For businesses that have only ever known an inside sales force, making the leap to an Independent Manufacturer Representative can seem daunting. But why shouldn’t you outsource your sales force? You are likely already outsourcing legal or accounting work. You may even be outsourcing bookkeeping or human resources or any number of vital elements of your business.
The reasons to outsource your sales force are the same for outsourcing anything else. It’s cost-effective. It allows you to leverage a level of expertise than can be cost-prohibitive in house. Manufacturer Representatives aren’t simply experts on your product. They are experts on their market area and chain retailers. And while an employee may move away for money, or expect regular raises, there’s no concern over that here. An independent rep has no similar cause to leave its territory that it invested heavily in for years. Similarly, with agreements in place, a rep will only ever take a percentage of commission.
While it may not be the big leap you imagine, and undoubtedly contains serious benefits, there are still things to consider before working with an Independent Sales Rep.
Start by ensuring you find a good manufacturer’s rep. There are three groups to interview. 1.) Existing customers. Customers and distributors are a great source for referrals to reps that you should consider as candidates that will represent your line. They know the reps they prefer to buy from, and who does a great job for them. But you may also want to be selling to customers you don’t currently sell to. 2.) New customers. If you have reps in other territories, those reps have colleagues in other territories that will happily give you a candid review of other rep firms and referrals to reps that do a better job. 3.) Rep trade associations. While this may not be as reliable, you will want to review rep trade associations for their opinions of the firms within your territory.
Next, consider the advantages of hiring a manufacturer rep. These are numerous and include the fact that hiring representatives instead of a direct sales force avoids the many fixed costs of supporting direct sales employees, including their salary, medical insurance, workers comp, human resources, travel and more. If you have a relatively narrow product line, your rep can bundle products with products from other manufacturers on his or her “line card” and include your product in a package deal, getting you in doors that may have once been closed to you. Also, independent representatives have intimate knowledge of their territory. Many major reps have years, even decades in a single territory. Similarly, manufacturer reps that focus on a single retail chain like Target, have an intimate relationship with all of the right people to give your product its best chance of getting to market and succeeding there.
It is important to consider all angles when making important decisions for your business, so we need to look at disadvantages. One such disadvantage is the loss of ownership of your sales force. While you can set high sales bars for independent sales reps, and they will likely achieve those goals, you generally can’t tell them how they are to achieve the goal. Reps are independent business people and although they welcome challenging goals, most will want to set their own plans for achieving those goals rather than have their method dictated or micromanaged. Also, you may choose a rep to participate in customer relationships that that rep is already a part of, but do not expect to necessarily come to own that relationship once it is established. Customers will almost always stay with the rep– the relationship is not transferrable.
Next, let’s consider how to get more of your rep’s time. This is actually relatively easy. Just basic blocking and tackling. Offer a quality product at a market-friendly price, ship the product on time, and make sure to pay the rep on time. Just following these basic courtesies can help you stand out on a rep’s card.
Many businesses that are new to this may wonder whether they have to pay commissions to reps on accounts they already had before hiring the rep. The short answer is Yes. Reps work hard to earn their commissions and know that it can take serious time and investment to develop new accounts. Commissions from accounts that came with the territory generally do not cover all of the rep’s costs to develop new customers, but can help offset the balance in the meantime. Keeping certain accounts as “no-commission” or “house accounts” will likely get you off to a rocky start with representatives, and many may simply not accept working under those terms.
So if you don’t have any sales, do reps work for free? Sometimes, but this may be disappointing to many reps. They are in the business of making profits like anyone else, so they will likely have little time to take away from manufacturers that are already paying them. If you need to hire a rep in a territory that has no existing sales, consider offering a stipend to help with the costs of territory development in exchange for monthly reports on those pioneering efforts.
Next, assuming you’ve chosen a firm to go with, a handshake will not be good enough. You’ll need an agreement in place that covers the needs of both parties. You can read other articles that discuss agreements here [link] and here [link].
Finally, after you’ve signed with a rep, please don’t simply send some catalogues and samples to reps and simply wait for the orders to come in. Reps should be onboarded like any other employee. Get together with them, set mutually-agreed upon goals, make a plan and be sure to include thorough training [link] on you company, brands and products.
You now have several things to consider. So should you just begin emailing everyone in the state? No! First, if you’re looking for a Target Manufacturer Representative, look no further. Three Sixty Sales is the best Target manufacturer’s rep in the business. If you’re looking for others, targeted individual emails can be successful. But not as successful as a phone call. Manufacturer representatives get countless email blasts from rookie principals, many of which don’t even fit in with that rep’s card, wasting their time, so these are often viewed with suspicion. Give them a call!
Hiring and supporting and outsourced sales is not easy, but the rewards that come from leveraging independent reps’ resources on your company’s behalf far outweigh the time and effort you will need to invest in launching your own sales force.