Expanding the Distribution Network
Entrepreneurs who successfully start a business and manage to navigate all the initial hurdles of getting an idea off the ground will be rewarded with a sense of satisfaction - and hopefully some degree of financial pay-off. But the profits generated by growing SMEs are often ploughed back into the business in order to drive forward expansion. There are a variety of ways to expand a business.
If you don’t want to expend internal resources on finding new business, you can work with a sales agent who will be able to use their own professional networks to find new avenues of income. They will generally sell your goods or services on a commission basis so there’s minimal risk in terms of expenditure.
If you’re spending substantial resources on producing goods, you may prefer to have a large customer who will buy in bulk and take care of the process of actually getting your products to market. This is the role of a distributor. They can handle transport, marketing and sales but you will become reliant on them rather than forming your own customer base.
If you’re an inventor or just want to focus on the design of a product, rather than getting involved with the manufacturing process, you can use a manufacturing licence agreement. This will hand over the industrial process to a third party and avoid the expense of setting up your own factory.
If you’ve got a solid brand and wish to expand locally, nationally or internationally without the hassle of setting up new shops or outlets yourself, you can adopt a franchising model. This allows other keen entrepreneurs, who may have a better knowledge of the market in their particular location, to take on the task of building your business.
As your business grows, you will need to be increasingly careful to keep within the bounds of competition law. In forming various business relationships - such as franchise or distribution agreements - you will want to protect your business interests as far as possible, but if you have a large market share you could end up falling foul of laws banning anti-competitive practices.
If you want to enter the overseas market, local sales agents, distributors and franchisees may all be able to help, as they will already already have the necessary language skills and knowledge of local regulations and business customs. Alternatively, you could try joining forces with a similar company abroad, form a European Economic Interest Grouping or even set up your own branch office.
However you decide to expand your business, you’ll find a wide range of suitable updated agreements available to download from our Business Folder. Click on the relevant links below for further information.