Before you hand your brand to a distributor, check five things: that the business is genuine and registered, that it can pay you, that it really reaches the shops and customers it claims, that its warehouse and people can handle your product, and that it has a clean reputation with other brands. A wrong distributor can damage your brand in a region for years, and getting out of the agreement can be slow.
1. Is the business genuine?
- GST registration: active, with the same name and address.
- Company records on the MCA portal, if it is a company or LLP. Partnership firms and sole proprietors are not on MCA: check their GST registration and Udyam certificate, and for a partnership, its registration with the state Registrar of Firms.
- Trade licence and any licences your product needs, such as a food licence.
- The owner’s other businesses.
2. Can they pay?
| Check | How |
|---|---|
| Turnover | GST returns or filed accounts, bank statements |
| Payment habits | References from two or three brands they already distribute |
| Debts | Charges on MCA, recovery or cheque-bounce cases on eCourts |
| Working capital | How they will fund stock for your brand |
Ask the brands they work with one simple question: “Do they pay on time?”
3. Do they really reach the market?
- A list of retailers they supply, with areas.
- Visit or call a sample of those retailers.
- Number of salespeople and delivery vehicles.
- Other brands they carry. Competing brands can be a conflict.
4. Can they handle your product?
- Visit the warehouse: size, cleanliness, storage conditions.
- Check stock systems: do they track batches and expiry dates?
- Ask how returns and damaged goods are handled.
5. What is their reputation?
- Speak to former brands they dropped, or that dropped them.
- Search news and online sources.
- Ask retailers what they think of the distributor’s service.
Protect yourself in the agreement
- Territory: exact areas, and whether they are exclusive.
- Targets: sales targets, and what happens if they are missed.
- Credit: credit limit and days, and a security deposit or bank guarantee.
- Brand use: how they can use your trademark, logo and pricing.
- Pricing discipline: rules on discounts and selling outside the territory.
- Exit: notice period, stock buy-back and handover of customer details.
Red flags
- Reluctance to let you visit the warehouse.
- References who are all relatives or friends.
- Cheque-bounce cases from other suppliers.
- Promises of huge volumes from day one.
- Insistence on exclusivity for a large area without targets.
How Ameya Artha helps
We check distributors and dealers: registrations, finances, court cases, references and retailers, with warehouse visits in Andhra Pradesh, so you can appoint them with confidence. See our due diligence services