Question

Topic: Strategy

A Contract With Dealers/distributors ?

Posted by Anonymous on 8/5/2009 at 10:09 AM ET 100 Points
We are bringing out a new software product for the USB in the local market initially and we are a start up company.

In order for the sales of the software, we are planning to fix up deals with the Computer Sales shops in the city. What we have planned is to give a percent of the total sales to the dealers.
Could you suggest me a probable best way to set the deal?

And also, being a start up , we don't have much money with us, so what would be the best way to let the end users know the availability of the new product, (which if they know about are sure to buy). ?

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RESPONSES

  • Posted by CarolBlaha on 8/5/2009 at 12:18 PM Accepted
    To set the deal-- a basic agreement should include-- are they exclusive or non exclusive? Territory? Length of time of agreement-- usually a year, with it automatically renewing. However most agreements also state contract can be cancelled by either party with 30 days notice. Marketing material at cost or n/cost? Demo's at cost or no cost. Statement saying they are independent contractos and not employees of your company. Define how they will buy and how you expect payment. Are you going to do performance reviews and how often?
  • Posted on 8/5/2009 at 3:21 PM Author
    The region is in Oman.

    So this has to be a legal agreement?

    And is it justable that they pay for the product entirely at first? or after sales (for which we have to review their sales)
  • Posted by Frank Hurtte on 8/5/2009 at 6:28 PM Accepted
    If you mean does the document need to be registered with the government or have a lawyer - the answer is no. But, the document does need to be formal, cover all the possible contingents and build a solid relationship for the future.

    Whether they buy and resell, take the product on consignment or something else is between you and them.

    Will the software be in a "shrink wrapped" package?
    What happens to opened packages?
    Who is responsible for putting out revisions?
    Will you sell upgrades?
    Will the dealer/distributor install it on computers they sell or service?
    Will there be quantity discounts?
    All of these are questions that need to be addressed.

    Now as far as getting the word out? You need to think of exactly who would buy your product.

    If you need additional help, my practice is built around distribution of high tech products. I have a number of free resources available on my website - see profile.
  • Posted by CarolBlaha on 8/5/2009 at 8:43 PM Member
    I have never done a distributor agreement where they didn't pay for product. Now-- you may give them extended terms-- but they pay for product. Think about it, what is their incentive tol sell your product if you simply put it on consignment??
  • Posted by CarolBlaha on 8/5/2009 at 8:45 PM Member
    Reading further-- you should have a letter of understanding. And it should be enforceable. Reality is again-- it may not be-- but its a talking point. Again-- they "say" they'll do ABC, and they don't. And you are out of trade secrets, product and clients.
  • Posted on 8/7/2009 at 4:06 PM Author
    Hey Frank, thanks that did make a lot of sense and well put...thank you

    and carol, u were really informative thank you.

    i would keep you in notice about the progress.. thank you.
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