Most multiple-person manufacturers’ representatives sell their businesses when they retire. While they owned the business, they created value in the business, value they exchange for dollars they add to their retirement accounts. The manufacturers’ representatives’ principals retain sales continuity in the territory; the new owner fulfills the dream of operating their own business. Works out well for all of them, doesn’t it?

For single-person manufacturers’ representatives, we see a different story. Rarely, if ever, do they sell their businesses when they retire. We hear two stories when we talk with them. They decide they no longer want to work and terminate their principal agreements. Or, they gradually work less and less in which case their principals terminate their agreements until none remain.

The multiple-person businesses sell to an existing employee, in some cases a daughter or son who works for them. A single-person business lacks that option.

Do opportunities exist for them? What about selling the business to someone who wants to become a manufacturers’ representative? About one-third of the new members who join MANA each month fall into the “Start-Up” category. Many ask if we know anyone interested in selling their business.

Finding Replacements

If you represent some really high-quality principals, another possibility would be to sell your firm to another manufacturers’ representative. If their current line card presents no competitive issues, this strategy works. Even if there are one or two competitive lines, they can terminate the agreements on those and sell the remainder. Most principals support this type of transaction. It eliminates the need for them to go through the lengthy recruitment process to find a replacement.

Because of the nature of this business, the buyer will be unable to borrow the necessary funds from a lending institution. That means the seller needs to finance the sale. They usually set up the buy-sell agreement in a manner in which they share commissions over a fixed period of time. For example, currently manufacturers’ representative businesses sell for about one times annual commissions. So, for a five-year period, the new owner shares 20 percent of the commissions with the previous owner.

Paying a Percentage

Paying a percentage rather than a fixed amount provides protection for both the buyer and seller. In the eventuality a principal terminates an agreement, the new owner can still afford the payments and not go out of business. It also provides an incentive for the current owner to sell to a competent businessperson, someone who grows the business. When that happens, the payments grow over the payout period, resulting in higher income to the seller. Selling to a competent and professional business person makes acceptance by principals much more likely.

For those that sell to start-ups, consider mentoring them for an initial period of time. For the seller, helping the start-up stay in business and grow is imperative. If they fail, the seller’s commission share disappears. Help them with the business, and the share increases over time. During the mentoring period, it makes sense for the ownership to remain with the original owner. That gives time for the new owner to build relationships with the principals so when the current owner relinquishes ownership, the chances for agreement terminations is minimized.

Connecting With Buyers

How do these one-person agency owners connect with prospective buyers? As a member, one tactic that creates opportunities is to use the RepFinder to create a list of prospects. You access it in the member area of the MANA website. Search for manufacturers’ representatives in the area that appears to sell complementary products. Since you download the results into an Excel file, sort by “Date Established,” newest to oldest. That places the start-ups at the top of the list. Contact them and learn if they want to purchase the business. Ask them to please keep the conversation confidential. You don’t want word getting out until you are ready to present your plan to your principals.

MANA recently created a new online “Agency Business Opportunity” ad program. Consider an investment in an ad to attract prospective buyers. When the ad results in the sale of the business, the ROI is significant. We also offer the option to place a smaller ad in Agency Sales. The ads provide ways to maintain anonymity.

We’re all living longer these days, so we need to add more to our retirement accounts than our parents did. Doesn’t it make sense to consider selling your manufacturers’ representative business to accomplish this goal?

For single-person manufacturers’ representatives, we see a different story. Rarely, if ever, do they sell their businesses when they retire. We hear two stories when we talk with them. They decide they no longer want to work and terminate their principal agreements. Or, they gradually work less and less in which case their principals terminate their agreements until none remain.

The multiple-person businesses sell to an existing employee, in some cases a daughter or son who works for them. A sin-gle-person business lacks that option.

Do opportunities exist for them? What about selling the business to someone who wants to become a manufacturers’ rep-resentative? About one-third of the new members who join MANA each month fall into the “Start-Up” category. Many ask if we know anyone interested in selling their business.

Finding Replacements

If you represent some really high-quality principals, another possibility would be to sell your firm to another manufacturers’ representative. If their current line card presents no competitive issues, this strategy works. Even if there are one or two competitive lines, they can terminate the agreements on those and sell the remainder. Most principals support this type of transaction. It eliminates the need for them to go through the lengthy recruitment process to find a replacement.

Because of the nature of this business, the buyer will be unable to borrow the necessary funds from a lending institution. That means the seller needs to finance the sale. They usually set up the buy-sell agreement in a manner in which they share commissions over a fixed period of time. For example, currently manufacturers’ representative businesses sell for about one times annual commissions. So, for a five-year period, the new owner shares 20 percent of the commissions with the previous owner.

Paying a Percentage

Paying a percentage rather than a fixed amount provides protection for both the buyer and seller. In the eventuality a prin-cipal terminates an agreement, the new owner can still afford the payments and not go out of business. It also provides an in-centive for the current owner to sell to a competent businessperson, someone who grows the business. When that happens, the payments grow over the payout period, resulting in higher income to the seller. Selling to a competent and professional business person makes acceptance by principals much more likely.

For those that sell to start-ups, consider mentoring them for an initial period of time. For the seller, helping the start-up stay in business and grow is imperative. If they fail, the seller’s commission share disappears. Help them with the business, and the share increases over time. During the mentoring period, it makes sense for the ownership to remain with the original owner. That gives time for the new owner to build relationships with the principals so when the current owner relinquishes ownership, the chances for agreement terminations is minimized.

Connecting With Buyers

How do these one-person agency owners connect with prospective buyers? As a member, one tactic that creates opportu-nities is to use the RepFinder to create a list of prospects. You access it in the member area of the MANA website. Search for manufacturers’ representatives in the area that appears to sell complementary products. Since you download the results into an Excel file, sort by “Date Established,” newest to oldest. That places the start-ups at the top of the list. Contact them and learn if they want to purchase the business. Ask them to please keep the conversation confidential. You don’t want word getting out until you are ready to present your plan to your principals.

MANA recently created a new online “Agency Business Opportunity” ad program. Consider an investment in an ad to attract prospective buyers. When the ad results in the sale of the business, the ROI is significant. We also offer the option to place a smaller ad in Agency Sales. The ads provide ways to maintain anonymity.

We’re all living longer these days, so we need to add more to our retirement accounts than our parents did. Doesn’t it make sense to consider selling your manufacturers’ representative business to accomplish this goal?

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