The business partner perspective

Relationships

There is an old saying: “Trust Takes Years to Build, Seconds to Break, and Forever to Repair”. It is risky for a successful services firm introduce a new supplier to its existing key accounts. The partner must be confident in the people, technology, and incentives

Tips: Before engaging a partner, ask yourself. How can I make this partner successful with my product? How can we agree on timelines and investments by both sides?

* a transactional referral or reseller model rarely works for Brazil without local references, used cases, and local distributors

Staff allocation

When a partner allocates a part-time employee to support your business in Brazil it means direct investment in your company. Employees in Brazil are more expensive than the typical monthly salary:

1) Direct: Salary, Benefits, taxes, and equipment,
2) Indirect: recruitment, management, overhead, and risks and
3) Premium: specialized workforce for international business.

Direct: a fully loaded employee in Brazil should cost 2.0 to 2.5 times the salary only on direct costs, which typically includes: 30 days of yearly vacations, benefits (private healthcare, equipment, transportation, and others), and other time off reasons

*Tips: Leverage  the link below to calculate basic direct costs: https://www.idinheiro.com.br/calculadoras/calculadora-custo-de-funcionario-para-empresa/

Indirect:
- recruitment and ramp-up costs should account for 1 ~ 7 months of salaries,
- supervisory (~10% of manager FTE cost) 1 manager for ~ 8 to12 employees, plus HR and IT support (~3 % of HR/ Finance FTE cost)
- labor lawsuits in Brazil are common, so there may be an additional risk for layoff, and legal and compliance costs

Premium: Education level in Brazil varies significantly, so skilled employees with language and technical skills cost more

* Tips: You can alternatively adopt a contractor or outsource activity to start your business for the initial case, but when your business is operative in Brazil then Full time employee is advised

Commissions

Frequently, partners may provide perks and services to their distributors, part time sellers and end clients. In many cases, it also includes paying commissions to their end client key stakeholders or government representatives off the record.

Many established companies typically do not have direct sales for the public sector in Brazil and, in many cases, even Top enterprise accounts with direct sales coverage in Brazil also have partners.

* Tips: Before setting up or changing an incentive agreement (referral/reseller partnerships), do your due diligence homework, you may create unnecessary attrition and possible risks/retaliation by the end client/partner.

Taxes

Resellers or distributors must pay import taxes (up to 100% of the value paid to the supplier depending on the product) and VAT invoice tax (6% of 15% of the invoice) – resulting in double taxation.

In many cases, if a reseller acquires your product for X, the break-even selling price to the end client will be 2X.

* Tips: Your go-to-market should plan multiple  distributors and system integrators.

Responsibility

When a Brazilian partner or representative signs a client agreement

This partner legally responds to your business in the country, this person is responsible in case of non-performance; GDPR breach, and any contract infringement.

Moreover, in Brazil, the concept of a Limited liability company differs from that of North America.

Any lawsuit at the business level means that the Brazilian partner or representative is a waiver of personal assets level.

Working Capital

Receivables from a corporation typically require minimum 90 days or more after project delivery and the invoice is submitted.