Every sales agency knows the importance of commission management. The topic of commissions presents many dilemmas while you’re negotiating a fair and equitable contract.
All manufacturers’ representatives should have contracts in place with principals whom they represent with written and agreed commission percentages. All commission programs should establish successful rewards to both parties in order to create a long-term relationship.
The commission on existing business helps to defray the new sales agency’s expenses for investing resources and time to create demand for the new principal’s products among the rep’s customer base.
Some manufacturers have little or no business in a specific territory. The agency will devote substantial time and significant expenses in establishing and developing the territory for the manufacturer. The manufacturer should consider compensation for these services. This is sometimes called “missionary compensation.”
MANA provides sample contracts, but we all have to keep in mind that each scenario is different. Primary examples are:
- The territory, large or small.
- Customer target accounts.
- Realistic goals.
- Existing accounts in the territory.
- Payments for missionary work.
- Payment for services/warehousing.
The bottom line is that commissions are the agency’s livelihood for continual growth. Therefore manufacturer’s awareness of what the commission represents is imperative.