Selecting the right channels, the key to success in Europe for small and medium sized businesses
A few years ago, I made the difficult decision to cease working with a particular client. We had started exploring opportunities for them in a European country – visiting end-users to get a feel for the market and generating initial leads, as well as connecting with potential partners. My challenges dealing with this client stemmed from the fact that he wanted to do business in Europe exactly the same way as in his home market in Australia. In Australia, he sold his business solution directly to end-users. In Europe, he did not want to have to deal with any middle man. After conducting a couple of fact-finding trips to Europe with him, I made several recommendations in order to take the export project a step further. I was very aware that, given we were targeting government, there was no way we would win any tenders if we responded simply as a small Australian company. In this instance, the best tactic was to partner with a European company with prior experience responding to government tenders and was very familiar with both the process and the buyers in that sector. Unfortunately, I was not able to get my point across to my client; he insisted that should keep visiting these end-users regardless. I knew his approach would take us nowhere and, subsequently, he would not get a good outcome with his exporting activities. For this reason, I decided to terminate our working relationship, citing the reasons for my decision (how dare I!)
The lesson from this story is that small businesses need to partner with companies that are well established in the export market they want to enter if they’re to have any chance of success. You may currently be selling directly to end-users in your domestic market; however, in Europe, doing direct sales involves creating a company, hiring people locally and being well informed about local laws – just to name a few factors for consideration. For most small business, I do not recommend this approach as it is risky financially. You may ultimately want to work towards this type of business structure in Europe; however, don’t initially start in this way.
The best option is usually to work with partners (or distributors) to leverage their expertise, knowledge of the local market as well as their market reach.
And there are only a few exceptions to this general principle (a large company with sufficient resources or if you are operating in a very niche market with one or two clients per country.)
Define Your Ideal Distributor Profile
Before engaging with distributors or partners you need to define the ideal distributor profile for your business. The best place to start is by reflecting on the profile of distributors you may have worked with previously. Next, try to identify the type of companies they are and what they do that worked well for you in terms of selling your product. You may not be able to locate this exact type of distributor in every single European country, but you do need to be able to leverage your experience.
To select an appropriate distributor for your business you need to be very clear about which industry you are targeting and the type of clients associated with that particular industry. For example, my target market is the public sector, I target city councils of ten to fifty million people. In this way, my target customer is the person managing all of the assets owned by the city (e.g. fleet of vehicles). Once you are very clear about your customer profile, you will be in a good position to find distributors with this specific clientele in their portfolio and who are already selling other types of products that are complementary to yours.
You need to ask the question: What type of similar products are my typical distributors selling in addition to my product? These complementary products might also be competitors’ products.
The other important consideration is what role you want the distributor to play for you. You should determine what tasks you want them to do for you in the market besides sales. This might include such criteria as after-sales service or repairs, and training.
Possibly one of the most important factors that will help you succeed in your exporting journey is your distributor’s profile. You need to determine what benchmarks will work best for you to ensure that you are able to maximise your sales. For a small business in the high-tech sector, some example questions that will guide you to head in the right direction include:
- Are they a large company or a small business?
- How broad is their product range?
- Do they sell high-end technical products?
- Are they mainly selling to customers via a catalogue?
- How large are their salesforce?
- Are they a wholesaler? Do they sell to a network of resellers or directly to end-users?
- What profile do their sales reps have? Do they spend more time on the road or are they in the office preparing marketing campaigns? Are they technically orientated? What are their sales incentives?
- Are they regional or nationally based?
To give you an example from my own exporting business, one year I realised that the sales representative I was trying to push to sell more of one of my client’s product had no salary incentives linked to sales. I was surprised to learn that he was not paid on commission. It would have been sensible to have known this information in the first place.