The timeliness of a MANAchat late last year couldn’t have been better illustrated than when 52 participants offered their anecdotal input on steps reps can — and should — take to keep their most‑desired principals. Unfortunately, many of their stories related to how principals have slipped from their grasp.

As the conversations evolved from these stories, it became clear that there are some common reasons why reps can lose a principal. For instance, the most commonly cited reasons are these:

• The rep has become too successful and there’s a certain amount of resentment on the part of the manufacturer to continue paying large commissions. According to one rep, “We’ve been so successful in the past that we’ve had a manufacturer say to us that ‘You’re making more than our CFO. We’re going direct.’ What happens is you’re being punished for your own success.”
• As one manufacturer purchases another, line conflicts develop causing the rep to have to make a choice of which principal to represent.
• A manufacturer is purchased by a private equity organization that is not familiar with the rep business model and remains overly focused on the line-item expense of paying the rep.
• There’s a change of personnel (e.g., sales manager, national sales manager). Shortly thereafter, reps find themselves in the new manager’s sights and on shaky ground.

The experiences described in detail by several chat participants put more meat on the bones of these scenarios.

Reasons to Be Fired

An overall perspective on the reps’ ability to keep good lines was offered by a rep who explained, “Basically there are two reason why reps get fired — selling too much and not selling enough. We’ve been fired for both. Realistically, there’s always going to be a 50 percent chance that you’re going to get fired or have to deal with a commission cut. When that happens, it’s up to the rep to take steps to mitigate the situation.

“Look at it this way, when you see that a single line has grown to become 30 percent or more of your revenue and you as the rep are the major contributor to that manufacturer’s bottom line, the fact is you’re going to stick out like a sore thumb. It’s a little bit like wearing ‘golden handcuffs,’ but it’s a line you really don’t want to quit.”

Those words set the stage for several other reps to offer their experiences.

A second rep related that “there have been a combination of events this year that caused one of our principals to make a change. The change they made was from a rep network to using direct salespeople. What happened to us — and all of this manufacturer’s reps — was that Covid and the impact of various environmental regulations caused the company to take a close look at their bottom line. We had been repping this company for more than 30 years, but this year they took a look at their profit and loss figures and all they saw was a line item of expense for reps. They looked at that instead of the sales that were coming in. This all came down to them not understanding how reps work. To their detriment, they didn’t consider that reps only get paid when they sell something. Direct salespeople are paid whether they sell or not.”

Another rep noted, “I’ve been in the rep business for a long time and just this year we lost a line of 50 years despite the fact our sales for this year were up 18 percent over last year. Part — if not all — of the reason for our termination was because the company was purchased by a private equity firm. The company changed from a family-owned organization to one run by bean counters. From what I was able to learn, they wanted a younger sales force in the field who would work for less.

“I have to admit, when that sale was consummated and the new owners wanted a list of our customers, I felt like something was going to happen and I just sat back and waited. I guess you could say I’m partially at fault here, but still when it happened it was a shock.”

Management Change

A change in management was cited by another rep who detailed his experience. “Every time we’ve lost a line, I’d have to say it was because someone in the factory left, or new management took over. Whenever someone new comes in they have a new set of disruptive plans that never takes into consideration how well things went in the past. They never look back at the rep’s prior performance. It seems like making change is easy for them. All they say is we don’t care what you did before, here’s what we’re going to do moving forward. We’re seeing more and more of this in the marketplace. Bottom line is that if the reps don’t agree, they’re told it’s time to move on.”

A Positive Experience

Not all the experiences covered in the MANAchat were negative, however. Consider one rep that related, “Customers want to buy products from people they know and trust. I had an experience where a manufacturer was working with a hybrid organization — some reps and some direct people. At one point, the national sales manager came to me to let me know I was out-performing several of his direct people in the territory I covered. He asked if I’d be interested in working with those accounts, as opposed to having them become house accounts. Naturally I said yes. What it really comes down to is that not only am I selling and servicing those accounts, I’m also protecting them from the competition. Once again, it’s a matter of the customer knowing me and what I can do for them.”

If the previous narratives detail several rep horror stories — with that last anecdote serving as an exception — the participants in the MANAchat did offer some advice and possible strategies that reps can follow to avoid termination.

Build relationships and practice “backselling” — The importance of building relationships between reps and manufacturers and the communication that should accompany those relationships was emphasized by one rep who maintained “Whenever we’ve lost a line, I’ve asked the question, ‘What could I have done better?’”

He went on to emphasize that “Our jobs as reps have always been to act as the liaison or ‘buffer’ between the customer and the manufacturer. If all I do is pass information on between the two, however, am I doing a disservice to my agency? I’d maintain that we should change that simple formula and make every effort to get all of our people involved with not only the manufacturer’s sales manager, but with all the people we come in contact with at the factory. At the end of the day, we as reps certainly want to be out there selling and not spending our time communicating with the factory; but, we’ve got to answer the question: ‘Do we make every effort we can to over-communicate with the manufacturer to truly educate them as to the value we provide?’”

That explanation led into several references to “backselling,” a term that has been described and defined many times in the course of articles that have appeared in Agency Sales magazine. In discussing backselling, John Haskell (aka Dr. Revenue), the author of those articles, emphasizes how important it is for reps to market themselves to their principals when he explains:

“When a sales manager or regional manager comes to visit with a rep firm there is often very little understanding of the rep’s business. In many cases the factory person does not know anything about how the rep’s business works. The individual salespeople who represent their company are a bit of a mystery to the manufacturer’s personnel.

“In most cases the factory person has not read the contract their company has with the rep company. In most cases the factory person does not know much about the financial or performance criteria that are in place between the factory that he or she represents as an employee and the factory that the rep represents as a contracted outsourced seller. In most cases the factory person has little or no knowledge or appreciation for the history between the factory and the rep firm.”

That’s the hurdle that reps must strive to overcome and MANAchat participants acknowledged the challenge. One rep offered, “Backselling is really a great term to describe what we should be doing. We’ve got to constantly remind our principals that we’re working for them — to let them know that we are a player on their behalf. I’ve been a MANA member for years and we’re intimately familiar with backselling. We make it a practice to do it with our key principals all the while trying to keep open clean and clear lines of communication. On a quarterly basis, we send out updates to those principals providing them with key metrics of those projects that we’re working on. We want to give them proof of what we’re doing, especially now during Covid.”

Another rep offered, “We constantly remind them that you’re sending us large checks because the customers know us, trust us, and are sending in big orders that benefit all of us. At the same time, we’re educating our principals as to what it costs us to run an agency. All of this information comes together to let manufacturers know that we’re providing value.”

Building Relationships

Also wading in on the benefits of backselling, one rep explained, “Building relationships with your principals’ management is critical. We’ve seen it time and again that you think you’re on solid ground, a new owner comes in or a friend of the president gets his ear, and you’re out on the street. That’s why we’re always working to build our contacts up and down the management ladder — not just with the vp of sales, but with everyone we’re in contact with. We do that by ensuring that when we have a business meeting, we come prepared with real action plans that show how hard we’re working for them. I’ll admit these efforts haven’t always been successful, but many times we’ve found that we’re the last man standing.”

Participation in rep councils — In general, chat participants explained that there was probably less rep council activity currently — owing primarily to the pandemic — however, they did emphasize how valuable the councils have been historically. According to one rep, “None of our people are currently serving on a rep council, however, in the past, we’ve been on three of them with long-term principals. There’s been nothing but positive feedback and the manufacturers have agreed that the councils provide them with plenty of value.”

This same rep noted that a valuable side effect of rep councils is the fact that “We’re able to build strong business connections with reps in other territories. We talk about what they’re doing with the same line in a different territory and that benefits not only us in our efforts, but the manufacturers that we’re all working with.”

Another chat participant offered, “The existence of a rep council can be a good indicator of the type of company you’re working with. By having a council they’re showing you that you’re part of the team and they appreciate the filtering of information that the council provides. It shows that they view you as an equal partner in executing their strategic plan.”

Diversify for Protection

Product line diversification — To protect against the damage that losing a single important line could cause to an agency, one rep stated the obvious fact that you should seek to diversify your product offering in order to avoid unexpected downturns. “At the same time, however, you do want to make sure you don’t take on more than you can chew. We’re always looking for new lines that are complementary to what we already represent. Inevitably, something is going to happen, and you want to be prepared.”

Work with well-crafted written contracts — “Having effective language in your contract is key,” explained one rep. “Early on, I address termination clauses and other issues with prospective and existing principals. I think it’s critical to include how you’re going to work together. If there’s a reluctance on their part to discuss those issues, you can quickly weed out the principals you want to work with.”

Perhaps the key to keeping the lines a rep firm truly wants to continue working with is included in the words of one of the reps that participated in the week-long series of chats: “If your goal is to maintain and strengthen the relationships you have with valuable principals, then it’s up to the rep to take every opportunity to meet with people in all levels of the company’s management. If you do that, you’re going to strengthen the commitment they have for the rep business model and they will continue to have your back. Added to that, however, is the fact that no matter how strong you think your relationships are, a principal can skip away from you. If and when that happens, make sure you’ve got an alternative plan and be ready to execute it.”

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