In many industries, international expansion is becoming a necessity rather than just another option to consider. Major manufacturers and businesses are increasingly looking to suppliers who can meet their needs on a global, not just a domestic basis.
It’s difficult to ignore the potential benefits that international expansion can bring, both in terms of growth and revenue. However, many companies still lack the knowledge and resources required to successfully kick-start overseas sales.
For companies beginning to explore the idea of selling abroad, independent sales representatives can provide an affordable way of building an overseas customer base and selling internationally.
What is an overseas sales representative?
Overseas sales reps are often referred to as manufacturers reps, foreign sales reps, sales agents or independent sales representatives – these terms are often used interchangeably, but not always correctly.
In simple terms, an overseas sales representative is an independent business or individual that acts on your behalf to help sell your company’s products or services overseas. They will be based within, or close to, the sales territory and will pitch and sell your products or services to prospective clients. A key differentiator is that sales reps, unlike agents, aren’t empowered to make commitments to clients on your behalf. The benefit? You retain control. The representative’s role is simply to develop opportunities and pass enquiries to you as they come in, providing support and guidance when you require it.
By partnering with an independent sales rep, rather than selling direct, you’ll gain instant access to an overseas market along with the rep’s existing network of contacts and experience in the market.
Nuturing Existing Relationships
Depending on your agreement and any exclusions you wish to stipulate, the rep’s role could also be twofold; their primary purpose is always to develop new sales opportunities and win work on your behalf, but in addition they can act as your main point of contact within the territory for existing clients. This helps you stay seemingly local to clients whilst you are still located overseas. In doing this, a sales rep nurtures your existing relationships to ensure clients are kept happy. Ultimately this will increase your chances of winning new opportunities with existing clients.
Unlike domestic sales reps, a good international rep may become your partner for years, helping to establish and grow your overseas sales before you hire your own staff or establish a physical presence. A good representative will have the cultural awareness and understanding of doing business that you lack – they’ll know how to negotiate any nuisances or quirks in the market and give you a head start.
Finding an international rep
There are a number of ways to find a good rep and even more ways to find a bad one – finding a reliable foreign rep with a good track record is essential and although it may be time-consuming, it will be worth your invested effort.
The process of shortlisting and vetting is much the same as finding any new supplier or recruiting a new member of staff. You’ll need to evaluate potential candidates carefully and ask a lot of questions. Not only will the company need to be experienced, they’ll need to specialise in your sector and have at least a broad understanding of your products/services before you consider signing an agreement.
Existing Clients; Complementary not Competing
Most independent reps provide services to multiple clients. Although this might seem like their attention is divided, it actually has a number of benefits. In representing several clients, the rep will expose your products to a much broader range of potential customers than a sales manager selling for a single business. Reps typically have a portfolio of clients who offer complimentary products or services – in this way they are able to achieve much broader market penetration and get your business in front of more people. It is important that you ask about a rep’s existing clients – they must not have any that compete with you.
Here are some good places to start your search:
1. Chamber of Commerce and Government Trade Support
Your local Chamber of Commerce makes a good starting point. One of their main goals is to support and foster international trade and Chambers usually offer export training, support and assistance. If they don’t know a rep, they’ll probably have a member who does.
Also consider the resources available to you through government. Most countries have overseas export or trade teams available to support international expansion. The US, Canada, Australia and the UK are examples of countries that provide this type of support. By approaching these agencies and/or your own country’s international embassies within your target market, you’ll increase your chances of finding someone pre-vetted and reliable.
2. International Trade Shows
International trade shows are the natural stomping ground for independent sales reps, regardless of industry. You’ll find them walking the halls, representing clients and keeping an eye out for new customers at most of the well-known shows. Research the major shows taking place in the countries you are looking to target and think about attending. If you aren’t sure which shows and when, touch base with your embassy or contact your local industry association. They may even hold your hand and guide you whilst you’re there.
Most countries have international trade missions and industry associations that offer support and guidance to businesses at overseas shows. In the aerospace industry you’ll see government agencies like the US Commercial Service, departments for economic development from numerous US States, and industry associations like the AIA – they all attend major aerospace shows in Europe and support businesses from the US.
3. Professional Networking Services, Online
Professional networking sites like LinkedIn are an invaluable place to network and to find sales professionals within countries you are looking to target. Ask for recommendations from your peers, join LinkedIn groups for you industry, network and ask questions.
The sales rep agreement
Finding a rep is only half the job. Once you’ve identified a company, agreeing terms that suit you both is the next step forward.
For a rep to start working on your behalf, you’ll need to sign a contract. This agreement will lay out the legal basis of your relationship and specify any special terms that have been agreed between both sides. Most sales rep agreements have a range of standard terms and conditions.
Some points to consider when reviewing the contract are the sales fee, the territory (the geographic area in which the sales rep will operate on your behalf) and adding exclusions and travel / business expenses.
The Sales Fee
The higher the sales rep’s fee – typically made up of a retainer and/or a commission – the less you get. The lower the fee, the less they get and, therefore, the less motivated they may be. It’s important to strike a good balance for both sides to form an effective partnership. A good sales partnership thrives on equal trust and equal investment.
Depending on you industry, most reputable overseas reps will expect to charge a monthly retainer fee and be paid a commission on the sales that they bring in. In countries like the US, it’s not uncommon for domestic sales reps to provide ‘commission only’ services. This means the rep works for free and you only pay commission on sales that actually come in. Sounds great, doesn’t it? When you’re trying to expand into international markets – as a new supplier – this kind of representation is often unviable for professional reps.
The supply chains of sophisticated industries like the aerospace, automotive and defence markets have become competitive and highly evolved – there has been a drive from manufacturers and OEMs to reduce their number of first tier suppliers and to reduce costs. Challenging suppliers not only need to demonstrate added value, they must also go through a process of obtaining specific client approvals, before they can begin to supply – even at the second and third tiers of the supply chain. For reps this means considerable time, investment and groundwork before their new clients can break into the market.
A retainer fee offers a basic level of remuneration to a rep whilst they help to establish your presence and guide you through the process. It may mean many hours liaising with potential clients and offering you advice. On an ongoing basis, it ensures that they service your business on an equal basis to their other clients. Commission-only sales contracts often encourage reps to go with the money; to focus on the client most likely to bring the quickest and greatest reward for their company – and that isn’t necessarily your business.
Fees and commission structures vary widely from industry to industry and product-to-product; what’s appropriate for one industry or business may not be for another. Many reps work with tiered pricing systems, others with flat rate fees. What’s important is that the structure you agree on works for you both. It’s worth asking around to get a handle on what’s typical for your type of business and industry.
This is the geographic area in which the rep will provide sales services for your business and – depending on your agreement – will earn commission. Do you want the rep to cover an entire region such as Europe, Asia or the Middle East? Or perhaps you want them to focus on specific countries? Talk it through with the rep and understand where their experience lies. There may be countries you hadn’t considered that should be included in the agreement.
This is an opportunity to ring-fence any existing clients and exclude them from commissions, within your contract. Often called ‘house accounts’, it’s common to add exclusions to sales rep agreements. There may be customers in the territory that you’ve already worked with and leads that you’ve developed yourself. Understandably, you shouldn’t pay commission for work you’ve already got. There are a number of ways to specify exclusions, you can designate an entire company a ‘house account’ or exclude individual projects or specific programmes.
When adding exclusions think about how else your rep might help. Geographically, your rep will be closer to your client than you. Although you might choose to exclude them from existing business with a specific client, would it pay to have their help winning additional opportunities? Having face-to-face meetings and building relationships is key – if your rep is based within the sales territory it’ll be more cost effective for them to visit the client and will keep your business seemingly much more local.
Travel and Expenses
Typically, a rep will be reimbursed for any travel expenses they incur as part of their work on your behalf. It’s important that you retain control of this expenditure so you don’t incur unnecessary expenses – the terms you both agree should be specified within the contract. Whilst you might have to spend money to make money, you don’t want to give the rep a blank cheque.
Rather than authorising a monthly or even annual expenses budget, you’ll be able to keep better control of this expenditure if you review and approve expenses on a trip-by-trip basis. When you agree to operate this way, the rep submits a detailed cost estimate before booking travel or going on a trip. You then approve or deny the request case by case. If you approve, the rep bills you for actual costs after travel. If you deny, you don’t incur any costs you aren’t prepared to pay.
Where possible, many reps will seek to share travel costs between multiple clients and this can present a significant cost saving. If your rep is visiting an area on behalf of another client, they may be able to schedule meetings for your business at the same time. In this way you’ll only pay half, or even a third, of the journey, travel and accommodation costs for some business trips.
When to get an overseas rep
It’s never too early to start putting out feelers and having initial conversations. If you’re not sure whether your business can be successful overseas, a good rep based in the territory should be able to give you some market insight and offer their opinion. It’s not in their best interest to sign clients who won’t or can’t be successful – ultimately, reps want to earn sales commissions from their clients because it’s where they make most of their money. Most reps are selective when choosing clients because each must be unique and compliment their existing portfolio.
1. Be realistic
Overseas markets can often be as competitive or more competitive than your own. Don’t underestimate the capabilities of your competitors because they’re overseas. In some industries supply chains are much more mature. If you’re the new kid on the block, OEMs won’t automatically look to add you to their supplier list. It may pay to be strategic and target the primes and second-tiers to establish your reputation. Foreign sales will require time and investment, but ultimately the rewards can be great.
2. Do your homework
Before you sign up with an overseas sales rep, talk to people you know and speak with at least one of their existing clients. Good reps should be happy to give you a reference and let you talk to their customers.
3. It’s still about relationships
Sales and marketing overseas is like selling at home, despite the use of eProc, e-bidding and formal RFQs, a large proportion of international sales are still achieved through business relationships. A good overseas rep should have a large contacts network and will have nurtured relationships for many years in order to become successful. Reps are constantly ‘doing the rounds’ – meeting procurement contacts every few months, year after year –at trade shows, over coffee or for formal meetings. These relationships lead to the rep having a detailed knowledge of who to speak to and where the opportunities might lie.
4. Stay involved
The sales process is a partnership between your business and the rep’s. It is therefore important you develop a strong relationship with them. The rep can only ever be as successful as you enable them to be – You will need to be committed to the sales process by providing the same kind of support to the rep that you would to your domestic sales team.
Consider: How often can you or members of your team be in the sales territory to support client visits? With a rep you won’t need to be in the territory all the time, but you should be there at least a few times a year. A foreign rep will open doors and drive the sales process but they’ll still need support from management and your technical/product team as opportunities begin to develop. The more you engage in the process, the more your business will get out of it.
5. Ensure the rep is a good fit
No one cares more about your business than you and your team, but try to find a company or individual that seems a natural fit for your business. Ultimately they’ll be representing your business and talking to clients on your behalf. You’ve spent years marketing your business and growing your sales – so your rep needs to be on the same wavelength and a natural extension of your existing team.
What have your past or current experiences with independent sales reps been like? Are there are things you look for or consider when hiring? Let us know in the comments below.