This is the second of three installments of a Small Business Guide to help manufacturers and sales representatives understand each other better, so that their relationship is not adversarial — as it is in many instances. Part one appeared in the July issue of Agency Sales magazine. Both parties need each other and a mutual understanding should create a positive partnership that will yield more profits for each, while extending the duration of their relationship.

Part three will appear in the September issues of Agency Sales magazine. A link to this complete e-book may be found on MANA’s website: MANAonline.org.

Reps’ Complaints About Manufacturers

Reps don’t lack for opinions about manufacturers. In my years of being a rep and dealing with reps, I often heard them talk about manufacturers. I present the following list to illustrate the range of problems that arise in the minds of reps as they think about their relationships with manufacturers. If you can avoid these problems as a manufacturer, you’re likely to have great representation in the field:

• They don’t pay on time, or accurately.
• If I do too much business, they might replace me with in-house personnel, cut the commission, or shrink my territory.
• They don’t communicate well:
  • They don’t pass on enough product knowledge.
  • I don’t receive timely copies of invoices.
  • When an item is a poor seller, I’m not told, and I stick my best customers with it.
  • They don’t tell me about new products.
  • They don’t share success stories from other territories.
  • They don’t send copies of ads from other territories.
  • They don’t keep me abreast of inventory status and out-of-stock items.
• They give my customers better prices or terms than I am empowered to give.
• They don’t listen to my input, and afford me no respect for my experience.
• They have a poor customer service department.
• They don’t set realistic goals or have no shared goals or expectations.
• They hire sales managers who don’t understand the business.
• They don’t ship on time (or ship incomplete).
• Product quality is poor.
• They don’t innovate enough new products.
• Their new product introductions are always too late.
• They don’t tell the truth and break promises.
• They expect too much from the rep in terms of collecting bills.
• They talk to my buyers without keeping me in the loop.
• They have too many “house accounts” in my territory.
• They have poor follow-through and don’t pay attention to detail.
• They don’t understand the business.
• They hide problems.

Manufacturers’ Complaints About Reps

To be even-handed, I should also present the kinds of gripes that manufacturers have about reps. Note that some of these complaints mirror the complaints in the preceding list. Again, if you can avoid this range of problems, you’ll be in good shape:

• They carry too many lines.
• They don’t sell my whole line; instead, they cherry-pick and sell the bestselling items only.
• They don’t return my phone calls, faxes or letters.
• They lack knowledge of my product line.
• They carry competitive lines.
• They are 98 percent in the buyers’ camp and 2 percent in mine, and I write their checks!
• They don’t stand up to the buyers when the buyers are wrong.
• They look to sell on price only.
• They spend too much time in their showroom.
• They give unauthorized deals to buyers and don’t tell us.
• Their follow-through is awful.
• They don’t give me feedback on their calls, or on our competition.
• They misrepresent the company.
• They don’t always tell the truth.
• They don’t train their sub-reps.
• Their sales are below my expectations.
• They keep pressing for higher commissions.
• We can’t read their orders (which are often incomplete anyway).

Training the Reps

Once you’ve gone through the arduous task of finding and retaining a good rep to work for you, don’t make the mistake that many companies make. They mail their new reps some samples, catalogues, and price sheets, and wait for the orders to roll in.

Take this approach, and you’re almost certain to be disappointed. And it won’t be the rep’s fault. Think about it: would you train any of your full-time people that casually?

What should you do instead? Depending upon your budget, here are some ideas:

Have the rep visit your offices and/or factory.

There they can personally meet the people with whom they’ll be dealing. This personal contact is important. You can show them your full line, fill them in on the history and traditions of the company, and share your vision with them.

Meanwhile, you can also state your expectations of them clearly. You should pay careful attention to the issue of sales quotas. These should be worked out jointly, rather than imposed arbitrarily by you. (If your rep is as good as you hope, he/she knows more about some key things than you do.) Get him/her to buy into a shared number. If yours is a new company, your rep will expect you to pay for this trip. Perhaps you could arrange a deal whereby you share this expense, with their portion coming out of commissions.

Visit the rep in their domain.

You can learn a lot about them as well as teach them about your company, its products, and how you want them to represent you. If your rep shares space with other people — e.g., shared office personnel or sub-reps, it may be beneficial for you to meet with all of these people. (Obviously, this doesn’t apply to a rep working solo from home.) You can learn about their resources while you’re educating them about your company and its products.

Ahead of this visit, ask the rep to set up sales calls for you to tag along. These should include visits to some major existing accounts, and possibly some potential accounts. Making these calls will help you learn more about the rep’s abilities and the strengths of his/her relationships with the buyer. It will help you determine what kinds of information you need to supply them to help sell your products. Meanwhile, you can be sharing your own thoughts about the best way to represent your company and its products.

You might try a variety of approaches on these calls. For example, at an early stop, you might present the product and company to the prospective client, and ask the rep to pick up the banner when it comes to talking specifically about benefits to this particular buyer. On subsequent calls, the rep might carry the whole load.

One fringe benefit of tagging along, by the way, is that this is one occasion on which your rep will talk only about your products. He or she certainly won’t present multiple companies and their product lines if you’re also in the room.

Work regional trade shows with your reps if they are exhibiting.

This will help you accomplish most of the ends described in the one-on-one calls above. It will also provide insights into your reps’ other lines, how they allocate space to each, and how they deal with new and small customers. It will also give you the chance to interact with the customers and learn more about them and how they perceive your product and company.

Make time for socializing.

Whichever of the above techniques you employ, also try to spend some social time with your salespeople. If you’re taking them out to dinner, invite their spouses or significant others to join you. Remember that you’re seeking to build strong relationships with your salespeople.

And remember that these reps are, for the most part, strong-willed, skilled, entrepreneurial types themselves. You really can’t order them around. Instead, you need to persuade them to give your products a fair share of their time and if you’re just starting out in a relationship with them, you’re likely to be at the bottom of the priority list. So sell yourself to them, to their staffers (if any), and to their spouses.

The training of reps is a constant process. It doesn’t stop after one visit, or after 30 visits. As you grow, one of the first major hires you should consider is a sales manager whose primary duty will be to work with and train the
sales force. This will free you up to work on other important aspects of building your business. I strongly recommend, however, that you stay in touch with your sales force. Let your sales manager know why you’re doing it, too: you’re doing it to stay in contact with a rapidly changing marketplace.

Most of the preceding discussion also pertains if you decide to use full-time salespeople. One major difference, of course, is that you have more control over them, but again, if they’re any good, simply issuing orders isn’t going to do the trick. They still will need to be persuaded to make their best possible efforts to help you and your company succeed.

A Tip For Reps

Most of this guide is devoted to helping entrepreneurs understand how the manufacturer-rep relationship works. I’ve made this a priority because I think that in many cases, reps can help entrepreneurs be successful with minimal cost.

But I think I should include a reward here for any rep who’s gotten this far. What follows is an idea that took me many years to arrive at, and which turned out to be worth a lot of incremental profits to me.

First, let’s reconstruct our starting point, which was a very traditional one: When we were reps, we sold goods for manufacturers who paid us a predetermined commission on the wholesale value of our sales. We worked on a national basis. Our approach was to look for promising items, as well as extensive lines.

Given that focus, it was very common for us to come across “one-item manufacturers.” In many cases, in fact, they came to us, and tried to persuade us to sell their product. The problem that many of these manufacturers had was that large retailers didn’t want to buy from one-item companies. It was too expensive for the retailer to add a new vendor number; the freight factor could be high on single products; and the retailer’s top management was always hammering on the buyers to cut down on the number of vendors.

After thinking about this for a while, we stumbled on the idea of having our own vendor number with major accounts. This allowed us to put all of the single items in our line under this one number. Yes, the shipping points were all different, but the vendors’ systems were accustomed to dealing with large companies that had multiple shipping points. And yes, by going this route, we became responsible for billing and collecting. So what we did was instead of working on a 10 percent commission, we marked the product up 35 percent. In return for the extra 25 percent, we took responsibility for billing the customer, carrying the credit, and performing some extra paperwork.

Manufacturers loved us, because suddenly they had a way to do substantial volume with one entity. We were an entity, moreover, that paid on time. They began treating us far better than when we were “only” commissioned reps. In fact, almost overnight, we went from being a lower life form to a higher one.

Buyers, too, loved us. They could now take advantage of one-item companies without making trouble with their own number crunchers. In fact, they got in the habit of referring good one-item prospects to us.

All in all, we loved this role as a “billing rep.” We made much more money, and dramatically reduced the chances that we would have a good line taken away from us if we did “too good a job” and our commission checks got too big. In fact, because we were controlling the billing and not dealing in branded products, we could change the manufacturer without upsetting the buyer. Our only real risk was that a customer might go bankrupt and not pay, but we minimized this risk by selling this deal only to AAA-rated customers whom we knew well.

It was win-win-win, for all three parties involved.

This experience led us to set up our own manufacturing company with a different name to outsource or import key items that our customers wanted. To all concerned, we were then the sales rep for this new entity.