When the check gets too big….
In the “Manufacturer’s Corner” section of this issue of Agency Sales magazine, we offer some of the comments made by manufacturers during a MANA seminar that covered how to manage conflicts in the manufacturer-rep relationship. The reps that participated in the seminar were just as willing to offer their thoughts on a number of issues including the ever-present worry reps have concerning what to do when their commission checks get too large.
One rep’s course of action is to “spend more time massaging my principals than I do the customer. I’ve gone way down in the number of lines that I represent because three of my lines are so important to me. I don’t want the vice president of sales to think that I’m spending too much time on other lines. I also let him know what I’m doing when I contact customers or there are major projects in the pipeline. That way he’s fully aware of the amount of time I spend on his line and he, hopefully, won’t begrudge the size of the check he signs for me.”
Another rep related his experience when he cornered a major order. “Several years ago we represented a line with a manufacturer where we averaged about $200,000 in business annually. We gained a major order of more than $1 million. That was great until we learned the customer had double ordered. The order went through, but the principal said, ‘You’d better be able to replace that business next year.’ Naturally, we couldn’t and wound up losing the line. That’s why we pay extra attention to any and all lines that result in major checks for us. For instance, just recently the general manager of one of the divisions of a major principal called and said he was coming through town and wanted to get together for a chat. I knew what he was looking for — he wanted me to buy dinner. I didn’t hesitate.”
Getting involved with collections….
While the manufacturers at the seminar were generally reluctant to have their reps get involved when it comes to collections, the reps who participated in the panel discussion offered some benefits to having reps in the loop.
According to one rep, “If it’s a medium to small account, I know everyone involved, and chances are I can rectify a situation quickly before it gets out of hand.” Another offered, “If we have a good solid relationship with the customer — and that’s something that we pride ourselves on — we’ll go to the decision-maker and let him know that payment has not been made. He’ll go right into accounting and solve the problem. We don’t mind doing that occasionally.”
The value of incentives
When one manufacturer described incentives he offered reps, one rep described a bonus program that worked too well. “The manufacturer had a bonus program where we’d be able to earn a $50,000–$60,000 bonus check annually. The fact is that it was too easy. The manufacturer revamped the program, and now we’re lucky if we can earn a $10,000 bonus. But you know what? The original program wasn’t fair to anyone — us or the principal. It was too easy for us and the manufacturer paid out too much. If it’s not a win-win for everyone, I say get rid of it. Sure, we’d like the big check every year, but I’d rather have a healthy principal and know that we’re going to hold on to the business.”
Dealing with poor-performing lines….
The question was asked: “What action do you reps take when you identify a poor-performing line?” Votes in favor of dropping a line were quickly heard. According to one rep, “If we identify a line that isn’t performing well and find that we can’t rectify the situation, I won’t hesitate to drop the line. If it’s not happening and not fixable, we’re just wasting our time.”
Another rep volunteered, “While it usually takes six months to a year to identify a real problem area, the sooner you take action, the better. No one’s going to be happy hanging on to a problem. You may lose your monthly commission, but if it’s a headache, you’re well rid of it — and the principal will appreciate your honesty.”
Going the extra mile….
Discussed earlier in this column were the pros and cons of the manufacturers’ representative getting involved in the customer collections process. In a recent interview with another rep, some additional thoughts were contributed to the dialogue. According to the rep, “I was working with one customer, and over a relatively short period of time I had been able to take their business from $5,000 annually all the way up to $200,000. The downside of that, however, was the fact that they had taken their payments out past 95 days.
“Rather than take some sort of preemptive action, the principal contacted me and asked if I could check out the situation. Now I’m not a collections’ guy — that’s not what I do for a living. But, here was a situation that was important and obviously growing in importance every day. Bottom line — if the principal isn’t going to get paid, then I’m not going to get paid.
“After asking questions of the appropriate people, I learned that the customer’s and the principal’s accounting systems were incompatible. At a certain level that incompatibility resulted in the customer having to perform certain functions manually, thereby slowing the process even more.
“By getting involved, I was able to negotiate their regular payment period from 65 days down to 45 days.
“My message in relaying this story is that on occasion the rep may know something about the customer or can find out something concerning the customer’s processes that the principal may have no knowledge of. If this ever happens, the rep should be kept in the loop.”
Eyes and ears contribute to “value add”….
The rep knows that he’s supposed to make calls, complete sales and follow up. But it’s the smart rep that brings quite a bit more to the table. At least that’s the view of one rep who maintains that an integral part of the rep’s job on behalf of his principals is to keep his eyes and ears open when making sales calls. “It’s imperative that the rep be attentive to what’s going on at the customer’s place of business. For instance, consider the following:
- Are the walls painted?
- Are the offices empty?
- Is the grass cut?
- Are there plenty of cars in the parking lot?
“If I notice all these things and report back to the principal, it can go a long way towards shedding light on why payments are late. Or, what if I hear rumors that a customer is up for sale or key management personnel have been terminated or are otherwise leaving? Isn’t that critical information that the principal ought to know about? And, by providing that information to the principal, aren’t I proving my worth as his ‘eyes and ears’ on the street?”
Saying goodbye to a healthy commission check….
“We have one principal that is a constant irritant to us. Adding to the problem is the fact that they send us (many times late) a large commission check.” That’s how one rep began a conversation concerning a problem he had.
“Sure, we appreciate the size of the check and enjoy what that income allows us to do with the agency, but I ask myself constantly, ‘Is it worth it?’”
The rep continued that he’s considered parting ways with the principal because “We’re always chasing late checks, and there have been occasions in the past when he’s unilaterally cut our commissions. As I look back over our years of experience with him, I think we would have been better off without him.”
Editor’s Note: These comments obviously beg the question of when is it a good time to sever the relationship? In this case, it’s a shame the rep has to look back over a long history of dissatisfaction. If he had taken action when problems first arose, he wouldn’t find himself in the position of having to wait for a the manufacturer who still owes him a serious amount of money.
