One of the feature articles this month is about developing new markets and territories. The thrust of the article is that manufacturers’ reps of today need to be developing new markets if they are to succeed and grow. When you develop these new markets, potential principals will typically have no existing business to turn over to the rep. The reality is that it always takes more time for the rep to develop new markets, and more time equates to more cost. Why should the manufacturers’ rep take time away from helping customers who already provide income to the rep, in order to work where the income may only possibly come sometime in the distant future?

Developing new markets is a risk. What if the company that wants the manufacturers’ rep to invest their time and effort goes out of business or gets sold to a new owner who has different ideas about how to set up the sales force? In these cases, the rep will have made a substantial investment in the territory for which there is no return, causing a loss for the rep.

For many years, manufacturers’ reps would not take on missionary lines because of the costs and associated risks. Fortunately, more creative people have come up with ideas that help share the risk and cost of pioneering, so the results can be win-win for both parties. As a result, more manufacturers are able to enjoy the benefits of outsourcing the sales function. Conversely, manufacturers’ reps are able to take on the pioneering efforts of some good products with a much higher probability for return on their investment.

For those who believe manufacturers’ reps should get paid commissions only, regardless, our recommendation is to maybe rethink that position. There’s no doubt they will be able to find a rep to take on the line, but they need to ask themselves, “Is this the most effective manufacturers’ rep business I could have signed up?” Think of how much additional business a more professional rep could have brought in. Investing a few thousand dollars a month for a year to work with the professional rep, likely would have brought in much more business. By the way, that’s far less costly than hiring direct salespeople.

You’ve already invested a great deal of money on product development, factory and equipment and fixed cost of salaried factory personnel. Why would you not be willing to invest a little up-front cost in each sales territory to get the best available sales firm? Earning the business is 50% of the battle today, and you want to invest 0% of your total capital in that area? That does not make much sense.

Keep an open mind, and build an arrangement that works well for both of you during the pioneering stage. The result could turn out to be a long-term, mutually profitable relationship for both of you. It doesn’t get any better than that.