Global Business in EDA
Modesto Casas, has 28 years of worldwide market successes. He is multi-lingual and multi-cultural having lived in six countries. Mo has taken several start-ups to international regions and developed them into compelling local enterprises. His company, In Region, takes high technology companies … More »
Why and how to globalize your sales and support team
October 24th, 2010 by Mo Casas
Today, globalizing is as important as having the right products and going after the right markets. Making the local sales operations productive is imperative whether the goal is to grow or merge a small company.
Globalizing is as important as having the right products and going after the right markets. In EDA all strategic customers have global operations. Most of them will look at products from different global perspectives, will do evaluations in different locations and will consider purchasing new products only if they serve their multiple groups. Wide Area Network software is the norm, not the exception. An evaluation in India, for a customer in Europe who will place an order in the United States is not uncommon, but it can wreak havoc on a non globalized sales force.
There are several ways to globalize the sales force. The one most commonly used in the past entailed setting up branch offices in the key markets, installing a sales manager and perhaps customer support in each region. In today’s market environment, the cost of this type of operation is prohibitive to the small and even mid-sized EDA companies. Each country has their own labor issues, requires local management, needs longer commitments and carries burdened costs that can read like a Stephen King horror novel.
A better way to approach global expansion is by using independent representatives in the local markets and in similar application domains. For the small entrepreneurial EDA vendor, this option offers the advantage of low overhead and a larger percentage of the costs related to commissions.
Starting a new geographical region
It makes most sense to begin a new region by employing an independent representative firm with an excellent track record and defer the decision to open the branch office after local sales surpass two million dollars. Consider that an experienced EDA sales person or applications engineer will cost roughly $200,000 per year. Add cell phones, car allowances, pensions, health insurance, taxes, facilities, furniture and computers and one could be making a commitment of as much as $300,000. Now budget your travel to visit them or fly them back to headquarters once a quarter to keep them focused and motivated during the start-up stages and most unproductive time in a new region. You are looking at a $350,000 to $400,000 first year investment. To complete my horror story, be reminded that since commissions are usually not abundant in the first year, most vendors have to pay a draw or guaranty, even though the revenue has not started to flow.
By contrast, a good local independent representative would charge a retainer of between $60,000 and $100,000 total or up to 25% commission on sales. Independent representatives take care of their taxes, infrastructure, computers, cell phones, cars and insurances. They take care of all the local regulations, most of them have excellent customer connections and many bring an administrative and engineering team. It’s easy to see that from zero to about two million dollars in sales, the independent representative is the way to go.
So, why doesn’t everybody go for an independent representative in every case?
The problem is usually productivity and a sense of losing control. I am often called by a new client to “fix” a distribution channel. The common complaint is that they have difficulty getting sales productivity from their independent representatives, but when I interview the representatives, they readily tell me that basic sales support is missing. They feel disconnected and very often are not even aware of the corporate messaging. I often find that the vendor expects the representatives to behave as their salaried employees and the representative wants to be informed, just like the salaried employee. They both want the same thing. They both want to sell more and support customers better. Both are looking at each other for something that the other side is not giving them, something they need to be more successful.
Optimizing an independent sales team
When I am hired to optimize the performance of a region, I first look at the management methods, communication and support processes in place and begin to make changes in these three areas immediately. Each region in the world has a different business culture, makes decisions in different ways and carries historical ties that can frustrate a foreign organization. One-size-fits-all hinders a corporate manager’s ability to get results. I find that each geography requires some adaptation of the sales and support plans, methods and expectations, but without compromising the company’s objectives, messaging, positioning and branding. While the goals connect everyone worldwide, the tactical implementations must remain local.
Second, I focus my efforts on the local market situations in each of the regions. I begin by understanding why each of the independent representatives are not selling more. I ask the questions directly followed by a request to focus on immediate actionable items that can help us to begin selling more. This reduces empty complaints and excuses, which we can discuss over Sake, Red Wine, Beer, Plum Wine or chewing some Betel Nut later.
Third, I implement a disciplined forecasting methodology. I’m not talking about the complex statistical forecast, but a simple method to get weekly updates on the business activity. My method is focused on the support required in each stage of a business deal. I want information that helps everyone take action in order to help the field sales person succeed. This enables the vendor to plan and focus resources on the activities that will move the engagement to the next step.
Fourth, I take a support approach to managing these independent organizations. I find that most representatives will focus on the products that make them money. Helping them to be successful gives the vendor the additional attention that they need in order to get the products out to foreign markets. The support approach opens a positive channel of communications to get valuable feedback on a timely basis from the customers. This is only possible if management is religiously asking the question “how can I help you sell more?”
When a product has succeeded close to home and the company is ready to expand to foreign markets, it pays to consider engaging a local representative who has the market knowledge, the customer relationships and the minimum requirements needed to open up the new market. Once engaged they need to be managed methodically, supported closely, included in the company’s plans and encouraged to tell the company about new ways to help them sell more product.
Tags: branch offices, distributors, forecasting, global sales, globalization, independent sales representatives, sales management, sales performance, sales productivity, sales support, starting new sales regions, worldwide sales