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I have often heard it said by manufacturing management that the process of finding, evaluating and engaging with an independent manufacturers’ representative is a frustrating process. For sure it can be a time-consuming procedure for both the representative and manufacturer seeking representation.

It is somewhat of a “ritual” or “dance” the two parties go through in order to evaluate the other’s compatibility. Both parties have information to share with the other but must first determine the level of sincerity of the other before sharing too many details. The process is much the same for high residual lines, as well as lower sales volume or missionary lines and everything in between. This is serious business for both parties and should be conducted in a professional manner right from the first contact.

From the rep’s perspective, the first contact exchange with the principal can be pivotal in their decision whether to engage with a prospective line or run the other way. Over the years I have come to realize that there are warning signs to glean from the initial call from a prospective principal that gives a strong indication if the potential relationship is worth pursuing. These “red flags” as I call them, offer clues if the manufacturer understands how to work with independent sales agencies and whether they are looking for a long-term relationship or just using the rep agency for a short sales boost by tapping the representative’s intellectual property. Sometimes principal managers unwittingly raise these flags as part of the ritual or dance they do early on in the relationship. Once raised, unconsciously or deliberately, it can be frustrating and can result in a poor experience and often lead to not finding the best representative in the territory for the manufacturer’s line of products/services. Call it a rep’s confession or just plain intuition but here are examples of red flags that have given me pause during the early stages of the prospective principal’s contact.

• When the prospective principal says “just get us in the door and we will take it from there.”

This statement is intended to make the rep feel that the line will be easy to sell and maintain but, in fact, it is a negative. The idea is to bootstrap the new line with a strong line card. Once the representative generates customer interest, the principal will step in to manage the process and relieve the representative of further involvement. Sounds great, but this mentality shows a total lack of understanding by the principal of how independent sales agencies work. Representatives do more than find the opportunities. We take care of our customers by managing the design-in and sales negotiation process from beginning to end including support after the sale. Customer engagement has to be a partnership between the representative and the principal with each contributing what they do best.

• When the prospective principal cannot remember their territory sales numbers or has little clue about their customer history.

This red flag indicates either the manager is uninformed or trying to cover up something. You do not have to give away trade secrets but be prepared to share basic sales information and some history you have had within the rep’s territory — good or bad. Be truthful! This is not the time to embellish the sales numbers. Having little or no sales is not a big negative provided you have a convincing argument for how the sales agency can make money representing your line. Talk about the features of your products or service, markets served, competition, and potential customers you would like to penetrate with the representative’s help. Rep managers are business people and we make new line decisions based on potential sales growth, line synergy and return on our time. Without some basic information upfront, it is hard to justify moving forward with discussions regarding taking on a new line.

• When the prospective principal blames the previous rep for all their issues including declining sales in the territory.

Most agencies that survived the Great Recession are good reps. Sure there are better and best reps for various products/services given the line card synergy and market focus of a particular representative. But, when a prospective principal blames a known good representative agency for his issues the probability is my firm’s relationship will not be much better. There is a common denominator and it is not the representative. A much better approach is for the prospective principal to have a couple of sales agencies’ names to give as a reference to help verify how successfully they support their independent sales network in other territories.

• When the prospective principal states he does not have a method of tracking sales splits but can do it “manually” if required.

Agencies cannot afford to develop new sales growth for a principal and wonder if they will get paid for their efforts. It is important everyone related to the consummation of the sale get their share of the commissions and manually tracking often leads to mistakes and commissions not getting credited properly. Salespeople are highly focused on selling and depend on their principals to have systems in place to assure they receive proper commission credit. It is incumbent upon a prospective principal to have proper tracking systems in place before starting their agency search.

• Prospective principal has a secretary or a low level staffer call the rep owner/manager to gauge the agency’s interest in their line.

Sad, but often these staffers have little clue as to what they are being asked to do other than contact various territory reps to see if they can be approached in the future by their boss. More often than not they cannot describe the product or service they are offering. This makes for a poor first impression and serves as a red flag to the rep that perhaps this company is a little overwhelmed and would be a risk to take on. Principal management using this tactic is usually unattached from front line selling and perhaps feels the representative’s position is beneath them. This does not augur well for a successful principal-rep relationship.

• A prospective principal wants to set up interviews at a local hotel or otherwise request to meet in a bar, etc.

Over the years I have seen big name lines and missionary lines go this route. Rarely do these meetings result in the manufacturer finding the best rep. From the rep’s view this is a sign the principal management is short circuiting the process. They do not want to take the extra time to visit each potential representative’s office, meet their staff and see their procedures. Hotel facilities often have limited audiovisual aids for the presentations, and reps are hard pressed to bring all of their staff to these meetings. A rep firm is far more than one or two top salespeople meeting in a hotel room or lobby. The inside staff giving local support to the customer is often the key to a successful sales team. Only by visiting the agency’s office and meeting their entire sales team can one get a feel for the personality and energy of the firm. Remember both parties are evaluating each other and this time together is well spent to assure compatibility and sharing of mutual goals. This increases the odds of the new rep-principal partnership being successful and enduring long-term.

• Prospective principal has poor collateral material but says the rep can rely on their website to download marketing/communications material.

This policy indicates to the rep that the prospective principal has little understanding of front line selling and is not willing to invest in their future sales. Data off the Internet is great but not having proper collateral material for the introductory customer’s first impression can mean the difference between opportunity and rejection. Asking the agency to print off online data often leads to poorly produced materials and at a high cost to the rep, not to mention the negative branding of the principal’s image. Agency managers know good marcom material is essential for successfully growing sales and we gravitate towards these potential principals when considering new lines.

• Prospective principal says he has house accounts with no justification, low or declining commission rates, and/or non-exclusive rep agreement.

Obviously this statement speaks volumes about the lack of understanding the prospective principal has regarding the cost of sales for a sales agency. It is totally unfair to the representative to suggest his other principals carry the cost load while they get a free ride paying less for the representative’s sales time. In many cases it is an indication that the prospective principal may not be running his company at an optimum level, may not be competitive in the market and the rep could even have trouble collecting future commissions. A low margin line can be very problematic for a sales agency if the line demands more time and attention than their potential income supports. Obviously taking key customers as house accounts limits the potential for sales growth opportunities for the reps at their major accounts. Non-exclusive rep contracts suggest the prospective principal is currently or will start using other sales channels. These arrangements usually confuse customers and eventually lead to a major conflict at the expense of growing the mutual business not to mention bruised reputations.

• Prospective principal asks for a list of potential customers for his product or services.

As the two parties drill down in their discussions and share more information to better determine their compatibility of forming a principal-rep partnership, asking for a list of potential customers is not out of order. However, asking for this list on the initial call is a red flag the prospective principal is fishing for information and not all that serious about partnering with a representative. Usually they will contact several representatives in the territory and ask for similar list. Rarely do they ever fully engage with a representative agency and tend to change reps frequently. A savvy representative will give these requests a lot of consideration before moving forward and honoring them.

• The prospective principal says he currently has a representative in the territory but is just looking for what other agencies may be available.

This is the biggest red flag of all. Usually they ask that you please keep the discussion confidential, which puts the rep in a compromising position. Reps understand if a manufacturer will do it to their current rep partner then they will certainly do it to them. This flag suggests the principal management is unscrupulous and has some serious ethics issues. Most sales agencies will politely shy away from these offers.

Better understanding how these red flags can dampen or squelch discussions when a prospective principal begins his initial agency search can help lessen the frustrations involved with finding the “best rep” for his product/service. The astute prospective principal will understand if they want to gain the rep’s mindshare they have to be easy to do business with and respect the sales agency as a business partner. Eliminating red flags or positively addressing them in the initial contact conversation will help insure a thorough dialogue in order to fully explore compatibility and forming a mutually beneficial partnership.

MANA welcomes your comments on this article. Write to us at [email protected].