How to Work With Independent Sales Reps
You want to bring your new product to market as quickly as possible, but you're on a tight budget. You don't want to spend the time or the money on putting together a sales team, so what are your options?
One consideration is working with independent sales representatives--sometimes called manufacturers' representatives or manufacturers' agents--who sell products or services to customers directly for the company or companies he or she works for. Unlike with hiring a salesperson, with a rep you are taking on no initial risk until the person begins producing revenue, because you're not responsible for health and retirement benefits. Sure, you may have to dole out a little more commission for each sale. But it's worth it if you want to test the market, or if your product will benefit from a demonstration, or your customers require constant explanation of new products. For this reason, independent sales reps work mostly for manufacturers, wholesalers, or technical companies.
Still, you can use reps in your business to cut costs and boost sales over the phone or penetrate new markets or territories. We've created a list of ways to find, retain, and get the most out of the reps in your budding sales effort.
Working With Independent Sales Reps: How to Find Them
Finding a rep to meet the exact needs of your company and to produce for you isn't a walk in the park. You have to learn to live with the fact that not all of your reps are going to produce in high numbers. This means you have to place a lot of reps in a lot of different locations in order to squeeze the most out of your sales initiative.
RepHunter.net, a Minnesota-based company that connects business and sales reps, helps to facilitate the process. The site aims to prevent the frustration of finding inadequate or mismatched reps so that you can get the most out of your team as quickly as possible. The fee to use their service is small, and likely won't amount to the price you will pay to place ads on job boards or in newspapers, hire an ad agency, or hire inside sales reps.
David Hoffmeister, professor at Chicago-based DePaul University's Center for Sales Leadership, suggests cheap alternatives like searching through trade publications in your industry or querying existing customers if your company has already taken off. "If they give you a recommendation, you can be pretty sure they are doing business with them already, and you can be pretty sure that they enjoy working with them and the way they do business," Hoffmeister says.
Communication and networking are also important. Visiting well-known trade shows to meet with different independent agents or agencies in your business can be a tremendous boon to your brand. Sally Thomas Cooper is founder and vice president of Lusive Decor, a Los Angeles-based custom lighting manufacturer for the hospitality industry. The company has an army of 17 independent sales reps that sell signature pieces for hospitality, gaming, commercial and residential projects. Cooper believes that her ability to network and hone in on industry trends has kept the company growing. "Custom lighting is a small, word-of-mouth, very much relationship based industry," Cooper says. Not only does she constantly spend time on the road making contacts, she also encourages her reps to enchance relationships with designers and key players in the field.
Always remember to network as much as possible with clients, customers, and just about anyone you meet at trade shows, who could provide you with hordes of potential contacts in the industry.
Working With Independent Sales Reps: What to Negotiate
Once you've found some potential reps, your next step is to have them sign an Independent Sales Rep Agreement. Independent sales reps and contractors technically aren't employees of your organization (you can't even say you "hire" them). That being said, you have to first understand the terms of any contract before agreeing to sign.
Unsurprisingly, the rate of commission is the No. 1 term you want to negotiate. Depending on your industry, typical commission rates run anywhere from 5 to 25 percent of the sale, according to the Manufacturers' Agents National Association. It might be hard to negotiate a rate that's lower than the standard for your category, especially if you want to recruit top quality salespeople. So keep the percentage within reason by looking at product cost, time it takes to make the sale, and volume level. To get a feel for your industry standard, attend trade shows or visit sites like MANAonline.com or RepHunter.net to see what different reps suggest.
Exclusivity is also an important consideration when signing on independent sales reps. While you want to find reps with lots of expertise and experience in your business category, you don't want them to conflict with any of your competitors. "If you're selling turkeys, you don't want a seller who represents two turkey companies," Hoffmeister says. "But it's ok if they represent companies in the same general food category," he adds. Likewise, Hoffmesiter says that there needs to be set boundaries for where the rep can sell and to whom. You don't want the person to interfere with your operation or, even worse, other salespeople in the region.
You must also reach an agreement about contract termination if the person fails to complete his or her responsibilities. Hoffmeister suggests you create a clause offering 30 or 60 days for beginning companies. While some companies allows reps to stay on regardless of productivity.
Uppercase Living, a Sandy, Utah-based home décor provider, signs on previous customers to show off their homes in demonstrations to friends, family, and potential clients. As demonstrators they sign an independent contractor agreement to display and sell products as well. Uppercase Living requires demonstrators to generate $300 in sales each quarter. Demonstrators who fail to meet the requirement are placed on a 3-month "pending period" to either make it up or decide to part ways.
Remember to consult with a lawyer to make sure you aren't violating any state or federal tax codes. Sometimes laws vary from state to state, so you need to pay special attention to areas like health insurance as well.
Working With Independent Sales Reps: Motivate, Support and Reward
With clients such as the Grand Hyatt Hotel in New York City and the Four Seasons Beverly Wilshire in Los Angeles, Lusive Decor's Cooper has no problem attracting talented reps. The trick is keeping them motivated.
She says that reps have to feel like having your company on their line card is a "feather in their cap," which comes naturally as your brand starts to grow. Cooper's support has been crucial to the company's success even as her industry overall floundered over the past few years, helping Lusive Decor to rank No. 310 on the 2010 Inc. 500 list.
"The attention that [the company] gets from representatives is directly proportional to how much they're earning from your product," adds Hoffmeister. You can also encourage reps to sell more by providing opportunity for growth. Hoffmeister says it's not uncommon for reps to actually join a company's full-time sales team once the company expands. When a rep delivers a significant amount of revenue for your company, it becomes worth it to hire him or her full-time, with the salary as the reward for all the hard work.
Another way to keep reps motivated about your product is to offer incentives to your most productive sellers. Direct selling companies, which employ independent sales reps called direct sellers or multi-level marketers, often take this tactic to the next level by offering everything from vacations, cars, free products and more to reps.
Brandi Rainey is in charge of training and preparing the demonstrators at Uppercase Living, a direct selling company, for their sales presentations. Since she trains a lot of stay-at-home moms with little or no sales experience, Rainey has to rely on the genuine interest the reps have in promoting the product. "My No. 1 goal as a trainer for the company is to help demonstrators remember that passion they have for the product itself," she says. Uppercase Living gives out marketing points that demonstrators can accumulate to go towards trips and recognition at conferences.
Working With Independent Sales Reps: The Direct Selling Route
Companies like Uppercase Living use reps as direct sellers to demonstrate and ultimately sell products in high numbers. Not only is direct selling a cheap way to market and spread a product, but it can also help in the recruiting effort as well.
"It's a word of mouth strategy," says Amy Robinson, a spokesperson for the Direct Selling Association, which represents around 200 direct-selling companies. "What it means in the end for a company is that they spend a lot less money on advertising and overhead, and a lot more money compensating those people who are selling their products," Robinson says. These companies rely on a multi-level compensation plan, she says, where sellers recruit, train, and mentor other sellers for the firm.
This strategy gets to the heart of why companies like Uppercase Living have flourished in recent years. With a weak economy and poor job outlook, many are looking for ways to supplement their incomes or get good sales experience under their belts. "Women develop strengths and talents that they didn't know they had," Rainey of Uppercase Living says. "You see them blossom as people," she adds.
Clearly not all products, or all indsturies, require personal demonstration. If your product won't necessarily benefit from this type of service, you can still provide your reps with the tools and materials they need to succeed. Lusive Decor, for example, maintains catalogs, mailings, and e-blasts that reps can use to keep up with customers in their territories. "We make sure that our reps have beautiful road cases," says Cooper, which makes clients excited about new products and designs.
Whether you use them as direct sellers or otherwise, reps can be a great resource to take your product to the next level. If you know how to train, where to look, and how to negotiate, you'll be well on your way to imminent sales growth in the future.