This is the 22st in a number of articles serializing The Sales Force — Working With Reps by Charles Cohon, MANA’s president and CEO. The entire book may be found in the member area of MANA’s website.

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“There’s just one more point from the MANA specimen budget I’d like to cover,” said William. “It has to do with calculating this typical rep’s average cost per sales call.”

William turned the typical budget report to its second page to reveal a statistical table. “Each of the four salespeople for this typical rep,” William continued, “makes 14 sales calls per week, 50 weeks per year, so the total number of sales calls made by this rep company each year is 2,800. Take the company’s total budgeted expenses, divide by 2,800, and you find that the rep company’s cost per sales call is about $255. Something not on the chart is the fact that during the time a customer will give us to make a sales call, we usually can discuss two or three lines — call it 2½ as an average. If we can discuss 2½ product lines per call and the cost per call is $255, it’s pretty clear that the cost per call per product line discussed is about $100. So as we work to maximize our effectiveness, it’s at least in the back of our minds that, as we choose which line to discuss during a particular sales call, we’re trying to pick a line that will bring us a return of at least as much as it cost us to make the call. And when we choose to promote a new product line at an account instead of one from a principal we’ve represented for many years, it’s because we expect an eventual payback based on that decision.”

“William, this has been an eye opener. May I take a copy of those figures with me to show Joe Troothe? There’s just one other topic I’d hoped to ask you about today, surge capacity and sag capacity.” Jim explained how he, Harold and Ruth had defined those terms and their hope that a rep company could provide those functions.

When Jim finished his explanation, William nodded. “I’ve never heard it described quite that way,” he said, “but that’s pretty much standard operating procedure with most reps. One of the reasons we’re so popular with engineers is that almost every time we visit we have some new product to show them. In addition to being a resource that assists engineers to apply existing products, reps are the conduits through which engineers most often find out about new products, so they rely on us as one of the most important ways they can keep up-to-date on new technology. There’s the surge capacity you described for new product rollouts, and it’s what reps do every day. The sag capacity you described is built into the rep business model as well. When one of our principals has a production problem, we will work to assist existing customers get the shipments they need, but we understand the last thing that manufacturer wants at that moment is a new customer who only will be disappointed with that principal’s performance. In those circumstances, we do just what you suggested — work on getting new orders for principals who can ship product. If the manufacturer that can’t ship doesn’t take too long and the problems don’t occur too often, we can pretty much pick up where we left off once the problem is resolved.”

“I really appreciate all the time you’ve given me today,” Jim said, “but I’m going to have to get back to the airport now. Based on what you’ve shown me about your company and the rep industry in general, I’m glad to tell you I’m going to recommend to Joe Troothe that we sign you up as our first rep.”

“I appreciate that, Jim,” William replied. “If that happens, I’d like to tour the factory, learn about your capabilities and meet Joe Troothe.”

To himself, William thought, “I’d better be sure that Joe Troothe is committed to reps before making any agreements with Troothe. I don’t want to be a dalliance that gets abandoned the first time we hit a rough patch.”

Jim had no trouble convincing Joe Troothe to hire Hannover Marketing. “After all,” Joe said, “if they don’t sell anything, it doesn’t cost me anything, because I’m not giving them our two big accounts in the area. Right, Jim?”

“I didn’t promise him anything,” Jim replied, but the budgets and costs William had shown him made Jim wonder how much effort he could get from William’s company without allowing it the commission income from Troothe’s existing customers.

Jim called William to let him know his company had been selected, and William was enthusiastic about representing Troothe. They agreed on a date for William’s visit. William asked to see Troothe’s rep agreement, and Jim had to admit he’d neglected to have one prepared. William suggested Jim use MANA’s agreement as a foundation and that Jim, Joe, and their attorney “tweak” it to fit their needs.

“If there isn’t an agreement for us to sign, we can’t really start representing you, so why don’t we push back my visit until you have the agreement ready?”

Jim suggested that the contract would take only a few weeks to prepare and that William go ahead and start without it. William countered with an offer to start talking to customers to find out their flange requirements, but was unwilling to make a formal announcement without a signed agreement.

“Jim, I’m sure you’ve had the unfortunate experience of counting on a deal that seemed like it was all sewed up,” William explained, “and then at the last minute something happened to derail it. I can’t broadcast our agreement to my customers without having a signed contract in hand.”

With Joe, Jim and their attorney all participating in writing the agreement, it actually took six weeks to prepare. Jim hoped the delay hadn’t cost him the initial enthusiasm William had shown for representing Troothe, but when Jim called William to let him know the agreement was ready and to schedule William’s visit to Troothe, William was eager to get started. The earliest their schedules meshed was six weeks later. Jim had hoped to begin more quickly, and kicked himself for not starting on the rep agreement earlier as Sue Elliot had suggested. As the conversation wound down to a close, William added, “Oh, by the way, Jim, could you go ahead and send me a copy of the agreement you came up with? As a part of my preparation for the visit, I’d like to familiarize myself with the document so I can ask any questions I have while I’m there.”

Jim agreed to email the document and blocked off the date of William’s visit on his calendar.

To be continued next month.

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