What should we include in distributor agreements—payment terms, performance obligations, and key contract clauses?

Members emphasize building distributor contracts around three core elements: volume commitments by channel, measurable KPIs, and a clear support matrix with cash-per-bottle incentives at different volume brackets.

**Key payment and commercial terms:** - **Standard payment terms** — 45 days from invoice is typical - **Prepayment option** — Request full payment upon order to improve cash flow and reduce admin; this works best for importers - **Blended approach** — 50% upfront + 50% in 14 days; graduate to 30 days from collection once the relationship is established

**Contract structure and duration:** - **3-year initial term** with early termination clauses triggered by missed targets - **Acquisition clause** — If your company is acquired, allow the distributor either to see out the contract or trigger a payout of 6–9 months of gross margin

**Performance protection:** - **Minimum sales obligations** — Include minimum volume or sales targets; one member successfully renegotiated mid-term to add this clause and later exercised it to recover 5,500+ 9L equivalent units from an underperforming distributor - **KPI framework** — Define clear, measurable performance metrics upfront to avoid disputes later

**Contract complexity varies by market.** Export markets range from informal (no written agreement) through short-form terms to heavily negotiated contracts (one member spent 6 months on a 50-page export agreement). Members recommend trying to secure minimum performance clauses even if distributors initially resist, as they provide crucial leverage if forecasts are missed.