Do Business Well

Manufacturers, wholesalers, business-to-business service providers, and job shops can all benefit from the use of outside sales representatives. Some companies who deal with the public have the same opportunity, such as travel agents, mortgage lenders, and apartment owners.

What is an independent sales rep?

1. The term “independent representative” sounds exactly like what it is. This person works for himself. He or his company, generally referred to as a rep firm, will not be on your payroll, but will earn their money from three sources of services they may provide:

A. The most likely situation is that you’ll pay them a percentage of every sale they make. This may range from as low as 1percent to as high as 20 percent, although the average isprobably between 5 percent and 10 percent.

B The rep may require that the companies he represents (called principals) pay some kind of base or guarantee. A base means an amount of money that is paid to the rep in addition to all amounts made on commission. A guarantee is an amount paid as a minimum, even if the amount of sales would not justify that much commission.

C. The rep may provide other kinds of services at a charge. These could include mailings, mass fax communications, inclusion in some kinds of advertising, or trade show services. They may also ask for expense money for travel, customer shows, or association memberships.

2. What does a rep do for you? He represents your line of products or services to customers who are likely to buy from you. The rep will have already established relationships with customers. The idea is that he will be able to use these relationships to open the door for your products. You should expect your rep to thoroughly learn your product line, the strengths of your company such as delivery or quality, and policies concerning price, freight, and terms.

It’s critical to communicate the vision you have for your company to your reps. If they don’t see the big picture, it will be difficultfor them to pass it along to the buyers.

Your reps should be able to help you with some aspects ofmarketing. They will give you feedback as to why your product is or is not selling, and what changes might help make improvements. They should also be able to make recommendations concerning who you should or shouldn’t be selling. This could be for reasonsof competition, pricing, or credit problems.

You may or may not even be able to get an appointment withsome of the buyers you wish to sell. If you do manage to get in front of one of the snarling, growling beasts you will be at ground zero in terms of credibility, politics, and relationship. This will also be true of someone you hire for the job unless you hire an industryveteran at great expense.

The rep, on the other hand, has established himself with thebuyers as someone who understands what will and will not work for that buyer’s company. He has probably ingratiated himself with other members of the management and staff. If he’s been around for a while, he may very likely know and play golf with the presidentor some of the VP’s.

He’s also done favors for this company and buyer before. He’sgotten them out of messes. He may have helped to sell off a poorly performing product to some other customer who was better ableto use it.

Most reps have one or two accounts where they can take almostany new item they think has possi5ilities and the customer will buy it automatically. They use these automatics to establish instant credibility with the principal after they’re appointed. Be careful.

These may be the only accounts the rep ever sells.

Another reason for using a rep is financial. You’ll usually be able to find a rep who will do a good job for you on straight commission—in other words, no advance, no base, no guarantee, and no other fees. This means that you pay no sales fees unless the rep sells something and you ship it. Some companies don’t pay their reps until they get paid for the shipment.

If you hire an inside salesman, you have a fixed salary, taxes, benefits, office space, phone bill, fax expense, travel, entertainment, and possibly car expenses. It would be rare today to find a salesman of any value who would not cost you at least five thousand dollars per month when all the above is taken into account. It could easily become ten thousand dollars.

Even if you handle these sales yourself, you’ll have the expense of phone, fax, travel, and entertainment. You’ll also have taken valuable time away from other possible duties, which may require you to hire help you wouldn’t otherwise need.

Another benefit of hiring reps is your ability to reach into more selling territories without a huge overhead commitment. If you’re a manufacturer and can only afford one inside salesperson, he’ll be limited by time to one hundred to two hundred active accounts. For the same amount of money, you can hire a sales manager who can then appoint reps all over the country.

They called on sixteen different industries in eleven states. In some industries we sold direct to retailers, in others we used wholesalers, and in still others we sold to OEM’s or end users. We did all of this with one sales manager.

Is there a downside to using reps? Sure. Successful reps may carry anywhere from ten to fifty lines of product. This means that your products have to fight for attention. If you aren’t constantly motivating the rep to sell your line, some other company owner or sales manager will be moving his products to center stage.

A powerful rep can get your product in the door. He may also have the power to get your products thrown out if you terminate him. He may also “land” a better line that is competitive to yours, drop you, and move you out of his automatic accounts.

When you have your own dedicated sales force, you protect yourself from these risks. You also know that you have a staff that is spending 100 percent of its time trying to sell your product.

Even if you use reps you’ll likely want to have some house accounts (customers where no rep or commission payment is involved). Sometimes, when you’re between reps, you’ll be able to establish a relationship with some customers. You might then decide to keep the account as a house account when you appoint the next rep. Obviously, the better reps aren’t going to be interested in taking your line if you’ve snatched the best accounts for the house.

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