Choosing a distributor without regretting it
The most common expensive mistake a foreign supplier makes here is appointing the first enthusiastic distributor they meet on exclusive terms.
I have been on both sides of this arrangement and I have watched a great many go wrong. The failures follow a pattern and the pattern is avoidable.
What to verify before anything else
The company in the register: owners, ultimate beneficiary, capital, how long it has existed. A distributor incorporated four months ago is a person with an idea, not a company.
Litigation history in the court register, and enforcement proceedings against them.
Their actual customers, verified by speaking to them rather than by reading a list on a slide.
And their warehouse and vehicles, seen in person. A distributor without logistics is an agent describing themselves as a distributor.
The exclusivity question
Exclusivity is what every distributor asks for and what should never be granted unconditionally. Grant it against performance: a defined volume, by a defined date, or exclusivity converts to non-exclusive automatically.
A distributor who will not accept a volume commitment is telling you they do not intend to build the market.
Who owns the customer
The most important clause and the one most often omitted. Specify that the customer list belongs to the supplier, that it is provided monthly, and that on termination it transfers.
Without that, terminating a distributor means starting again from nothing, and every distributor knows it.
Termination
Define it, with notice periods, stock buy-back terms and what happens to outstanding receivables. A relationship that cannot be ended cleanly will not be ended when it should be.
The general rule
Non-exclusive first, exclusivity earned, customer list owned, exit written. Everything else is commercial detail.
I made the mistake in this piece myself and it was expensive: giving exclusivity to the first enthusiastic distributor means limiting that market to that person's pace. I now start with no exclusivity at all and build a structure renewed annually against targets. And I write into the first contract who owns the customer list — it cannot be discussed later.
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