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Other Expansion Methods

Distributorships and Dealerships

Simply stated, distributors and dealers sell and service a company’s products. The main difference between them is that distributors are normally wholesalers. This means they can sell to other distributors. Dealers, on the other hand, are limited to selling to retail customers. Occasionally, distributors sell directly to the retail customers, but dealers never sell to other distributors or dealers. Distributors and dealers lower their risk by associating with known products and services. Yet since they receive no other support except product knowledge, they face a higher risk than do participants in other business opportunities.

The advantages of expanding your business through distributorships and dealers include:

• Investors provide the financial capital for expanding into new territories.
• Investors are generally more motivated to succeed than are employees.
• There is limited risk to your company should a distributor or dealership fail.
• You do not have to provide dealer or distributor support beyond providing sales and marketing training.

The disadvantages of dealerships and distributorships include:

• You have little, if any, influence on whether distributors or dealers devote their full energies to promoting the company's products.
• Dealers and distributors may hurt your company's reputation and brand.
• Dealers and distributors may carry and promote the products of competing companies.

Sales Representatives or Agencies

Sales Representatives and Agents are marketing resources that take orders for the products or services of a company. From the investor’s perspective, risks are limited, although there is no long-term security underlying the opportunity. Yet the income potential is usually high.

The advantages to expanding your business through this method include:

• The company has independent contractors performing services without having to pay for full-time employees.
• It’s easier to appoint, reward, terminate, and replace agents than it is employees.

The disadvantages to expanding your business through this method include:

• Sales representatives or agents may not be as loyal as employees are, since the former have no format ties (e.g.: benefits) that bind them to the company.
• Even through sales representatives and agents are not employees, their actions can legally obligate the company.