Do Business Well

How do you find reps? Call the buyers you wish to sell. Tell them you’re planning to introduce a new line into their area, and you wonder whom they might recommend as a rep. I have never had any problem getting one or more suggestions from every call.

After you’ve amassed a list of potential candidates, call each one and do a brief telephone interview. Give him some background on your company and product to see if he’s interested. Determine if he has any conflicting lines (it’s usually considered a conflict of interest for a rep to carry the same items from two factories).

Here are some of the things you’ll want to inquire about:

1. Territory covered.
2. Types of industries serviced.
3. Major accounts called on.
4. Commission percentage expected.
5. Number of people employed as salespersons.
6. Other services offered and cost, if any.
7. Trade shows attended. Will he have a booth? Will he work yours?
8. How many lines does he carry, their names, and which are major and which are minor?
9. How much income must he generate from a line to stay “interested”? If your sales will generate five hundred dollars per month commission in a territory, this may be one rep’s average principal and for another it may be below the minimum he’ll accept.
10. How much notice does he expect before termination? How much notice will he give you if he wishes to drop the line?

During the interview you’ll be trying to sell the rep on your company. At the same time you’ll be deciding if you want to buy his services. Seldom will you be offering a line that will immediately become a top producer. Therefore you’ll need to sell the rep on such things as quality, prestige, and future growth. You’ll want to employ all the sales approaches mentioned previously, beginning with enthusiasm and need finding . . . right through to closing.

Don’t despair if you can’t find a rep. I’ve seen company owners sell the most bizarre products to major national mass marketers such as Sears, J. C. Penney’s and Woolworth’s. The same buyers have turned down our company’s proven winners even though presented by well-established reps.

If it seems by this comment that I’m waffling in my otherwise obvious preference for using independent reps, it isn’t so. I’m merely suggesting that if you’re not able to find a rep in one or more territories that you believe will give you excellent representation, go after the accounts yourself.

Once you’ve entered into an agreement with a rep firm, you’ll want to draw up an appointment letter. This letter can be a massive legal document or a few short paragraphs. I’ve always opted for the few short paragraphs whether I was hiring a rep or acting as one. The letter should cover:

1. Territory to be covered by geographic area, industry, and placement in the distribution chain. You’ll want this to be very specific so as to avoid as many possible conflicts as possible.
2. The amount to be paid and when. In establishing the commission rate, you’ll want to consider: a) what you can afford; b) what you believe is necessary to motivate the sales rep; and c) the longterm precedent you’re establishing. (Once a commission is set, it’s extremely difficult to lower it.)

As to when you pay commissions, I’ve seen this vary from the day of the sale to ninety days after payment. The most common approaches are: the fifteenth of the month following the month of the sale; the fifteenth of the month after the month of payment. Many companies will stretch this to two or even three months if the payment terms are long. When considering the “when” question, you’ll want to take into consideration your own cash flow and the motivation of the sales rep.

3. Include a starting date and a termination clause. Most reps and principals feel that either one should be able to terminate with thirty days’ notice. While this type of escape clause generally works to the reps‘ disadvantage, most will readily go along. There areplenty of times when their success with your minor line will open a door to a major opportunity for them to sell for your competitor. Thus, they’ll rarely want to be bound to any longer term.

You also want a short term. You want to be able to make a fast change if the territory is not performing up to your expectations.

4. You may wish to conclude with a standard legal paragraph regarding the operative law (by what state law will you both be bound) and the method you’ll use to resolve disputes. I generally prefer arbitration since it’s cheaper and faster than a lawsuit.

How do you get the most out of independent reps? It’s easy to spend hundreds of hours and thousands of dollars interviewing and appointing reps all over the state, country, or world, only to forget that they need to be managed. There are few people in business who feel greater pressure than reps. Every factory wants its rep to devote all of his time to their product line.

1. Reps say that the most important thing a principal can do for them is provide support materials: brochures; catalogs; price sheets with sizes, weights, specifications, and other needed information; samples; advertising slicks; discount policies; and anything else that will help them make the sale.
2. Managers maintain that their success with reps is directly proportional to the amount of time they spend “encouraging” them. Letters, phone calls, statistical analysis of their sales performance, field visits, sales meetings, and participation together in trade shows all provide opportunities to keep your company’s needs first on their mind. There may be a fine line between encouragement and annoyance. In most instances you’ll be better off erring on the sideof annoyance.
3. Pay your reps on time. Most reps feel that their pay should be as important as your company payroll. They’ll ask you whether your employees will keep working if they’re not paid on time. Sometimes, if a rep feels aggrieved, he’ll simply stop working for you, even if he hasn’t technically resigned.
4. This is not to suggest that most reps will leave you high and dry over a missed commission during a financial crisis. It does suggest, however, that reps will spend their greatest effort working for the companies that will pay them in a timely fashion.
5. Find out what other things besides commissions will motivate reps. Contests sometimes stimulate extra sales. You may wantto offer a trip, or other prizes for new accounts, a percentage increase, or other goal.
6. New products, packaging, and promotions are always good motivators for sales reps. It’s much easier for a rep to call back on a customer he has been to see only days or weeks ago when hehas a clear-cut reason for the visit, such as a new product to show.

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