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Selling abroad? Make sure you hire the right type of partner to make the move a success.

By Andrew Douglas

You have settled on a foreign market for your product or service — now you have to find someone to pound that faraway pavement and sell it for you. Do you hire an agent, open a foreign office, find a distributor or pick another type of representative? What’s the difference and who is your best bet? Consider your options carefully.

There are three basic types of representatives, but the boundaries among them are sometimes blurred. A big import-export firm, for example, may include them all under one roof.

The agent. An agent is an individual or firm you employ, usually on commission, to sell your product or service. This gives you the most control over how deals are handled.

The distributor. A distributor is a firm you choose for its distribution channels in the market; it buys your products from you and then sells them directly.

Trading houses. Full-service trading houses handle multiple aspects of exporting, such as market research, transportation and advertising. Some firms buy your product outright, while others may act as agents on commission.

Establishing your own local office instead of using a representative is another possibility, but it’s expensive and rarely required early in an export initiative. In some countries, it’s not even an option — you can’t operate in certain markets except through a state-approved representative.

In choosing what best suits your needs, there are no hard and fast rules — it depends on the business sector you’re in and on the nature of your product or service.  What follows are some tips from various exporting clients and foreign market representatives of Export Development Canada (EDC).

1. Understand the market

Before you decide on a representative, you have to understand how your market is segmented — by industry or regional divisions. Then pick a representative whose capabilities match your market segment. If your product is advanced technology or manufacturing equipment, for example, you would want a representative who has a technical as well as a sales background.

One way of finding potential representatives is through contacts at trade fairs. You can also check sources such as the Canadian Trade Commissioner Service (www.infoexport.gc.ca), which has officers in Canadian embassies and consulates abroad. Trade associations and local chambers of commerce are also helpful.

2. Find a savvy local agent

Some of your own suppliers or other companies in your sector can recommend an agent who has done good work for them. To penetrate a market    quickly, look for an agent with good contacts to large buyers. You have to work with someone who has a good grasp of the market, speaks the language, and really knows and understands the buyers.

3. Don’t sign a long-term deal immediately

In certain countries, you need a distributor who buys your product and then remarkets it.  One of the main differences between a distributor and an agent is that the former will usually want an exclusive agreement immediately. Be careful not to get trapped in a long-term agreement with a distributor who doesn’t do a good job. For example, you may find the distribution network is not as good as it was presented, or that your products are not compatible with the distributor’s product line.

When dealing with agents, it is wise to avoid an exclusive agreement within the first year.  Try to develop a solid working relationship first and then, if both parties are comfortable, you could proceed to an exclusive agreement. If you’re entering a large market such as China or India, don’t give it all to a single representative. Instead, split it into zones of responsibility and find an effective representative for each zone.

4. Evaluate buyers carefully

Even if an agent finds you a buyer, it is still your company’s responsibility to properly evaluate that buyer before securing the deal, and to ensure proper protection on payment, such as a letter of credit or export receivables insurance to back it.

5. Maintain your business standards

Finally, it’s important to understand a potential representative’s approach to business integrity. If he or she offers a deal that doesn’t meet your standards, perhaps because it involves payments of doubtful legality, turn it down.

Andrew Douglas (adouglas@edc.ca) is responsible for research and market intelligence for EDC’s Small Business Development Group. For more information visit www.edc.ca/smallbusiness.

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