You've got a great product but how do you sell it overseas? Rod Drury explains in the fifth of a six-part series.
KEY POINTS:
All New Zealand business people should be looking at how they contribute to exporting. It is so important for us as a country that we earn foreign currency.
In the online world you can put up a website and you're immediately global, but many businesses rely on people selling to people. So how do you go global?
The normal path is seeking distributors in overseas markets who can provide you with a low cost way of getting coverage internationally.
The United Kingdom, for example, is full of people selling things. There are thousands of people looking for new opportunities to monetise their relationships. This selling industry is added to every year by displaced executives with extensive networks looking for products to represent.
Conferences and industry events are common ways to meet people and you can often find these people online. In the UK, business networking site Ecademy (ecademy.com) is popular.
There are often two tiers - distributors, and resellers. Distributors may hold a master distribution relationship for the country and have access to a network of resellers.
Some distributors - many at it for their first time - will work on a 100 per cent commission basis and cover their own costs. If there are two tiers, expect to give 50 per cent of your sale price away as margin. Normally the distributor will get 40-60 per cent of a sale and the reseller 20-40 per cent.
In a single-tier model just think of it as the distributor.
While they will want you to be exclusive with them, often they will represent several other opportunities as well. Therefore, you will be competing for shelf space - attention - with the distributor, so you want to make sure you are paying a good margin. They will focus on whatever makes them the money, and you want to make sure that whatever else they are selling is complimentary.
Experienced distributors can point to a track record of success. In the UK, they will probably seek a few thousand pounds each month to cover expenses. New distributors will be more desperate to represent your product, but they may be unproven.
It is important to put a performance clause in any contract, which can become your way out if the distributor does not perform. Put a schedule of low sales numbers in for the first few months so it looks comfortably achievable. This should ensure that you get some mutual quick wins and if they fail to fire you have an out for later.
You must treat the distributor as another type of customer. Give them all the sales aides they need and concise information, so with minimum effort they can appear knowledgeable about your product.
You might want to plan a two-week trip with them in a month and have them fill the diary with appointments. This is a good early test and allows you to get to know them and show them how to sell your product. You'll also learn a lot about the market.
A useful practice is deal registration. You give the distributor another 5 per cent of margin if they register each deal. This avoids channel conflicts and gives you a basis for measuring effectiveness of conversion and pipeline.
Selling overseas can be a lot of fun. Getting the right engagement of place will allow you to minimise costs and risk, while providing opportunities to be wildly successful.
Always ask around for advice - Kiwis are always willing to share overseas selling war stories.
* Rod Drury is CEO and founder of leading NZX-listed accounting software provider Xero (www.xero.com).
