How to manage international commercial partners to grow your business
Exporting through international commercial partners can represent considerable opportunities for UK businesses in terms of improved profitability, growth and competitiveness. Many routes to market are possible such as franchising, joint venture, licensing, distribution, independent reseller, agent, contract manufacturing, piggy back, trading house, export management company, broker or commercial agent. In some countries, local partners are mandatory. However, international partnership can also increase business risks if the partnerships are not managed rigorously.
Identification and selection of potential partners:
- After selecting your market, don’t be tempted to just partner with companies who have made an inquiry
- Identify potential partners at industry or channel events, country missions, on competitor’s websites or with the help of Enterprise Europe Network, DIT, Chamber of Commerce.
- Look for long term partners, evaluate their competencies, territory coverage, companies they are already working with, client profiles, number of sales & marketing people, storage facilities, strengths and weaknesses, commercial and financial situation and values and payment terms.
- Question the level of investment they are prepared to make to sell your product/services i.e. training, stocks, allocation of sales & marketing resources focused on incremental revenue rather than fulfillment of orders.
Negotiation with potential commercial partners with a focus on distribution partners:
- Go and visit partners in their country so that you can get a feel for their business, understand their challenges and develop the relationship.
- The commercial offer must be compelling and precise, taking into account the partner’s business. It should include quantities, thoroughly calculated export pricing including incoterms (masterclasses available from DIT), lead time and quality. Special care must be taken when selecting incoterm and currency due to their impact on profit (duty, insurance, transport cost etc) and responsibilities for both parties.
- Seek commitment such as: will they research the market? Will they test the market?
- Understand what the partnership will bring to the selected partners. They can look for cross selling and up selling opportunities. Commercial return, opportunity to sell additional value-added services (maintenance or installation) & increased customer stickiness.
- Clarify their requirements from you (training, marketing and sales support etc.). Be prepared to commit to a budget but demand proof of dedicated expenses to your product.
- Some flexibility around T&C’s are likely to be required due to cultural and legal differences.
- Consider impact on cash flow due to laps of time between ordering and actual payment. Consider credit insurance in case of non-payment.
- International commercial contracts are based on the United Nations Convention on Contracts for the International Sale of Goods
- Define the law of which country will apply
- Anticipate contract termination and specify dispute resolution process.
- Consider legal advice.
Oxford Innovation through the Enterprise Europe Network helps ambitious businesses innovate and grow internationally. Jointly funded by the European Commission and Innovate UK, experts advise and connect companies looking to go global, transfer technology and access EU funding.
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