Your overseas partner can make or break your export business. Finding the right partner starts with looking in the right place.
There’s no real art to finding the right overseas partner, just the logic of pairing two businesses with common goals—and, of course, due diligence. But if you’re stuck for places to look, you’re probably missing a crucial step.
It sounds obvious, but the first thing you need to do is identify the type of partner you seek. There are several different types of partners and each will perform a specific function and complement your business in different ways; looking for a distributor would involve a different type of search to looking for a joint venture partner, for example.
Next, define what you expect from your partner. Ask yourself questions such as: What kind of feedback do I expect from them about my business? How involved should they be in decision-making? Are they capable of giving my business the attention it requires? Communicating this part clearly should narrow the choice of potential partners by what they can, or are willing to, provide.
Playing the seeker
Rhonda McSweeney, executive general manager of FCm Travel Solutions, says that when Flight Centre sought overseas partners to expand its global network, it was after a mixture of agencies to acquire and licensees to carry the brand. The best indicator of a good partner was domestic strength. “We ensure the agencies we select have a strong local reputation. Foremost, they must be well established in their local corporate travel sector,” she says. “Secondly, they must be respected for the quality of their service and product offering.”
The other key thing that consolidated the brand was finding partners with the same outlook. “We believe the ultimate foundation for a strong global network is having the same philosophies and approach to service,” says McSweeney. “This ensures that around the world we all share the same ‘business DNA’.”
Once you know what you want, where do you look? The most common method is to issue a request through an organisation such as Austrade, or via the export department of your state government. Other good places include global industry institutes, regional associations, bilateral chambers of commerce and trade fairs.
Less reliable are the internet and distant acquaintances of distant relatives. Don’t underestimate the value of asking other exporters where they found their partner; save yourself some time and hassle as word-of-mouth referrals could be useful for finding a partner—or avoiding others.
Yin Robards is the business matching executive at the Australian branch of the Hong Kong Trade Development Council, overseeing applications for all types of partnerships: from manufacturers, distributors and agents to joint venture proposals. She says seekers often want their partner to have experience and knowledge of their market, be trustworthy and have a proven track record. “Most also look for continuing business relationship rather than something one-off,” she adds.
Check them out
When you’ve collected some candidates, research not only the potential partners but also the business environment in which they operate, so that you understand the context of the data you collect.
“It is crucial for businesses to understand the culture and business environment of a new market. You need to have a strong understanding of the diverse business practices from country to country,” says McSweeney. “There are so many different cultures, languages and currencies that you need to be sensitive to the fact that one market is not going to be the same as another, even if they are in the same region.”
Robards agrees: “I would suggest enquirers do some research and understand the market and industry sector before they apply for our service. For example, do they understand the Hong Kong and Chinese business culture? Is their product ready to expand outside Australia? Are they ready to seek a business partner in Hong Kong or China?”
To attain a better idea of the type of relationship you might expect, she suggests seekers ask to make contact with their potential partners’ existing clients if possible.
Tim Harcourt, chief economist at Austrade, says while its matching service won’t guarantee anything, going through a business matching process will increase the likelihood of compatibility. “We can get people to meet: whether they get on is another story, but we increase the probability that they do. We’d get you people who are more suitable than if you’d gone in there randomly.”
If you go it alone, he says the questions to ask are: “Is the company reliable? Does it have a good reputation? Does it exist? Is it being audited? Has it got all the paperwork?”
Reliability and knowledge of their market are the two key traits seekers need to find in a partner, particularly if your brand is at stake, such as with franchises. “The more sophisticated arrangement, the more you have to rely on your partner,” says Harcourt.
Having selected a partner, you still need to be vigilant about the details—from drawing up a contract to protecting your intellectual property. Keeping the lines of communication open at this point counts the most. Both parties must understand all aspects of the partnership they are entering.
“Both written and oral communications are important,” advises Robards. “Patience is also an important aspect when dealing with a partner with a complete different cultural background.”
Also remember that your partner will also be looking at your business to see if it is a good fit for theirs. “Potential partners normally seek a product or brand that is unique and/or well known in Australia,” says Robards.
Harcourt nominates “a commitment to your product and service, and an ability to innovate constantly” as attractive to an overseas partner. And strong internal operations, he adds: “Treating your workers really well matters. If you’re going to be a good employer, chances are you’re going to be a good exporter and good at international business as well.”
But as with most relationships, it’s not just the match on paper that’s important, it’s genuine commitment from both parties. “Someone who has long term commitment to your product and long term commitment to Australia really helps,” says Harcourt, and that goes for seekers as well: “The best generic advice is to be persistent—don’t run off when things go wrong.”
The match box
Thoroughly research a prospective partner.
Know their business and ensure it fits well with yours. Make sure your partner has experienced and talented staff in your product area or industry and an effective marketing strategy to help sell your product or service. Look at their website and any associated marketing collateral.
Understand their financial position.
Before entering into a business relationship, research the financial status of your prospective trading partners or agents. Look at revenue, costs and cash flow, and talk to key financial officers. Where possible, obtain copies of financial statements. Look for sustainable profitable growth, not short-term turnover. Where financial details are not available, consider using prepaid payment terms, then progress to letters of credit and possibly to open account payment terms once you’re satisfied with the trading history.
Be aware of the risks in dealing in your prospective partner’s country.
Have knowledge of local conditions and regulations in your trading partner’s country. Some of the main risks are country, political and industry risk. Take advantage of information and assistance from government agencies such as the Export Finance and Insurance Corporation (EFIC), the Department of Foreign Affairs and Trade (DFAT) and Austrade.
Make sure your contracts are clear.
Ensure you fulfil all of your responsibilities under local law. Get legal advice so contracts with business partners are both valid and fair. Also, make sure all of your actions are legal in Australia and in the export market.
Build relationships in person. Nothing beats face-to-face relationship building, so visit the overseas market you are looking to export to and meet with prospective partners.
—Andrew Skinner, head of trade and supply chain, HSBC Bank Australia