International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting Time To Review Contracts By Jim Cotton This is the time of the year you should be reviewing your agents/dealers/distributors contracts. But first, how do you think of your contracts, agreements or whatever you call them? Are they a legal document that's intended to intimidate someone? Or, are they a road map clearly explaining certain activities and how these activities will be carried out? Clearly, there are real needs for legally binding contracts. But, I have always urged that contracts be used as a marketing tool. Actually, everything that you do should be a marketing tool, but that's another story. What your dealers/distributors in Latin America want is a stable, long-term relationship. One without problems, and structured. Structured in the sense that they know for sure that X, Y and Z are going to happen and are going to happen in a pre-described way. No surprises. Actions that will transpire that their office staff can handle. Handle without their participation, since they may be in the field for extended periods of time. If you're offering credit, for example, this should be covered in your contract, as well as attached documents. But remember, we described the contract as a marketing tool. And what's the most important thing to you. All year long. Not just right now? Why, selling more product, of course! So you must include in your contract some business plan attachment for the coming year. And the coming three years. And, yes, the coming five years, as well. Each of these years can be adjusted annually, of course, but they must be in your agreement. Your dealer must realize that you're thinking about the future and are expecting certain production from him in order to achieve your mutual goals. Keep your agreements simple. Do your homework regarding the individual country's laws (so you can get out if necessary), but don't lose sight of the goal. That goal should be to do more business, not write legal documents! A lot of people are confused about these agreements. One reason is that they forget these are marketing tools. One of the best ways to ensure your dealer/distributor gets this picture is to make the contracts "annually renewable." On December 31st of every year, they expire. No automatic renewals! They must be renewed manually. In person! If you have your business set up this way, you have the opportunity to sit down with your dealers at least once a year and review their marketing plans, which is part of their contracts. And, of course, they know this! This will cause some scheduling problems for you and your people. But, what's the basic point, anyway, if you're not selling more and more? Don't you feel it important that you visit with your dealers at least once a year, in their offices? The larger you are, of course, the lesser the problem will be, since your field managers will be handling this work on a routine basis. But are they? Or, are the contracts being filled out by your field people and then "signed" by the dealer as just another "thing to do for the crazy gringos?" This trip should be your most important trip of the year. You should ask the dealer to present to you how he has accomplished his marketing plan over the last year, and how he expects to do in the coming years. This exercise causes him to do some work that may not have been done in the past. Maybe work that would never be done if you hadn't asked. The "marketing plan" attachment to your contracts should be simple, yet direct. You should include columns for last year's numbers (could be dollars, units, etc.), this year's projection, and columns for the coming three- and five-year estimates. Also, there should be areas included for a narrative on the condition of the dealers local market area, and the effects of his national government on his business, what problems he sees for the future, and what opportunities he plans to take advantage of. Include a "communications" area where the dealer can describe problems he's having with you or your office. Over the past several years, the one problem most often encountered is poor communication between the home office (factory) and the dealer in the field. In some cases, this is amplified because you may not have any Spanish-speaking staff on hand. In others, it's simple neglect. But, whatever the cause, you need to know, and you need to know it now! By making the comments a part of your marketing plan attachment indicates to your dealer you're serious about your business. Jim Cotton is an international management consultant based in Atlanta, and makes frequent business trips to Latin America. e-mail. Advertise on this site Put your company on this site!