This is the 23rd 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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The agreement excluded Troothe’s two big accounts. Jim was uneasy about sending it to William, but Joe Troothe had been specific that he didn’t want to give up any existing accounts to the new rep.

William asked about the totals in the territory, and Jim said, “It’s $250,000, but once you exclude the two house accounts, it’s more like $50,000.” Jim had shared the figures on the two house accounts hoping William would see the potential of the line. Jim’s comment had that effect on William, but it also stiffened his resolve to get Troothe to reconsider its position on house accounts.

The plant visit would be a long day for William, but by taking the first flight out and returning on the day’s last flight he could accomplish it in one day. Jim picked him up at the airport. As they walked into the lobby, Jim realized he hadn’t asked the receptionist to add William’s name to the welcome board in the company’s lobby. “That’s really just for visiting customers,” Jim thought to himself, “but it would have been a nice touch.” If William noticed, there was no indication that it bothered him.

Jim took personal charge of William’s plant tour, introducing him to key Troothe employees in sales, customer service and engineering. Perhaps subconsciously, Jim had arranged a quick introduction to Joe Troothe in the morning but pushed back the longer meeting with Joe until the end of the day because Joe’s adamant position on retaining the house accounts might turn out to be a sticking point. Jim hoped to sell William on his company so convincingly that William would willingly forgo the house accounts.

Jim invited Harold to join William and him for lunch, and the conversation was so positive that Jim started to think that William might be pliable on the issue of house accounts. When Jim and William sat down to discuss the agreement after lunch, however, it became clear that William would not easily accede to Troothe’s plans to maintain house accounts in the territory.

William had forced himself to resist the temptation to try to resolve that issue over the phone before he committed to the time and cost of visiting Troothe, knowing that it was easy to get a “no” over the phone, but a “yes” usually required a face-to-face meeting. “Jim, my whole office is excited at the prospect of introducing Troothe products to our customers, and we think we can do an excellent job for you. As you’d expect, though, there are some elements of the agreement I’d like to discuss with you before we go forward.”

“We did our best to make a fair agreement,” Jim replied, “but if there is something you’d like to discuss, we’re willing to listen.”

“First, I have to tell you that none of the other principals we represent have any house accounts,” William started, but then Jim interrupted.

“You know, William, Joe Troothe has been pretty specific with me on that topic. If we’re going to discuss it, why don’t I see if I can get him in here to hear what you have to say?” Jim left to find Joe Troothe and bring him into the meeting. When he returned with Joe in tow, William started again.

“Hi, Joe. I was just telling Jim how excited our whole office is about introducing Troothe products to our customers, and that I would like to discuss the sales agreement.”

Joe was not unfriendly, but his tone was brusque. “Jim said you had a problem with house accounts. I don’t see any need to pay a sales commission on business you did nothing to earn, but go ahead and tell me what’s on your mind.”

William could see he had his work cut out for him, but he forced himself to keep his tone friendly and non-argumentative. “Joe, I have to tell you that none of the other manufacturers we represent have house accounts.”

“Good for them, but I don’t see why we should pay you for an account we earned on our own.”

“Did Jim share the MANA typical rep budget that I gave him on his last visit?” William asked, pulling a copy from his brief case.

Joe looked at the document. “Right. I’ve seen this. We went over it after Jim visited you.”

“Great. As you can see, the bottom line is that it costs a typical rep company about $255 to make a sales call. During the sales call, most customers will give us enough time to discuss two or three of the manufacturers we represent — call it 2½ as an average. If the call costs us $255 to make and we discuss, on average, 2½ manufacturers per call, our cost per manufacturer discussed per call works out to about $100. Now I am willing to make an investment in developing Troothe’s business because I plan to have a long and successful relationship with you, but our company has to consider the fact that every time we make a call on Troothe’s behalf, we are forgoing the opportunity to use that time to discuss another principals’ products. I think you know that each of our four salespeople will make more than two calls per week on Troothe’s behalf. So, if we do the math based on a minimum on two sales calls for Troothe per salesperson per week, $100 cost per call times four salespeople times two calls per week times 50 weeks per year, this works out to $40,000 worth of sales calls at my cost. I am not trying to recover the full cost of my sales calls, but without those house accounts the residual business in the territory would leave me more than $30,000 in the hole if I take on your line.”

Joe’s body language softened slightly, but he said nothing, so William added “Joe, why don’t we discuss something else and come back to this point.” Joe nodded. “Another thing that’s pretty standard is to include the rep in the manufacturer’s product liability insurance,” William continued.

“I don’t see why I should be buying your insurance,” said Joe.

“It really isn’t possible for a rep company to buy liability insurance,” said William. “For such a small company as ours, it’s almost impossible for the insurance companies to rate us, so they just jack the premiums out of sight. More importantly, if and when a product liability issue surfaces, it’s important for the manufacturer and the rep to be represented by the same lawyers and insurance carrier. As you know, when a product liability lawsuit comes up, everybody gets sued. It’s not uncommon for the plaintiff to figure out that the rep never took title to the material, really isn’t a part of the supply chain and offer him a deal to drop the suit in exchange for full cooperation against the manufacturer. We don’t want our interests and yours to be divided. We think it’s best for both of us to be linked in this situation if it ever should occur. For that reason, many insurance carriers will include a rep as an added named insured for no charge or for a nominal charge.”

“If it’s nominal,” said Joe, “I don’t see a problem. Anything else?”

To be continued next month.

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