© robu_s | Dollar Photo Club

Principals are the most important asset an independent manufacturers’ representative firm has.

As a result, it is absolutely essential that the agency analyze and evaluate the list of principals regularly. The agency is putting all of its resources into building business for and with the principals, so it’s critical to know what the value is of each principal relationship.

Everything Is Based on Profitable Commissions

No matter how you feel about a principal, no matter what each principal is paying you, the bottom line is that you, the independent agent need to know whether each principal who represents 3-5 percent of your income is of true value to you.

What Is “True Value”

Reps love to sell and love to work. Most reps would be perfectly happy if they did not have to think about anything but the lines and the customers, but there is much more to representation today than ever before. This article is designed to suggest the questions that you, the rep, need to be asking yourself and your team about every “significant line.”

Significant Is the Starting Point

Any line that does not represent 3-5 percent of your business is not significant!

That is the bottom line. If a line does not now nor have the potential of at least three percent of your total commission volume, you should get rid of the line.

I have been through this argument with many agencies — “But it pays for gas, tires, phone, etc.” That is terrible thinking. Every line requires time, commitment, full support through all aspects of your business. You cannot afford to represent any very small line regardless of how much you like the owner of the company, what the line used to produce, etc.

What Is the Rep Support and Commitment of the Principal?

There is no quantified data base that will allow you to assess the quality of support and the commitment a principal has to manufacturers’ representatives. The best way I have found to assess this vital part of the over-all assessment of principals is to compare and contrast the 5-10 principals that provide 90 percent of the agency’s income.

If you use a 1-10 scale where:

• 10 = “It could not be better, one of the best principals we have ever represented!”
• 5 = “This company is not really committed to reps. They don’t really believe in the system of outsourced sales representation and they have little or no appreciation for the work we do.”
• 1 = “For this company reps are a necessary evil. The minute they think they can afford it, they will go direct; there is no future for reps with this company.”

On the basis of these measuring sticks, how do your principals compare and rate? Hopefully, your top principals are 8-10 on the rating scale. If they aren’t, what are you going to do about it?

• How well does the principal go to market?
• How strong is their support for sales?

This evaluation is second only to the review of the company’s attitudes toward independent agencies. If you are representing a company that is a 10 on the marketing and support side, you stand the best chance of gaining business and leveraging the company’s efforts to provide solid, growing sales for many years to come.

If a company gets a 5-6-7 on this section of the ratings, you have a chance of doing pretty well with the line based on your efforts, connections, and your history in the territory. The company is not doing much to make it easier or better, but at least they aren’t hurting your efforts.

If a company is below five, they are actually hurting your sales efforts and you need to think about dropping them and, if the market is right, replacing them with another, hopefully, competitive line.

Many Other Considerations, but Concentrate on the Big Three!

There are lots of other things to consider when evaluating your core principals, but start with these three. Reps need to take time to “work on” the business.

This evaluation of principals has to be at the top of your list. How often? At least once a year. The timing is important. Don’t start a new year without this review. If you evaluate your principals, you will determine your action steps.

It may be as simple as going to visit the principal and meeting with their key people to get them better acquainted with your rep firm and your approach to the business in the territory. Or it may be as complex as beginning a plan to find another line to replace this principal because you have determined that your firm does not have a good future with this principal.

Bottom Line — Just Do It!

These activities mean current and future income to your firm. Good luck and good planning.

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