© Shannon Fagan | Dreamstime.com

As more and more independent manufacturers’ representatives introduce the subject of shared territorial development fees or retainers in their initial conversations with prospective principals, manufacturers have contacted Agency Sales asking for information concerning such payments. One of those manufacturers referred to a recent conversation on the subject that appeared in the MANA LinkedIn discussion group.

That discussion hit many of the major talking points on this subject and the manufacturer thought it might be enlightening for his peers. The conversation began when an agent explained that he was in the beginning stages of negotiating with a new principal and the prospective principal was open to discussing a start-up retainer. The million-dollar question in the discussion was, “What’s my best approach at dealing with this so that it doesn’t become a sticky wicket during the closing portions of setting the agreement in place?” He added that he was looking for some advice that might demonstrate possible pitfalls or potholes regarding negotiating retainer fees and not necessarily basic negotiation skills.

Participants in MANA’s discussion group have never been bashful about offering their opinions, and this was another occasion when several of them jumped right in. The first opinion came from a rep who advised that before discussing the shared new territory development fee, it might be wise to “develop an emotional and true interest from the principal first, and spend time demonstrating the value and work that you will be performing. You need to create respect and recognition and have them convinced that you will deliver what they need in order to succeed.”

He continued that it would be worthwhile to “spend time listening, reformulating, and understanding what is key for them. Figure out if you can deliver it, and then present your request for a retainer.”

That was hardly the end of the advice the manufacturer received. Another agent offered that “Since there are real costs to starting up and taking on a new line (e.g., training, trial sales, etc.), it’s reasonable to ask a principal for those funds. On the other hand, I tend to think principals ought to also ask you about those costs, and I always feel the greatest challenge is to develop and communicate a territory marketing plan. In other words, what is the plan to succeed? Are you prepared to help execute the principal’s territory plan?”

One of the major benefits of manufacturers being aware of these types of discussions among agents is that they learn what’s being spoken about and determine the most effective way to respond to agents’ negotiating points.

Here’s what another representative offers as his approach to new principals: “We have three programs when discussing a new venture with a new supplier.

• No retainers on existing business of $500,000 or more in a territory.
• A one-time launch-pad into the marketplace, a $5,000 one-time cost for 30 days of consulting of the top 100 accounts and an introduction, associations and event planning, e-mail blast and social media training for the industry.
• $1,000 per month retainer for 12 months, or commissions, whichever is greater.”

In addition, this rep also has a one-time $500 start-up for website and marketing materials.

The rep concluded that “We really don’t like the monthly retainers because we tell principals that it takes 12 to 18 months to build a territory, as we have been doing this for 15 years. What happens is that after 3 to 6 months, the sales are not there and then it becomes very sensitive, and in most cases, results in a termination for both parties.”

Finally, another rep offered his perspective of retainers: “We had a new principal a few years ago that paid us a monthly retainer for the first year. They had a small chunk of existing business, but not enough for us to go out and actively promote their products to the level they wanted in the first year. The retainer was set up that commissions from new accounts would count towards the retainer and thus lower the monthly retainer. Essentially we were being guaranteed a minimum each month. So, you’ll want to think about whether the retainer should be in addition to whatever commission you would be normally due.”

Listening to the Customer

Elsewhere in this issue of Agency Sales, independent agents describe some of the steps they take when searching for candidates to hire when they expand their sales staff in order to grow business. One of the steps they take is to ask customers if they have any recommendations. A manufacturer, who follows the same path when looking to fill holes in his agency network, heard some words from a customer that he’ll never forget. When he approached a customer and asked what he thought of an agent who had been calling on him for about 15 years, the customer responded by using the word “passion.” According to the manufacturer, “The customer told me the rep was just about the best he had ever worked with and the reason why was that the rep was passionate about his work. He said the rep not only knew the product line up and down, ‘He cared about what my needs were and has always been there to anticipate and more than meet my needs.’”

The manufacturer maintains it’s that word “passion” that has stuck with him. Whenever he comes across another agent with a similar level of passion, he knows he’s got a winner.

There’s Nothing Better Than Immediate Communication

A manufacturer was chagrined when he heard a complaint about compensation for one of his agents. In looking back at what happened, he was appreciative that his agent let him know about their dissatisfaction, but he wished the communication had come a lot sooner.

During an annual meeting with one of his top-performing agents, the head of the agency let him know about untimely payment of commissions. For one reason or another, the agency was not being paid on time and this was something that was going on for a couple of months. Rather than let the manufacturer know about it from day one, the agent saved his complaint until the annual meeting. “I’m glad he came directly to me with the problem but I’m a little surprised he remained such a top performer after enduring this for four months. If anything, I would have wanted that information sooner. I would have found out what the problem was and solved it on the spot. In any event, the agent was appreciative and he remains someone that represents us professionally in the field.

Appearances and Preparedness Mean Everything

One manufacturer recently commented to us about a question that was posed on the MANA LinkedIn discussion board. It seems an agent was curious about how others dressed when it came to customer calls. That got the manufacturer to thinking about how agents dress and prepare when interviewing for new lines. According to the manufacturer, “The rep always has to keep in mind that there’s nothing more important than selling himself to a manufacturer. He can’t simply expect to stroll into an interview room and be hired just because he’s there. It’s imperative that he make a good appearance and present himself professionally. One thing I always keep in mind is that this person is the one who’s going to serve as my eyes and ears in the field. Ultimately, he is me in the field. As such, I want him to present himself as professionally as I would.”

Fearing the Handwriting on the Wall

Top-quality principals and their professional agent partners have long touted the benefits of two-way communication. Both sides cite timely and honest communication as the cement that holds their relationship together. That’s why one agent who could once boast of the openness between himself and his principal was especially disappointed when changes took place at the factory and no information was passed down.

Here’s how the situation evolved:

• During an 18-month period, the national sales position (the one that was in close touch with agents) began looking like a revolving door. No sooner was one person in the position, than he was replaced. In all, three people occupied the position during that period — each of them with a slightly different attitude toward outsourced sales.
• In order to save money, the company terminated its engineering applications staff and drastically cut its inside sales support. According to the agent, “Talk about not having any ‘rep champions’ at the factory — they barely know who we are.”

The agent continues that while their checks keep coming and sales remain fairly strong, “I’m worried about the future. We’re doing our part, but I wish someone would just sit down with us and let us know what their plans are for the future.”