The first step to find local partner or distributor is to define evaluation criteria . This post we outline a list of potential evaluation factor and it is not compulsory that you take all factors into your assessment.
The first step we usually recommend our client to set up partner search criteria. Each criteria consists of a set of measurement scales. You should take a close look at how to evaluate each measurement scale to understand what type of number or figure that need to fill in the assessment. Below is a list of the main criteria, measurement scale;
Company size
Annual Revenue - Fill in latest annual revenue (e.g. 350 mn) Depending on your strategy on finding partner, some company prefer to partner with medium size distributor due to less complex management structure and they are more rely on their supplier for R&D and new product development
Revenue Growth Rate - Fill in % growth rate There is no fix rule on ideal company growth rate, basically, you should be watching for company with a steady growth rate due to stability rather than high growth fluctuation
Growth Steadiness - Choose the following number in (x) that reflect the condition of your partner (1) Highly fluctuate growth during the past 5 years (2) Medium fluctuate growth during the past 5 years (3) Growth stalled (no growth) (4) Stable growth during the past 5 years You may change the condition or the choice as appropriate to your needs
Number of Employee - Fill in number of employee | Only include permanent employee
Registered Capital - Fill in registered capital (million USD) Data can be obtained from financial statement through desk research
Product Portfolio
Revenue Share by Product - % of revenue of your similar products or those that target the same customer segment. For example If you are looking for partner who are selling medical device to surgical practice, the % of revenue share by product should be % of revenue from surgical treatment product
Number of Products/Services - Fill in number of products / or product group that your potential partner have. For ideal partner you should think of an optimal number of products that your distributor should hold, that's not too many and lack of focus, but not too few that demonstrating its limited capability
Price Positioning - Choose the following number in (x) for price positioning that match with your product strategy
(1) High-price
(2) Mid-end price
(3) Low end price
Salesforce Capability
Number of Sales Staff - Fill in number of sales staff If you deal only with a business unit, you may want to fill number of sales person just for the business unit that are relevant to buying, selling and servicing your products
Number of Customers - Fill in number of customers Ask for approximate number of customers that are currently active during the past 1 year
Customer Segments - Fill in number of customer segments that your potential partner has cover and it is
Technical Capabilities
Number of Specialist Staff - Fill in number of specialist staff e.g. engineer, doctor, mechanics and etc
Availability of equipment and facility - Choose the following number in (x) for availability of equipment and facility (1) Equipment is in good condition, facilities and resources are widely available (2) Some equipment is in good condition, facilities and resources are available (3) Equipment is not in good condition, facilities and resources are limited
Number of Stores - Fill in number of stores where they products are available
Location Coverage - Fill in number of provinces that their products are available
Distribution Network
Number of Local Dealers - Fill in number of local dealers Local dealers are defined as other companies that are within their network
Brand Awareness - On the scale 1 to 10, how well their brand are known among your target customers, 10 being the highest awareness
Number of Key Accounts - Fill in number of key accounts For ideal potential partner, you can also fill in number of large customers of your targeted segment
Financial Stability
Debt to Equity Ratio - The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity. And when using the debt/equity ratio it is very important to consider the industry in which the company operates. We recommend to use industry average D/E ratio for the ideal partner, if such an information are not available, alternatively you can also use average ratio from shortlisted potential partners.
Return On Assets (ROA) - Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. We recommend to use industry average ROA for the ideal partner, if such an information are not available, alternatively you can also use average ratio from shortlisted potential partners.
Operating Cash Flow/Net Sales - This ratio, which is expressed as a percentage of a company's net operating cash flow to its net sales, or revenue (from the income statement), tells us how many dollars of cash we get for every dollar of sales. There is no exact percentage to look for but obviously, the higher the percentage the better.
Logistics and Facilities
Number of Warehouse - Fill in number of warehouse
Warehouse Space - Fill in size of warehouse space (sqm) For ideal potential partner, you may fill minimum size of warehouse space you need for operation
Number of Truck - Fill in number of truck vehicles
Stock Level - Fill in number of months that would take them to sell and complete their stock
Aftermarket Service Capabilities
Number of Service Staff - Fill in number of service staff
Number of Servicing Case per Month - Fill in number of servicing case (how many projects, service staffs are working on in a month)
Management Style
Organisation Structure - You have to understand how your potential partner structure their organisation and assess whether it would be positive or negative to distribution and management of your product. Evaluation: on the scale 1 to 10, how well their organisation structure facilitate management for your growth?
Key Value - Evaluation: on the scale 1 to 10, how your potential partner key value are align with your organisation?
Years of Experience - Fill in number of years in experience of a key executive
Average Turnover Rate - Choose number in (x) that reflects a situation of your potential partner (1) High turnover rate (2) Medium turnover rate (3) Low turnover rate
Strategic Alignment
Future Growth Plan - Evaluation: on the scale 1 to 10, how your potential partner future growth plan align with your organisation?
This post is part of the partner search assessment. We constructed the evaluation sheet that you can use to assess your potential partner's capabilities. You can download the file here.
If you have any problem on using the evaluation sheet, please feel free to contact our team at contact@canvassco.com.