Perhaps the hardest waters to navigate in a U.S market entry expedition are developing sales channels. With tight timelines and even tighter budgets at stake, understanding how to leverage U.S. manufacturing, distribution and sales networks in the most efficient way possible is both challenging and necessary for scaling firms.
For insight and guidance into how scaling firms should approach U.S. sales channels from a budgetary, logistical and management perspective, we spoke with American manufacturing market-entry guru Lance Scott of Alliance Technologies.
Lance founded Alliance Technologies with a mission to help international advanced manufacturing companies accelerate strategic growth in the American market through direct operational management and expert guidance.
During our September 12th interview, we asked Lance how he supports scaling firms in navigating the U.S. market’s unique landscape.
Saving money by hiring out
“In the U.S., we have a sales structure that is quite mature and on the surface to those less familiar, seems crazy.”
Lance was referring to the role that independent reps play in manufacturing, distribution, and sales in the U.S. market. He also recognized scaling firms’ natural inclination to hire a direct sales force to avoid engaging (and compensating) a third party.
“The geographic size of the U.S. has many implications for how we do sales. Firms that are able to hire their own direct sales team must already be quite large to successfully manage such an operation and get results.”
According to Lance, what helps to guarantee the success of a layered distribution model is payment structure.
“These representatives have a defined territory and work on commission, i.e. get paid on their success.” And as Lance points out, while they take some margin, it’s worth gaining access to new product introductions and key accounts that would otherwise cost thousands of dollars to acquire.
“It’s a complex matrix but, after 30 years of defending the model, I’ve come to believe it is the best strategy for U.S. market entry given our unique geographic size and existing sales structure.”
The advantage of sailing through charted territory
In addition to the budgetary pressures on a scaling venture, timing is also a factor. Specifically, with regards to sales channels, Lance points out major advantages to contracting out from a timeline perspective.
Capitalizing on existing networks and relationships in a new market can significantly shorten the amount of time that prospects spend in the sales funnel.
As Lance points out, using third-party distributors and manufacturers also creates up and cross-sell capabilities that would otherwise not exist.
How to select the right third-party rep for your company
As someone whose success is measured by his ability to design and deliver highly effective sales channels for his customers, we asked Lance which criteria he uses to select manufacturing and distribution representatives.
“Over the years I’ve developed a ranking system similar to a report card for reps to make sure that expectations are managed. To evaluate them, I look at things like technical competence, familiarity with the product and, when necessary, the larger systems involved. I also look at the firm’s operational capacity, specifically their infrastructure, internal technology, staff and customer service.”
In addition to these criteria, Lance looks at soft factors like whether they are easy to work with and do they truly understand what it means to operate on behalf of an international parent company.
Again, the key is to be able to manage and measure expectations.
Who do you want at the helm of your scaling venture?
Companies and trade folks quite often debate whether to hire a local U.S. salesperson as their first employee versus transplant someone from the parent company. Each has its own benefits, risks, and trade-offs.
Do you prioritize company experience or marketplace experience?
Which skills/attributes are most important for that first hire in the new market?
While it’s always possible to find that perfect individual from the home market who is worldly and experienced enough to execute a foreign scaling venture, they may not exist within your company.
In selecting the right person to lead a scaling venture, many companies focus on industry-specific experience. From Lance’s perspective, this is a mistake. “Personally I focus more on skillset. If somebody’s a great Key Account Manager, I believe that they can learn a new industry or a new vertical.”
In an ideal world, you have a leadership team with innate cultural knowledge of the U.S. market and substantive knowledge of the parent company. That may look like an American lead supported by an applications or sales engineer from the home market.
However you decide to formulate your leadership team, make sure they are adept at understanding and responding to differences in business culture. This, according to Lance, will be your most critical navigation tool.
For more expert advice on overcoming the challenges of U.S. market-entry, check out our interview with Lance Scott titled: Navigating the Challenges of the American Market: The Impact of a Vast Geographic Territory.
To check out all of MEET’s webinar content on how to successfully scale your company in the U.S. market, subscribe to our YouTube Channel.
MEET (meetroi.com) helps international B2B growth companies soft-land and scale in the U.S. through trade shows and in-person events. MEET’s processes help its clients ramp-up sales quickly and maintain a steady stream of high-quality prospects going forward. Contact Bill Kenney for a no-obligation conversation: firstname.lastname@example.org or +1 (860) 573–4821.