Using an agent or distributor for overseas expansion…

Lockdown provided business leaders with time to evaluate their current strategy, assess what business will look like post lockdown and consider what plans they need to implement to ensure they remain successful and ahead of their competition with a #BusinessForTomorrow.

Dan Town, Audit Director within the corporate services team at Hazlewoods Business Advisers and Chartered Accountants takes a look at the routes for overseas expansion.

For those businesses operating overseas, or even for those who currently do not but have seen an increase in demand for their products and services, the use of an agent or distributor creates opportunities for growth into new geographical markets which previously might not have been an option.

Of course, there are both advantages and disadvantages to using international agents and distributors. Making use of new contacts and gaining valuable market insight at this time could give rise to opportunities to grow exports quickly. However, companies need to consider the pricing strategy and commissions payable and whether they outweigh the cost to the business.

Due diligence on any potential agent or distributor to ensure they are the right fit for a business is critical. It is important to spend time obtaining credit references, understanding the supply chain and whether they have the relationships in place to maximise the opportunity for your product or service. Time invested at the beginning will ensure you partner with someone who will truly maximise the potential of your business and invest in a lasting relationship.

A practical way to do this would be to ask for references from other businesses they are working with and contact these companies to ask for their experience of working with them. This is an ideal opportunity to understand any reservations you might have and obtain genuine insights to how they operate. Some companies, from experience, have produced questionnaires to be completed prior to engaging in discussions with potential agents. If an agent will not invest time in these questions, then they might not be the best partner for you.

For those businesses who are already working with an agent or distributor, now is an ideal time to evaluate the current agreement and relationship you have:

• Is the agreement still working to your initial expectation and are you seeing a return on the relationship?
• Are they keeping you up to date with local legislation changes which could impact on your product or service being delivered locally?
• What are the lockdown implications in that region and how will they impact your business?

These are all questions which should be considered to understand what business will look like in the future in that region and whether your product or service is still fit for purpose. If it is not, then it might be a good opportunity to consider ending the relationship and considering new geographical regions which do not impose such restrictions.

There are a number of resources available to those UK businesses who are looking to trade outside of the UK; for example, the department of international trade and British chambers of commerce can provide assistance to help your business achieve this. You could also ask your existing customers or supply chain who might be able to recommend someone who they have already gained trust in to reduce time spent on due diligence.

With widespread media reports of the UK looking likely to be entering a period of recession, overseas operations present opportunities and ways to maximise growth in turnover and profitability. With careful planning and finding the right partner, the opportunities for overseas expansion could be a solution for businesses, both to further expand sales or to fill the void of cancelled orders.

Hazlewoods is an independent member of HLB, an international network of independent professional accounting firms and business advisers. If you are looking to expand your business overseas, please get in touch with Dan Town at dan.town@hazlewoods.co.uk or 01242 680000.

For further insights and advice to support businesses in building a #BusinessForTomorrow, visit the dedicated resources webpage which is updated daily: www.hazlewoods.co.uk/responding-to-the-coronavirus.

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