Direct or Dealers ???

You've developed a terrific product with excellent margins.
Great!
What next? These are the questions you may be pondering:Who am I going to sell it to? Or through whom will I sell it? And how much must I give away.

Here are some thoughts:
1. Selling direct is tough but possible. A strong ad program to generate leads will be critical.  Reps cold calling wastes your time and theirs.  For a new company with a new product this may be the only alternative.  Dealers may worry about taking on a new product and new company. Selling direct also means providing direct parts sales, and providing direct after sales service. This last item is more important than parts sales if the parts are standard among other manufacturers.

2. Selling through dealers/distributors.  A dealer network already exists for your product. Yes, it truly does. The only question really is the discount from retail.  Dealers have substantial investment made in developing their client list, their physical location, their tech staff, parts departments. In addition they have a reputation in the trade area they service.  All these are available to the new product but for a price.

3. Some manufacturers become obsessed with how much the dealer makes for "essentially doing nothing." This is crazy and nuts and a sure sign of both ignorance and arrogance.  New companies frequently want to establish complex discount programs for parts, products, so that the dealer really has to work for the commission. Established dealers are suspicious of such programs, especially from new companies. New companies must earn the right to dictate terms because in the early stages of business the balance of negotiating power is with established dealers, not new companies.

4. The best way to gain a solid reputation with dealers is to be generous with the discount, relaxed on inventory requirements, yet still maintaining a disciplined 2% net 30 payment term.

5. Some new companies resort to rental.  Allowing dealers to sub-rent brings them on as well.

6. The key point with dealers is not to worry about how much money they are making on your product, but rather to help them find ways to build their business using your product.  [Also: don't include outrageous interest rates in figuring your rental rates. If the banks are lending at 10% don't expect your customers to accept it.


Finally obsession with patents products will usually absorb the needed energy for aggressive marketing.  The software industry learned this early.

Curiosity is Cing

Critical to conquering successful international business is an insatiable curiosity and the subsequent willingness to go deep in finding key contacts.  One must realize the obvious but frequently dismissed fact: everyone is somewhere, just find out where that somewhere is and you have found them.  Meaning: when you haven't found your key contact dig like a dog in search of a bone!  Disorganized....organized... doesn't really matter. What matters is a fierce determination to find that contact and then make contact. This requires dogged hard and intense work.  But the payoff will come sooner or later and sooner the more fiercely one works at it.  Remember they have the cash that belongs in your pocket.  They have your commission! Track them down and convince them that by handing over their money to you and then you handing them the product that their wants will be quenched like water surely quenches fire.

International work isn't for the lay-about.  A 13 hour plane ride is too tough for you?  It takes that long to drive from Salt Lake City to Phoenix. Would you make the drive if you knew your big commission was in Phoenix. Oh yeah!  Both are miserable trips but neither lasts forever.

Can't speak the language? The language of $$$ and a contact at the US embassy will connect a qualified interpreter with you in a matter of a day or two.

What's your next excuse?

Call to discuss further

"So Prove It" Part 2

Your prospect may be thinking it, or may be saying it, or may be pounding the table with his eyes popping out of his skull and the veins in his neck ready to burst.

At some point you must show proof. What is proof? Proof is defined as a demonstration which proves in the mind of the prospect the results you are claiming.

And that is the rub.  You may be in love with your demonstration, but your prospect may still remain unconvinced. Benjamin Franklin observed: A man convinced against his will, is of the same opinion still.

I've seen it happen to others and it has happened to me.

Why do proofs fail? Here are a few common reasons:

1. The prospect hasn't been prepared by you.  Which is to say the explanation leading up to the demonstration has failed to prepare the prospect for the punch line.
2. The proving demonstration failed to operate correctly.  Very costly mistake due to lack of your preparation. Every demo needs a few dry runs and a dress rehearsal.  Make sure the operator is rested, relaxed, and ready to respond to questions.
3. The demo doesn't fit the prospect's problem. Nothing worse than having the right answer to the wrong problem.  Manufactures who focus only on selling what is inventory frequently find they are demonstrating products for which a need existed three years ago, but the need was filled better by a newer product 6 months ago.
4. The demonstration lacked zip, organization, and precision. I recall having the Hitachi general sales manager in Australia look at a machine I wanted them to sell.  Hitachi is crazy for "fit and finish." The machine we were demonstrating didn't fit together well, there  were welding splatters all over it, the paint job had several noticeable sags precisely at eye level.  [Remember a static machine is a demo of the manufacturers ability.]  Later we showed the sales people and the dealers that the machine worked very well. That evening on a river cruise and steak fry the general sales manager complained, for the 15th time, about our fit and finish. I'd had it with his pestering. But he was right; I had to admit it. Finally I blurted out the truth: "Well, it does look like hell, but it sure works like the devil."

A demonstration is like a great movie. It must start off with a bang, have a climax, and then finish off with a great ending.  If you have trade shows coming up, remember these points.

p.s. Just had a demo go bad and I wasn't allowed to be on hand for the demo....owner didn't want to spend the money for me to be there.  It was a $3.5 million deal.   Before the owner got it going and tested to make sure the bugs were out, they invited the customer to see it. The customer had to fly/drive about 800 miles to see it. Machinery only worked about 50%. So the customer got the privilege of seeing a busted demonstration.

Part 2:
Well the customer bought the order anyway and I was happy to get the commission. However the commission should have been larger but the customer beat the heck out of us on the price, all due to the busted demo. I had the unfortunate privilege of making the above mentioned 800 mile round trip with just the both of us in the car.  He's a Frenchmen so wasn't interested in hearing Rush Limbaugh, or Golden Oldies during the drive. He was hopeful going to the demo, and rather peevish the 400 miles back to the airport.


There are 4 key tasks which must be achieved to sell construction equipment, dental equipment, or even clothing.  Watch for the Big Four on my next post.

Don't get lost, and getting lost is natural

What to do?In the kerfuffle of starting and running a business it is very easy to be caught up in the thick of the thin. When you are forced to play the money game it is easy to forget why you started that restaurant, bar, construction company, race track, or HVAC contracting business. The mental and family pressures can be quite intense and not easily relieved.

So what to do?

Drop back 10 yards and punt.

A strategic retreat is designed not to give up but rather give time to re-strategize so as to more ably deploy resources and recapture the initiative.  It's tough on the ego, but better to be a bit humiliated that forced to Chapter 11.

We can help. www.EricStoddardConsulting.com has more than 60 years of business leadership experience at your beck and call. That does not mean we are cheap.