Buying or Selling Your Rep Firm


The Buy-Sell process is not easy, my friends, but it’s not impossible to do! The key to success includes plenty of preparation and planning. In my years of experience as a rep, and in speaking on this topic and consulting to many rep firm buyers and sellers, I estimate that only about 50% have been successful. And the 50% that were successful usually experienced some glitches or underwent major changes during the buyout period.

What makes a successful Buy-Sell? A plan with good detail and clear expectations helps; always ask “what if,” and have solid contingency steps in place. The best plans start years in advance of the actual transition phase. As an owner of a rep firm, you should always maintain a succession/transition plan, even if you just recently took ownership of the company! Be vigilant in your planning — things will work out much better this way than if you were to suddenly say, “Hey, I’m thinking of retiring this year… now what?!”

My advice is to always start with the needs of the Seller. Next, look at what ‘type’ of Buy-Sell you have. There are two basic types of a rep firm buy-sell. One is an internal purchase where employees buy out the owner of the firm. The other is an external purchase where someone outside the company (typically another rep company) purchases the rep firm. Both can be tricky.

There are three parts of a typical Buy-Sell. The following example is called, “It is what it is.”

Valuation. This is usually the tough part and should be done first. It is the key point in which trust is established (or not!). In my opinion, there is no such thing as a ‘firm fixed’ deal with an established fixed price for the rep firm. With the volatility in the rep business these days, a firm fixed price just does not make sense, unless it is a quick sale, and the value is some fraction of one times annual commissions. I think that the ‘target’ price actually is one times annual commissions, unless there is some large asset or large liability involved. For our example, let’s say your firm has an annual commission revenue of $1,000,000. The ‘target’ value is just that, if nothing changes over the buyout time (how likely is that?).

Structure of the Deal. With the no firm fixed deal concept, the seller (owner) is paid 20% of the total annual commission per year, over 5 years. Or 10% over 10 years, or 14.29% over 7 years, or basically, whatever the buyer(s) can handle with respect to rep firm cash flow. Using the example of $1Mil and 5 years, the seller would get $200,000 (20%) per year for each year of the deal. That is, if nothing changes and the commission income remains at $1Mil for each of the five years. Not likely. In this, ‘no guarantee’ method, the buyers are only responsible for the percentage, and if income goes up or down, they still pay 20%, not a firm fixed monthly income. Successful buyer(s) should increase the business, and the seller would then receive MORE than the anticipated $1Mil over the five years. You may consider a cap to this, but that would also require the consideration of a minimum (floor) which IS guaranteed. There are several ways to structure these payments, not just a true stock purchase. With this method, the seller is paid exactly like a rep firm is paid commissions: by performance of the company.

Making it Work. Prepare for lots of time, and you will need to advise all of your manufacturers of the plan, and go to most of their offices/factories to explain the plan in detail, and emphasize why it is good for them. Your customers, distributors and dealers will be less concerned and less involved, and they will ask “will our parts still ship on time?” and “will our price still be the same?” None the less, you should (proudly) tell them about the transition and plans for the future and how the rep firm service level will remain the same (or get better) for them. Do not discount nor neglect the internal impacts — your TEAM. Be certain to over communicate with all of your employees about the plan, the transition, and how it will (positively) impact them and their jobs. Explain in detail the challenges they will face and expectations you have. This is vital to a successful transition.

Sellers: You must have ultimate trust in your buyers. You must ‘let go’ and not only transition the business, but also transition the extremely, successfully close relationships you have with the principals and customers. Let go, and get out of the way — let them (the buyers) call the shots.

Also, get professional help — and I don’t mean Dr. Phil or Jerry Springer. You should consult with your accountant, a good rep attorney, and perhaps even a tax attorney. MANA can help too, and we also have a list of 24 attorneys that are very experienced in this field.

Buying-Selling a rep firm can work. Remember to have a detailed plan (in advance), clear expectations, high levels of trust, and good contingency steps — and you will win. Good luck!

Buying, Selling and Merging of Rep Companies


It is often said that in one’s personal life the most important financial decisions have to do with buying or selling a home. For a manufacturers’ representative, perhaps the most important decision in your financial life has to do with buying or selling a rep company. Some enter the rep business by either buying into or buying out an existing rep company. And upon retirement, the only way to benefit from the value of the rep company you’ve built is to sell it — sometimes to a family member, sometimes to an employee or employees, and sometimes to an outside … Read the rest

The Art of the Deal

Buying, Selling and Merging Agencies

There are three parts of a typical buy-sell process: business valuation, transaction structure and the transaction mechanics — making it work. The following are important aspects to all steps of the process.


A buy-sell agreement is frequently the key document in a rep firm’s business continuation plan. Mel Daskal describes the role of the agreement in more detail. “These agreements establish a fair price for an ownership interest in a closely-held business and ensure an orderly business transition. They usually provide that the business (or a portion thereof in the case of multiple owners) … Read the rest

When Manufacturers Merge


Do you think that your principals look at your line card before acquiring a new company that may end up being a top competitor of one of your lines? When manufacturers merge, consolidate or otherwise effect a major organizational change, it’s hardly unusual for manufacturers’ representatives to get lost in the undertow.

Not so when Kanthal Heating Systems of North America acquired and combined several U.S. OEMs of industrial heating elements/equipment and their distribution networks. What resulted was a rep-friendly environment that has seen a maximization of the manufacturer’s sales efforts, continued sales growth and increased business.

At least that’s Read the rest

Fearless Prospecting in a Changing Economy


During the past few years, the sales profession as well as the economy has changed dramatically. Cutbacks, downsizing, and a need to do more with fewer resources dominate many companies. For salespeople, this means a tougher time prospecting and a longer time frame for converting those prospects into paying customers.

As a result, many salespeople are either getting a lot more “no’s” as an answer, or they’re getting no answer at all from prospects. And the more “no’s” a salesperson hears, the more he or she develops a fear of rejection and dreads prospecting in general. That’s when prospecting procrastination … Read the rest

How to Overcome the Barriers of Change


The business organism must grow to survive. Even if we could miraculously hold everything steady — costs, margins, productivity — our value proposition immediately degenerates due to the unyielding forces in a competitive marketplace.

What is the miracle that stimulates growth? It’s called change. Change is the sharp stick that moves us out of our comfort zones, and forces us, as George Lucas would say, “to do dangerous and scary things.” Change creates opportunity for growth. But why do we resist change so much? Why is it that when change happens oftentimes our first reaction is to dig in our … Read the rest

How to Avoid the Blank Stare of Disengagement


Prospects size you up personally while making their buying decision. “Are you credible?” “Competent?” “Interested in their situation?” The following tips will help you avoid the blank stare of disengagement when faced with similar scenarios.

Consider Your Demeanor — Don’t Confuse Boring for Sincere

Create flair and drama as you present a new idea, product, or service. Wanting to shed the huckster image of 40 or 50 years ago, some sales professionals have gone to the other extreme, and removed all animation, inflection, and energy from their delivery style in an effort to come across as more “sincere.”

Instead of Read the rest

CSP Program Continues to Hit the Mark


For both seasoned sales professionals as well as for those who are new to the front lines of the profession, it appears that the CSP program continues to hit the mark. Instrumental in gauging the program’s success are the following comments from recent program participants.

For even the most casual visitor to a MRERF CSP course, a couple of important points are immediately evident:

  • Since manufacturers’ representatives only make money when they make sales, sales training is critical to their success.
  • When it comes to sales training, not all reps are created equal. Some reps have been in the trenches
Read the rest

Manufacturers Report a Great Investment With High Returns


In terms of discussion, the subject of rep councils comes and goes. For some, the Councils continue as a valuable part of the manufacturer-rep relationship. For others, Councils continue to meet, but little is done as a result of those meetings. Here, we talk to a number of manufacturers who have enjoyed considerable success with their rep councils and offer us some thoughts on what has made their Council so effective for their organization.

Most manufacturers start rep councils with the best of intentions. But once started, some manufacturers encounter obstacles or lack the necessary follow through to realize Council … Read the rest

How to Respond — and Not Respond — to Your Customers


Technology is a great enabler when it works. We can accomplish more with good technology than we can without it. However, when the manufacturers of technology think they have a better way and try to force it upon the rest of us, the rest of us have a way of responding that is not always good for sellers of technology.

I had the opportunity, recently, to review some new technology that I use a lot in my business. There are good and not-so-good features pertaining to each, which I will share with you in this article. I welcome your comments.… Read the rest

Audits Zoom in on Fringe Benefits of Corporate Executives


“Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you off the map.”


The IRS publication of a new audit techniques guide for their auditors is both reason for celebration — and panic. On one hand, it provides a perfect roadmap of exactly what the IRS auditor is looking for, and how he or she will go about doing so. Which, in turn, tells you what you can do, what not to do — and how to do it. On the other hand, publication of such a guide virtually assures you that … Read the rest

How to Protect Yourself From Investment Scams


As American consumers feel the pinch of a tight economy, many are looking for faster ways to make money and save for retirement. Unfortunately, such a mindset opens the door for investment scams, which are currently on the rise in terms of quantity and variety.

Those who fall prey to investment scams often lose much more than what they would have put into a typical investment. Many are cheated out of their life savings, insurance payments, and even equity out of their homes. To make matters worse, regulators are usually unable to protect the victims after they have been “taken” … Read the rest