This is the 26th 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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“I see your point,” Jim replied. “Two national trade shows probably would bring in a total of 250 sales leads, which typically translates to 25 quote requests. Based on our current hit rate, that would be five new customers. So to be equal in value to two national trade shows, the rep would have to bring in 25 viable quote requests and close five of them as customers. I think that would be doable, but I agree it’s not a lock.”

“And let’s not forget that you had one smaller rep interested in taking on the line and that he didn’t balk at excluding our house accounts,” Joe reminded Jim. “Let me bounce this off you. I am not going to roll the dice on spending the equivalent of two national trade shows on William’s company, but I could live with the equivalent of one trade show. Call William and see if you can talk him out of taking commission on the house accounts. If you have to, you can settle on half commission on the house accounts for the first year, with the understanding that we are going to be expecting a lot of activity from him if we’re paying commission on existing business, so we’re going to put him under the microscope. And, if we do end up paying commission on our existing business, we will want him to understand that we will expect to get our money’s worth. Spending that money on a trade show would bring in at least a dozen viable requests for proposal and three solid new customers, so that’s what I’m expecting from William if this goes forward. But, Jim, don’t give him those numbers. I don’t want him coasting if we accidentally set too low a goal and he hits it early on.”

After an extended conversation, William agreed to accept reduced commission on existing accounts for the first year, but William was adamant that if Troothe was sufficiently satisfied with William’s company’s performance, full commission would start in the second year.

Joe was pleased that Jim had been able to bring William on board, but he wanted something more. “Jim, this isn’t a very scientific test we’re doing. We hired William’s company and met him halfway on the house accounts, but I’m wondering how his company’s performance would compare with a one-man rep company that wouldn’t demand commission on house accounts, or maybe in a territory where we didn’t have any big accounts so house accounts wouldn’t be an issue. So what I want you to do is pick a territory that seems to be comparable to William’s and find a rep there who won’t require any up-front funds from us — somebody whose work would be 100 percent speculative. I want to know what the difference is.”

The territory Jim found didn’t have any significant business, and he quickly learned that Joe’s admonition to find a one-person rep company was unnecessary. With no residual business to fund a rep’s initial activities, one-person companies were the only ones that expressed interest when Jim called. The process went quickly. With no residual business on the table, the reps seemed amenable to signing Troothe’s standard agreement without alteration. Jim found several candidates, settled on what he considered to be the best of the group and had a signed contract in hand within a week. With the quick negotiations, William’s company had only a six-week head start over the one-person rep. Six months later, Jim had enough experience with both companies to give Joe an informed opinion on the relative performance of the two reps.

“In six months we’ve already picked up more than 25 quote requests from William’s company,” said Jim. “Based on the close relationships William and his sales force have with those customers, I think our hit rate is going to be about 33 percent. Comparing that with the 20 percent rate we achieve with our direct sales force, I attribute the difference to the fact that the salespeople at William’s company are native to the area and customers who would not offer a second look to our factory-based direct salespeople are extending that courtesy to our local reps. Just based on what’s currently in the hopper, I’m expecting to close on nine of these by the end of this year. Now, they’ll probably close around month 11 or 12 of William’s contact, so he won’t be getting any commission on these accounts any time soon, but the results we’re getting make me feel pretty good about the commission dollars we spent on them.”

“How about our ‘one-man band’?” asked Joe. “He didn’t cost us anything up front.”

“I’d say we’re getting a reasonable amount of effort and results from him,” said Jim, “when you consider that he’s been working pretty much for free so far. Under those circumstances, all we have a right to expect is that he’d help us pick the ‘low hanging fruit’ and I think we may get one or two orders out of him in the next year or so. What it boils down to is that if we’re looking for in-depth, comprehensive coverage, we can’t get it for free. And, of course, when we’re not paying that rep for any residual business, we can’t demand very much from him, so he isn’t as responsive to our questions as William’s company. Neither Troothe nor the rep who received no residuals has made much of a financial investment in the relation- ship, and I think it shows in the casual way each of us treats it. If we get something out of him, fine, and if we don’t, it didn’t cost us anything. Overall, when you consider the cost of my time, it’s probably better for us to spend a little money to get a rep who is going to attack more than the lowest of the low-hanging fruit. The rep we aren’t paying is going to let more things get past him, but we really can’t fault him for that. One thing our customer service people notice is that a rep who isn’t focused on our products is more expensive to support, because we haven’t paid him enough to learn our product line well or even to visit the plant. After all, how can we ask him to buy a plane ticket that will cost as much as three or four months’ commission? It was a reasonable experiment,” Jim concluded, “but I think in the future I’m going to be sure both Troothe and the rep company make financial commitments to each other before we sign any new rep agreements.”

To be continued next month.

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