regarding the company’s background, owners, staff, financial statements and a marketing plan that the candidate intends to deploy for your products in the requested territory.
Also, having a standard International Distributor Application is tremendously useful when you have multiple candidates applying for the same territory’s distribution rights at the same time, as it provides you with a uniform set of documents to review and compare. Furthermore, only serious candidates will complete this application. Those who do not complete it self-disqualify themselves.
Once you have received and reviewed the International Distributor Application from a candidate, you can decide whether to move forward, go back to the candidate for further information/clarification or decline the application outright.
If you select a candidate, I highly encourage you to take one more step before signing the International Distribution Agreement: ask the U.S. Commercial Service to conduct an International Company Profile (ICP). The U.S. Commercial Service is the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration. It has a global network of experienced trade professionals located throughout the United States and in U.S. embassies and consulates worldwide.
The ICP is a full or basic background check on a specific foreign company. Learn more about this service here. I always conducted a full ICP on the candidate selected before signing the International Distribution Agreement as an extra step of due diligence and to ensure that the information provided on the International Distributor Application is accurate.
The last step in the International Distributor Screening and Selection Process is to sign a formal International Distribution Agreement. The biggest potential blunders in this step are:
These are samples of international distribution agreements. They are just for you to see the basic clauses, sections, width and breath of an international distribution agreement:
It is critical that an international trade attorney crafts and reviews the final version of the agreement to ensure that it complies with local law.
This International Distributor Screening and Selection Process is simple, efficient and relieves you of redundant work while allowing you to focus only on serious, qualified candidates. Selecting the right candidates, helping them grow as productive distributors and keeping them for the long run will prove to be a key factor in your company’s export success.
If you missed the first article in this series, read it here: Turbocharge Your Exports By Selecting the Right Distributors