Rep Contracts: Simple, Clear, FairBy Bryan Shirley
Maybe it seems too obvious, but I think that there are some real basic things that manufacturers and reps need to observe and do when creating an agreement for representation.
The things that both parties need to strive to have:
- An agreement that is simple, yet complete.
- An agreement that covers all the needs of both parties and clearly states expectations.
- An agreement that is fair, equitable, and balanced, not one-sided.
Let’s recall another obvious fact: reps are not attorneys, and neither are the sales managers that are usually involved with the negotiation of the contracts. We’re sales folks, and that’s what we do well: sell! There is a certain need for professional help when it comes to the construction of an agreement that fits the above criteria.
Some tips for manufacturers when it comes to representative agreements:
- Listen to what is important for the representative firm to have in the contract.
- Don’t establish an agreement that creates problems if there is a significant sales growth in the future.
- Avoid any house accounts unless there is an extremely valid reason.
- Be open to suggestions for new and different clauses, and don’t say, “all our agreements have to be the same.”
- Don’t hide behind, “it’s up to our legal department.” If something makes sense, get it in the contract.
Some tips for representatives when it comes to representative agreements:
- Listen to what is important for the manufacturer to have in the contract.
- Don’t “negotiate to negotiate” — focus on the things that are important and make sense.
- Think openly and with a win-win attitude as to not get stuck in the negotiations. Try new stuff!
- Review your existing contracts annually, to be certain that they are up-to-date and applicable.
- Use a MANA attorney for the process. (The list of MANA Rep Attorneys is available to all MANA members.)
Another great tool for both parties is the new, and continually updated, A Manual for the Creation of a Rep-Principal Agreement. This is available in the members section of our website under “Contract Guidelines.” We also have some great reports relative to starting a new rep-principal relationship.
Remember that this first step in the process is very critical, so take your time. Establishing a great Representative Agreement is the best way to create a high level of trust, and get the relationship off to a great start.
I don’t know about you, but I’m getting tired of hearing all about the “turbulent times” and “recession economy” and “how bad it is…” I think that we all know where we are. The real question is what are we going to do about it? Reps need to push themselves more to make more sales calls, find new opportunities and new accounts, and really listen to what the major customers need and want. Manufacturers need to not cut commissions. Recall that if a rep territory is down 50% in sales, they already took a 50% reduction in commission revenue. If you cut the commission by 20% (5% to 4%, or 10% to 8%), they effectively are getting hit with a 60% reduction to their company’s commission revenue.
What we all need to do is get out of our comfort zones, communicate more, enhance the teamwork between the factory and the representative, and be positive and optimistic with new ideas and different approaches and solutions. And, more than ever, MANA matters: promote the function and have passion for your profession.