Use overseas sales agents or hire a local team? That is the question…
To grow your sales overseas, at some stage you will need to decide, which is the better option for your business, engaging sales agents or hiring your own salesforce.
In export market, when you don’t have a local presence, it’s hard to keep an eye on your distributor’s sales representatives. How do you ensure that they will always keep your product high on their priority list. For this reason, I have found it beneficial to establish network of sales agents for my clients in Europe.
In the US, this is just really hard to get in the market if you actually don’t do that! Independent sales reps have their entries into distributors and key accounts and it is hard to even go around that model.
Often exporters are not aware of what is involved in hiring employees in Europe. You need to create a company to be able to employ someone. You need to understand local laws and different types of employment contracts.
There’s a big difference between hiring employees in Europe and Australia. The only exception would be the UK, which have more similarities to Australia. It is less risky for a small business to hire staff in Australia than it is in Europe.
In France or Germany for example, it is very hard for an employer to dismiss someone if they under-perform, particularly if there is conflict and the disgruntled employee takes you to court.
Any employment contract is regulated under the given country’s law, imagine having to deal with translation costs and lawyer’s fees!
Risky and costly
For a small business owner, managing overseas employees can be risky and costly. I always recommend that small businesses look for the most flexible, low-risk option when exporting.
During the initial stages of your exporting operation, you should always have the ability to get out fast if you need to. When your turnover grows and you become established, you can then consider hiring your own salesforce in overseas markets through a local subsidiary.
I even found out that that large European companies opt to have such flexible company structures in several European countries. I know of a German manufacturer who has an arrangement with their French distributor to be their representative in France. So, they actually have a French company, managed by their distributor. European manufacturers often use sales agents in their own country or in other European countries instead of recruiting their own salesforce.
By engaging the services of a sales agent, you can ensure your product receives broad national coverage. Your sales agent will visit customers and will talk to your distributor’s sales team daily. They can develop networks of local distributors or target end-users. They will respond to enquiries about your product.
Generally, sales agents are paid commissions, so dealing with them is low risk. If you need to discontinue a contract, you will have to pay an indemnity to your agent. In some European countries, there are regulations associated with engaging sales agents. These outline the obligations of the company appointing the agent and of the agent themselves. It’s important that you find out your legal obligations before recruiting a sales agent.
A sales agent should represent several companies. If the agent you’re about to recruit represents you alone, you are at risk. They are entitled to request to be re-classified as one of your employees.
This means that you would have to create a company and employ them as a staff member, entitling them to the same social benefits as an employee. Make sure you are not the only company they are working for. Check with a local lawyer about the risks associated with appointing a sales agent before finalizing any contracts and also what is the process to exit from that contract.
Most successful strategy
I have tried several approaches to recruiting sales agents, including placing advertisements on sales agents’ websites. Generally, I have not found advertising on websites effective; however, it may differ from country to country.
The most successful strategy is always word of mouth. In Europe, I have found that talking to local people in your industry is the best approach. It means that you won’t be able to achieve results if you don’t have a good understanding of the local players. You need to have built some kind of local network in place in order to be able to cross-check information.
The best source of information about sales agents will be your distributors. If you find that within your industry your distributors never work with a sales agent, then working with a sales agent may not be the best option for your business. If they do, then ask them which sales agents they find best to work with and are likely to offer you the most support. If your product has sufficient traction, sales agents will contact you as word about your business spreads.
Another good strategy is to approach other manufacturers who deal with non-competitive products and ask their advice. This can easily be done at a trade show or over the phone.
Before you appoint a sales agent, see what you can afford in terms of percentage of sales. It may vary between seven to ten percent (or more) of sales depending on your product and industry.
Regular phone calls and emails
A trial period will offer you an easy way out if you’re not satisfied with an agent’s services.
Remember that reporting to you will be more limited than if they were your employees.
Regular phone calls and emails work better than reporting processes which tend to be laborious and time consuming.
To decide whether or not hiring a sales agent is your best option for every European Union country you will need to enquire from your distributors and end-clients. It usually depends on the country and then, within each country, or the specific industry.
In Germany, independent sales agents don’t always have a good reputation. Both distributors and clients think that it is preferable to establish a German company and hire your own staff.
This should not be taken as a general rule, as many excellent agents work with German high-tech industries.
In France, using an independent sales agent is quite common. However, your decision will really depend upon the industry. In Italy, sales agents are relatively common because distribution networks can be quite dispersed.
The best advice I can give you regarding sales agents is to ask, ask and ask. Word-of-mouth is a wonderful resource! Good luck!