Moving a loss-making local entity to a distributor model is one of the more demanding changes a finance leader can support. I have worked through this in several markets. The spreadsheet is the easy part. Most of the value, and the risk, sits in how the transition is run.
Build the case on the full picture
Compare the two models on the same basis. A distributor model usually means lower net revenue per unit, because the distributor needs a margin, but it can remove a large fixed cost base. The right comparison is profit and cash after all costs, including one-off exit costs, over several years.
Decide what you keep
Define the retained roles early. Someone must still own the brand, the pricing principles, the commercial plan and the performance of the partner. Unclear accountability is one of the most common reasons a transition disappoints.
Reset pricing and trade terms
A move from domestic sales to a distributor changes the gross-to-net structure. Set clear pricing principles and allowance rules from the start, and check how the new prices relate to neighbouring markets.
Plan the exit carefully
The checklist covers people, contracts, inventory, receivables, tax and legal entity matters. Bring HR, legal and tax in at the start. Inventory and receivables deserve special attention, because they turn into cash or write-offs during the handover.
Keep visibility after go-live
Once you stop selling directly, you can lose sight of the market. Agree reporting with the partner on sell-out, inventory and activity, and review it regularly. Good governance of a distributor looks a lot like good governance of a shared service: clear service levels, regular reviews and a named owner.
Done well, this kind of change can turn a loss-making position into a profitable one quite quickly. It rests on clear numbers, clear roles and steady communication with everyone affected.
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