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Getting together with other people who will be involved with a manufacturers’ representative (manufacturers’ rep) as an employee or independent contractor (sub-rep) should be done with forethought by both the manufacturers’ rep and sub-rep from the beginning when they are first considering an alignment of resources.

The manufacturers’ rep who will usually be the one who has the direct relationship with the principal should have a full understanding with the sub-rep and the sub-rep should know what is expected of him or her.

First, let us look at the relative experience the sub-rep has in the field the manufacturers’ rep is hiring the sub-rep to be engaged in. Does the sub-rep have any particular principal interaction with the principals the manufacturers’ rep is hiring the sub-rep to engage in? And whose principal is it, the manufacturers’ rep or the sub-rep’s? This last question has an important effect on the relationship and should be covered before any relationship is created.

To make a successful relationship the manufacturers’ rep needs to figure out how the sub-rep can be beneficial to the manufacturers’ rep’s business. Among the questions that need to be addressed are: (1) What is the sub-rep’s experience in the field that is most concerning to the manufacturers’ rep? (2) Does the sub-rep have any principals of his or her own that he or she wants brought into the relationship? (3) What will happen to the sub-rep’s principals if the sub-rep joins with the manufacturers’ rep? These are just a few of the issues that need to be covered early in the discussions between the manufacturers’ rep and the potential sub-rep.

The question of what sales experience a potential sub-rep has with what you want the sub-rep to be engaged in and how they are expected to produce sales is important to both. If the sub-rep has no sales experience and has no real knowledge of the products the manufacturers’ rep wants the sub-rep to get involved with, what is the reason for thinking about hiring such a person?

Let’s look at other factors that must be considered when bringing in a sub-rep. First, is the sub-rep going to be an employee or an independent sub-contractor of the manufacturers’ rep’s firm? If an employee then, the tax and other costs must be considered which include the office space, car, insurance, vacation time, sick leave, etc., not to mention the learning curve time that may be needed to bring the new person up to speed.

If the new sub-rep is coming into the manufacturers’ rep’s firm as a sub-contractor, what is the experience that they have that will benefit the firm? If they have good — and I emphasize “good” — experience, where does it come from? Is that person a rep or from a company that is in a related field as the companies represented by the manufacturers’ rep? One should check to see if there is any conflict of interest and if so, does the potential sub-rep have a duty to stay clear of any conflict? This is generally covered by a specific contract term that says the potential sub-rep is prohibited from going to work for a firm that is or may be competing with the business or potential business of the company where the potential sub-rep has worked. But a specific contract term, or lack of one, does not necessarily prohibit a former employer from going after a former employee or sub-contractor under the proper circumstances.

Once a manufacturers’ rep has decided it wants additional sales help, there are a number of other things that should be considered. Should the salesperson be in the form of an employee or an independent sales sub-contractor? Some of the basic issues for each relationship have been covered but there are still others. The most important to consider is insurance coverage. Regardless of whether the manufacturers’ rep firm hires an independent sub-rep or an employee sub-rep, auto insurance coverage is important. And, of the course the manufacturers’ rep firm should make sure that the amount of coverage is more than satisfactory.

Auto insurance is not the only type of insurance a manufacturers’ rep firm should have in force. The others include product liability, warranty, and those that cover other types of issues. The type of insurance that should be obtained by a manufacturers’ rep firm or an independent sub-contractor can best be determined by contacting a reputable insurance agent.

Whether you are looking for sales help as a manufacturers’ rep firm or you want to become an independent or direct sub-rep, you should thoroughly review the items in this article, but do not think these are the only things you need to know. It is incumbent on you to determine your exposure and where you can get answers to your areas of concern.

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